Tech Terms: two tier enterprise resource planning

Organizations use two-tier enterprise resource planning (ERP) to run two integrated ERP systems simultaneously. One system, the legacy application, also called the the Tier-1 system, is typically deployed at the corporate level and the other is managed at the subsidiary level. Two-tier ERP software is often used by large corporations with multiple sites or by an organization that’s based in multiple geographic locations.

The Benefits of Two-Tier ERP
Two-tier ERP enables an organization to optimize regional back office processes at a site that operates under a business model that is separate from the main company. At some locations the ERP requires special considerations — including translations or regionalized business models — and organizations my look to maintain a legacy ERP at headquarters with two-tier ERP solutions to support specific needs at the subsidiary level that fully integrates with the corporate system.
Master data management is one of the biggest concerns for organizations deploying two tiers of ERP. There should be no duplication of effort between the two ERP systems. Consistency is required at the second tier to ensure the corporate first-tier ERP achieves a single source of information for financials, orders and other business.

When Do Organizations Use Two-Tier ERP?
Often a Two-tier ERP system is implemented when the legacy, Tier-1 system, becomes very large and costly to customize, maintain and upgrade or when mergers and acquisitions leave an organization with multiple ERP solutions that they are unable to consolidate to a single ERP system.

According to EnterpriseAppsToday, the following scenarios are common in organization that use two tiers of ERP:

  • A business with a very specific local focus – single-site or multi-site within a single country or region.
  • A business with operations geared strongly toward a specific industry that doesn’t feature strongly at corporate headquarters.
  • A newly-acquired operation with a mismatch of multiple outdated, unsupported ERPs.
  • A small subsidiary with no formal ERP in place.
  • A small operation at the second-tier which doesn’t warrant the use of enterprise ERP software, but may be brought into the corporate fold as operations grow.

Source

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