What is ERP?

What is ERP?

ERP stands for Enterprise Resource Planning. ERP is a systematic way of integrating data and processes of an organization into one single system. A functional ERP system is usually made up of both hardware and software components. Most ERP systems use a central database to store data for various functions found throughout the organization.

The term ERP originally referred to how a large organization planned to use organizational wide resources, hence the word “enterprise” and “resource”. In the past, ERP systems were used in larger, more industrial types of companies. Today, the use of ERP has changed. It now encompasses various processes within the organization and covers multi-industry. In fact, ERP systems can be used in almost any type of organization – large or small.

In order for a software system to be considered ERP, it must provide an organization with functionality for two or more systems that work concurrently with seamless integration. While some software packages exist that are branded as ERP, it may only cover certain basic functions for an organization like payroll and accounting. Most ERP systems however cover several functions at the same time.

Some of the more complete ERP systems can cover a wide range of functions and integrate them into one central database. For instance, functions such as Financials, Operations, Warehouse Management, Inventory Control, Supply Chain Management, Production functions, Manufacturing functions, Project Information, Warranty Tracking and Customer Relationship Management were all once stand alone software applications, usually housed with their own database and network. Today, they can all fit under one umbrella – the ERP system.

Basic Requirement of ERP

One of the key functions of ERP is to integrate resources from various operations in the company into one unified system. Integration allows information to be shared readily across the enterprise. This increases visibility for the senior and top management and allows them to monitor the company’s business processes in real-time.

Although the ideal solution is to have one ERP system to function in the organization, some larger organizations operate with 2 more more ERP systems that “talk” in the backend and exchange data through external interface with other stand alone systems which might be more powerful and perform better in fulfilling an certain organizations needs or business processes. For example, it is known that some ERP systems are stronger in manufacturing, while some are stronger in project management. Some applications are specialized and tailored for certain industry, eg, healthcare, hospitality, food and beverages, etc. Hence the solution put in placed might encompass vendors from different specialization. However, the implementation for such solutions must be well coordinated with full commitment from both the vendor and the customer.

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Why should I implement an ERP solution?