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Definition of ERP

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Definition of Enterprise Resource Planning

Enterprise Resource Planning is an integrated software package that integrates all facets of the business, including planning, manufacturing, sales, inventory, HRIS (Human Resource Information Systems), finance and marketing. ERP software is multi module application that integrates cross functional department centrally.

Basic Information

- Minimum three modules should be there (Sales, Purchase and Inventory) or other combinations.

- It comes in different suites - Manufacturing suite and Non-manufacturing suite.

- CRM (Customer Relationship management), SCM (Supply Chain Management) are the extended category of Enterprise Resource Planning to fulfill the complete requirements of organization.

- It improve and streamline the internal business process effectively, which typically requires reengineering of current business process. While CRM and SCM attempts to enhance the relationship with customers and suppliers respectively.

- It's components are the common components like a MIS (Management Information System). It generates all kinds of report; top customers, top suppliers, WIP (Work In Process), shop floor, order tracking, production reports, AP/AR (Account Payable/Account Receivable), GL (General Ledger), Balance sheet, Trail balance, HRIS reports etc.

- Most of the software is module based, which is the core of the system. Each module automates the business activities of a particular functional area. i.e. Sales module will cover all sales activity in the organization, Manufacturing module will cover all production activity etc. In every ERP all the modules are highly linked because all the functional areas of business process are interconnected with each other.

- There are three levels of business processes - Strategic Planning, Management Control and Operational Control. The software has been designed to support or streamline business processes at all three levels.

- ERP software can not take decisions. It will work like DSS (Decision Support system). It will provide you all the relevant information. Based on that information business managers will take decisions and they can do advance planning for the organization.

- It can be used by all levels of employees - workers, supervisors, managers, executives, top level management.

- Selection is crucial and important for the organization - If you choose a wrong software you will be in trouble. There are so many failures stories. Many of the ERP softwares out there were created with a specific industry in mind. Always see a complete software demo before finalizing any Enterprise Resource Planning for organization.

- At the time of selection, check two-three pakages that is made for similar types of industry. Always consider following points before finailizing software and vendor- Who is going to implement? What will be the implementation time? What are the track records of Company? Vendor track record? (If software is going to implemented by third party)

- When selected software does not have a unique features that you are looking for your organization. Customizations will come in the picture.

- The implementer or consultants will do the complete process mapping and GAP analysis for implementation. They will map the current business process with software to identify the customization.

- Customization should be limited. Too much customization will ruin the original features of the system and it will be costly. Customization services are chargeable basis and it will take time too.

- It is available in all range. It will vary from user wise, company size, etc. Earlier this software was used mainly by the big organizations but now it is also available for small and medium size enterprises (SMEs).

To better understand the benefits and functioning, this website has gathered some of the finest books on Enterprise Resource Planning and business management.

Related Books
Modern ERP
Select, Implement and Use Today's Advanced Business Systems
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This book introduces terminology and is a fairly easy read with both text and graphics. The book addresses the history of ERP systems, who needs them, how to justify their implementation, and the different process that software package can encompass.

 Read Related Articles

Advantages of ERP
What is ERP System?
ERP for Manufacturing Company - Challenge, Solution
How to Get Successful Implementation

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