ERP or Enterprise Recourse Planning systems integrate the external and internal management information of an entire organization. It embraces the finance, accounts, manufacturing, sales, service, customer relationship management etc. The purpose of ERP is to facilitate the flow of information between the different sections of the organization and manage the outside connections. ERP systems can run on a variety of computer hardware and network configurations, mainly employing a database as a storehouse of information.
- An integrated system that operates in real time, without relying on periodic updates.
- A consistent look and feel throughout each module.
- A common database, which supports all applications.
- Installation of the system without elaborate application/data integration by the Information Technology (IT) department.
The following are common functional areas covered in an ERP System. In many ERP Systems these are called and grouped together as ERP Modules:
- Financial Accounting – General Ledger, Payables, Receivables, Fixed Asset, Cash Management, Financial Consolidation etc.
- Human Resources – Recruiting, Training, Payroll, Benefits, Diversity Management, Retirement, Separation etc.
- Management Accounting – Budget, costing, cost management etc.
- Manufacturing – Production, engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, manufacturing projects, manufacturing process, Product Life cycle etc.
- Supply Chain Management – supply chain planning, supply scheduling, order to cash, purchasing, inventory, product configuration, claim processing etc.
- Project Management – Project planning, resource planning, project cost planning, work break down structure, billing, time and expanse planning, performance units management, activity management etc.
- Customer Relationship management: Sales and Marketing, Commissions, services, customer contact, customer support etc.
The essential advantage of ERP is of integrating the myriad business processes thus saving time and expanse. The management cab take decisions faster. The data becomes visible across the organization, errors are fewer and data duplicity lessens.
- Sales forecasting, it allows inventory optimization.
- Chronological history of every transaction through relevant data compilation in every area of operation.
- Order tracking, from acceptance through fulfillment.
- Revenue tracking, from invoice through cash receipt.
- Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced).
ERP systems centralize business data, bringing the following benefits
- They eliminate the need to synchronize changes between multiple systems—consolidation of finance, marketing and sales, human resource, and manufacturing applications.
- They bring legitimacy and transparency in each bit of statistical data.
- They enable standard product naming.
- They provide an all-inclusive enterprise view. They make real–time information available to management anywhere, any time to make proper decisions.
- They protect sensitive data by consolidating multiple security systems into a single structure.
- ERP provides support to upper level management to provide them with critical decision making information. This decision support allows the upper level management to make managerial choices that enhance the business down the road.
- ERP can greatly improve the quality and efficiency of a business. By keeping a company's internal business process running smoothly, ERP can lead to better outputs that benefit the company such as customer service, and manufacturing.
- ERP also creates a more agile company that can better adapt to situations and changes. ERP makes the company more flexible and less rigidly structured in an effort to allow the different parts of an organization to become more cohesive, in turn, enhancing the business both.