Enterprise Resource Planning (ERP)
The definition of enterprise resource planning
These are systems that attempt to integrate all data and processes of an organization into a unified system. A typical ERP system will use multiple components of IT hardware and software to achieve the integration. A key ingredient of most ERP systems is the use of a unified database to store data for the various system modules.
The term ERP originally implied systems designed to plan the use of enterprise-wide resources. Although the origins of ERP can be traced back to the manufacturing environment, today's use of the term ERP systems has much broader scope. Such systems typically attempt to cover all basic functions of an organisation, regardless of the organisation's business or size.
ERP's ultimate aim is to attempt to integrate all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs.
To be considered an ERP system, a software package or solution must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package.
However, the term is typically reserved for larger, more broadly based applications. The introduction of an ERP system to replace two or more independent applications eliminates the need for external interfaces previously required between systems, and provides additional benefits that range from standardisation and lower maintenance (one system instead of two or more) to easier and/or greater reporting capabilities (as all data is typically kept in one database). The disparate and often incompatible systems are replaced by a single unified systems.
Examples of modules in an ERP which formerly would have been stand-alone applications include-Manufacturing, Supply Chain, Financials, Customer Relationship Management (CRM), Human Resources, Warehouse Management and Decision Support System. Most vendors' ERP software is flexible enough that you can install some modules without buying the whole package. Many companies, for example, will just install an ERP finance or HR module and leave the rest of the functions for a later date if at all.
The benefits behind ERP
The benefits of ERP are obvious, with such as systems:-
- More streamlined processes
- Improved flow of information through an organisation
- Less likelihood of bottleneck between the various modules
The affordability of enterprise resource planning
Formerly ERP was purely restricted to large organisations, in the sense only they could afford to invest on them. This put the small and medium busineses at a large disadvantage. They were not able to make use of the application to gain the necessary benefits. ERP's future seemed closed to them.
However this drawback has been removed after the intervention of open source facilities. The concept of outsourcing has helped in removing the difficulties faced by small and medium enterprises. Hence a large potential for ERP still exists in the SME. Market and hence potential to gain competitive advantage.