In this article by Greg Moss, author of Working with Odoo, he explains that Odoo is a very feature-filled business application framework with literally hundreds of applications and modules available. We have done our best to cover the most essential features of the Odoo applications that you are most likely to use in your business.

Setting up an Odoo system is no easy task. Many companies get into trouble believing that they can just install the software and throw in some data. Inevitably, the scope of the project grows and what was supposed to be a simple system ends up being a confusing mess. Fortunately, Odoo's modular design will allow you to take a systematic approach to implementing Odoo for your business.

(For more resources related to this topic, see here.)

What is an ERP system?

An Enterprise Resource Planning (ERP) system is essentially a suite of business applications that are integrated together to assist a company in collecting, managing, and reporting information throughout core business processes. These business applications, typically called modules, can often be independently installed and configured based on the specific needs of the business. As the needs of the business change and grow, additional modules can be incorporated into an existing ERP system to better handle the new business requirements. This modular design of most ERP systems gives companies great flexibility in how they implement the system.

In the past, ERP systems were primarily utilized in manufacturing operations. Over the years, the scope of ERP systems have grown to encompass a wide range of business-related functions. Recently, ERP systems have started to include more sophisticated communication and social networking features.

Common ERP modules

The core applications of an ERP system typically include:

Sales Orders
Purchase Orders
Accounting and Finance
Manufacturing Resource Planning (MRP)
Customer Relationship Management (CRM)
Human Resources (HR)

Let's take a brief look at each of these modules and how they address specific business needs.

Selling products to your customer

Sales Orders, commonly abbreviated as SO, are documents that a business generates when they sell products and services to a customer. In an ERP system, the Sales Order module will usually allow management of customers and products to optimize efficiency for data entry of the sales order. Many sales orders begin as customer quotes. Quotes allow a salesperson to collect order information that may change as the customer makes decisions on what they want in their final order.

Once a customer has decided exactly what they wish to purchase, the quote is turned into a sales order and is confirmed for processing. Depending on the requirements of the business, there are a variety of methods to determine when a customer is invoiced or billed for the order.

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This preceding screenshot shows a sample sales order in Odoo.

Purchasing products from suppliers

Purchase Orders, often known as PO, are documents that a business generates when they purchase products from a vendor. The Purchase Order module in an ERP system will typically include management of vendors (also called suppliers) as well as management of the products that the vendor carries. Much like sales order quotes, a purchase order system will allow a purchasing department to create draft purchase orders before they are finalized into a specific purchasing request.

Often, a business will configure the Sales Order and Purchase Order modules to work together to streamline business operations. When a valid sales order is entered, most ERP systems will allow you to configure the system so that a purchase order can be automatically generated if the required products are not in stock to fulfill the sales order. ERP systems will allow you to set minimum quantities on-hand or order limits that will automatically generate purchase orders when inventory falls below a predetermined level. When properly configured, a purchase order system can save a significant amount of time in purchasing operations and assist in preventing supply shortages.

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Managing your accounts and financing in Odoo

Accounting and finance modules integrate with an ERP system to organize and report business transactions. In many ERP systems, the accounting and finance module is known as GL for General Ledger. All accounting and finance modules are built around a structure known as the chart of accounts. The chart of accounts organizes groups of transactions into categories such as assets, liabilities, income, and expenses. ERP systems provide a lot of flexibility in defining the structure of your chart of accounts to meet the specific requirements for your business.

Accounting transactions are grouped by date into periods (typically by month) for reporting purposes. These reports are most often known as financial statements. Common financial statements include balance sheets, income statements, cash flow statements, and statements of owner's equity.

Handling your manufacturing operations

The Manufacturing Resource Planning (MRP) module manages all the various business operations that go into the manufacturing of products. The fundamental transaction of an MRP module is a manufacturing order, which is also known as a production order in some ERP systems. A manufacturing order describes the raw products or subcomponents, steps, and routings required to produce a finished product. The raw products or subcomponents required to produce the finished product are typically broken down into a detailed list called a bill of materials or BOM. A BOM describes the exact quantities required of each component and are often used to define the raw material costs that go into manufacturing the final products for a company.

Often an MRP module will incorporate several submodules that are necessary to define all the required operations. Warehouse management is used to define locations and sublocations to store materials and products as they move through the various manufacturing operations. For example, you may receive raw materials in one warehouse location, assemble those raw materials into subcomponents and store them in another location, then ultimately manufacture the end products and store them in a final location before delivering them to the customer.

Managing customer relations in Odoo

In today's business environment, quality customer service is essential to being competitive in most markets. A Customer Relationship Management (CRM) module assists a business in better handling the interactions they may have with each customer. Most CRM systems also incorporate a presales component that will manage opportunities, leads, and various marketing campaigns.

Typically, a CRM system is utilized the most by the sales and marketing departments within a company. For this reason, CRM systems are often considered to be sales force automation tools or SFA tools. Sales personnel can set up appointments, schedule call backs, and employ tools to manage their communication. More modern CRM systems have started to incorporate social networking features to assist sales personnel in utilizing these newly emerging technologies.

Configuring human resource applications in Odoo

Human Resource modules, commonly known as HR, manage the workforce- or employee-related information in a business. Some of the processes ordinarily covered by HR systems are payroll, time and attendance, benefits administration, recruitment, and knowledge management.

Increased regulations and complexities in payroll and benefits have led to HR modules becoming a major component of most ERP systems. Modern HR modules typically include employee kiosk functions to allow employees to self-administer many tasks such as putting in a leave request or checking on their available vacation time.

Finding additional modules for your business requirements

In addition to core ERP modules, Odoo has many more official and community-developed modules available. At the time of this article's publication, the Odoo application repository had 1,348 modules listed for version 7! Many of these modules provide small enhancements to improve usability like adding payment type to a sales order. Other modules offer e-commerce integration or complete application solutions, such as managing a school or hospital.

Here is a short list of the more common modules you may wish to include in an Odoo installation:

Point of Sale
Project Management
Analytic Accounting
Document Management System
Outlook Plug-in
Country-Specific Accounting Templates
OpenOffice Report Designer

You will be introduced to various Odoo modules that extend the functionality of the base Odoo system. You can find a complete list of Odoo modules at http://apps.Odoo.com/.

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This preceding screenshot shows the module selection page in Odoo.

Getting quickly into Odoo

Do you want to jump in right now and get a look at Odoo 7 without any complex installations? Well, you are lucky! You can access an online installation of Odoo, where you can get a peek at many of the core modules right from your web browser. The installation is shared publicly, so you will not want to use this for any sensitive information. It is ideal, however, to get a quick overview of the software and to get an idea for how the interface functions.

You can access a trial version of Odoo at https://www.Odoo.com/start.

Odoo – an open source ERP solution

Odoo is a collection of business applications that are available under an open source license. For this reason, Odoo can be used without paying license fees and can be customized to suit the specific needs of a business. There are many advantages to open source software solutions. We will discuss some of these advantages shortly.

Free your company from expensive software license fees

One of the primary downsides of most ERP systems is they often involve expensive license fees. Increasingly, companies must pay these license fees on an annual basis just to receive bug fixes and product updates. Because ERP systems can require companies to devote great amounts of time and money for setup, data conversion, integration, and training, it can be very expensive, often prohibitively so, to change ERP systems. For this reason, many companies feel trapped as their current ERP vendors increase license fees.

Choosing open source software solutions, frees a company from the real possibility that a vendor will increase license fees in the years ahead.

Modify the software to meet your business needs

With proprietary ERP solutions, you are often forced to accept the software solution the vendor provides chiefly "as is". While you may have customization options and can sometimes pay the company to make specific changes, you rarely have the freedom to make changes directly to the source code yourself. The advantages to having the source code available to enterprise companies can be very significant. In a highly competitive market, being able to develop solutions that improve business processes and give your company the flexibility to meet future demands can make all the difference.

Collaborative development

Open source software does not rely on a group of developers who work secretly to write proprietary code. Instead, developers from all around the world work together transparently to develop modules, prepare bug fixes, and increase software usability. In the case of Odoo, the entire source code is available on Launchpad.net. Here, developers submit their code changes through a structure called branches. Changes can be peer reviewed, and once the changes are approved, they are incorporated into the final source code product.

Odoo – AGPL open source license

The term open source covers a wide range of open source licenses that have their own specific rights and limitations. Odoo and all of its modules are released under the Affero General Public License (AGPL) version 3. One key feature of this license is that any custom-developed module running under Odoo must be released with the source code. This stipulation protects the Odoo community as a whole from developers who may have a desire to hide their code from everyone else.

This may have changed or has been appended recently with an alternative license.

You can find the full AGPL license at http://www.gnu.org/licenses/agpl-3.0.html.

A real-world case study using Odoo

The goal is to do more than just walk through the various screens and reports of Odoo. Instead, we want to give you a solid understanding of how you would implement Odoo to solve real-world business problems. For this reason, this article will present a real-life case study in which Odoo was actually utilized to improve specific business processes.

Silkworm, Inc. – a mid-sized screen printing company

Silkworm, Inc. is a highly respected mid-sized silkscreen printer in the Midwest that manufactures and sells a variety of custom apparel products. They have been kind enough to allow us to include some basic aspects of their business processes as a set of real-world examples implementing Odoo into a manufacturing operation.

Using Odoo, we will set up the company records (or system) from scratch and begin by walking through their most basic sales order process, selling T-shirts. From there, we will move on to manufacturing operations, where custom art designs are developed and then screen printed onto raw materials for shipment to customers.

We will come back to this real-world example so that you can see how Odoo can be used to solve real-world business solutions.

Although Silkworm is actively implementing Odoo, Silkworm, Inc. does not directly endorse or recommend Odoo for any specific business solution. Every company must do their own research to determine whether Odoo is a good fit for their operation.