5 minute guide to ERP

Information technology has changed the way we live and the way we act. ERP or Enterprise Resource Planning is one of the most widely implemented enterprise software systems in a wide range of industries and organizations. In this short article we try to map out the basic yet important concepts relevant to ERP.

What is ERP – ERP is the abbreviation for Enterprise Resource Planning. ERP definition refers to both ERP software and business strategies that implement ERP systems. ERP implementation uses various ERP software applications to improve the performance of organizations for 1) resource planning, 2) management control, and 3) operational control. ERP software consists of several software modules that integrate activities across functional departments – from product planning, parts procurement, inventory control, product distribution to order tracking. Most ERP software systems include application modules to support common business activities – finance, accounting and human resources.

ERP systems – ERP is much more than a piece of computer software. An ERP system includes ERP software, business processes, users, and hardware running the ERP software. An ERP system is more than the sum of its parts or components. These components interact together to achieve a common goal – streamlining and improving organizations’ business processes.

History of ERP – Enterprise Resource Planning (ERP) is the development of Manufacturing Requirements Planning (MRP) II in the 1980s, while MRP is the development of Inventory Management & Control conceived in the 1960s. ERP has expanded from coordinating manufacturing processes to integrating enterprise-wide backend processes. In terms of technology, ERP has evolved from older deployment to more flexible level-built client-server architecture.

Benefits of ERP – ERP software tries to integrate business processes across departments into a single enterprise-wide information system. The main benefits of ERP are improved coordination across functional departments and increased efficiency in doing business. The implementation of ERP systems also helps to facilitate day-to-day management. ERP software systems are originally and ambitiously designed to support the resource planning part of strategic planning. In reality, resource planning has been the weakest link in ERP practice due to the complexity of strategic planning and the lack of adequate integration of ERP with Decision Support Systems (DSS).

ERP Errors – We couldn’t finish our short guide to ERP without mentioning ERP errors. The failure of multi-million dollar ERP projects is reported once in a while, even after 20 years of ERP implementation. We have identified the four components of an ERP system – 1) ERP software, 2) business processes that support ERP software, 3) users of ERP systems, and 4) hardware and operating systems running ERP applications. The failures of one or more of these four components can cause errors in an ERP project.

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