Enterprises Resource Planning

Enterprise resource planning (ERP) is the integrated management of core business processes, often in real-time and mediated by software and technology.

ERP is usually referred to as a category of business-management software — typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from these many business activities.

ERP provides an integrated and continuously updated view of core business processes using common databases maintained by a database management system. ERP systems track business resources—cash, raw materialsproduction capacity—and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data.[1] ERP facilitates information flow between all business functions and manages connections to outside stakeholders.

Enterprise system software is a multibillion-dollar industry that produces components supporting a variety of business functions. IT investments have become the largest category of capital expenditure in United States-based businesses over the past decade. Though early ERP systems focused on large enterprises, smaller enterprises increasingly use ERP systems.

The ERP system integrates varied organizational systems and facilitates error-free transactions and production, thereby enhancing the organization’s efficiency. However, developing an ERP system differs from traditional system development. ERP systems run on a variety of computer hardware and network configurations, typically using a database as an information repository.

ERP systems typically include the following characteristics:

·         An integrated system

·         Operates in (or near) real time

·         A common database that supports all the applications

·         A consistent look and feel across modules

·         Installation of the system with elaborate application/data integration by the Information Technology (IT) department, provided the implementation is not done in small steps

Functional areas

An ERP system covers the following common functional areas. In many ERP systems these are called and grouped together as ERP modules:

·         Finance & AccountingGeneral LedgerFixed Assetspayables including vouchering, matching and payment, receivables Cash Management and collections, cash managementFinancial Consolidation

·         Management AccountingBudgeting, Costing, cost managementactivity based costing

·         Human resourcesRecruitingtrainingrosteringpayrollbenefitsretirement and pension plansdiversity managementretirementseparation

·         Manufacturing: Engineeringbill of materials, work orders, schedulingcapacityworkflow managementquality control, manufacturing process, manufacturing projects, manufacturing flow, product life cycle management

·         Order Processing: Order to cash, order entry, credit checking, pricing, available to promise, inventoryshipping, sales analysis and reporting, sales commissioning.

·         Supply chain management: Supply chain planning, supplier scheduling, product configuratororder to cashpurchasinginventory, claim processing, warehousing (receiving, putaway, picking and packing).

·         Project management: Project planning, resource planning, project costing, work breakdown structurebilling, time and expense, performance units, activity management

·         Customer relationship management: Sales and marketing, commissions, service, customer contact, call center support — CRM systems are not always considered part of ERP systems but rather Business Support systems (BSS).

Components

·         Transactional database

·         Management portal/dashboard

·         People

·         Software

Advantages

The most fundamental advantage of ERP is that the integration of myriad business processes saves time and expense. Management can make decisions faster and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include:

·         Sales forecasting, which 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, which:

·         Eliminates the need to synchronize changes between multiple systems—consolidation of finance, marketing, sales, human resource, and manufacturing applications

·         Brings legitimacy and transparency to each bit of statistical data

·         Facilitates standard product naming/coding

·         Provides a comprehensive enterprise view (no “islands of information”), making real–time information available to management anywhere, anytime to make proper decisions

·         Protects sensitive data by consolidating multiple security systems into a single structure

Benefits

·         ERP can improve quality and efficiency of the business. By keeping a company’s internal business processes running smoothly, ERP can lead to better outputs that may benefit the company, such as in customer service and manufacturing.

·         ERP supports upper level management by providing information for decision making.

·         ERP creates a more agile company that adapts better to change. It also makes a company more flexible and less rigidly structured so organization components operate more cohesively, enhancing the business—internally and externally.

·         ERP can improve data security. A common control system, such as the kind offered by ERP systems, allows organizations the ability to more easily ensure key company data is not compromised.

·         ERP provides increased opportunities for collaboration. Data takes many forms in the modern enterprise. Documents, files, forms, audio and video, emails. Often, each data medium has its own mechanism for allowing collaboration. ERP provides a collaborative platform that lets employees spend more time collaborating on content rather than mastering the learning curve of communicating in various formats across distributed systems.

 

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