What is ERP?

What is ERP?

ERP is stands for Enterprise Resource Planning. ERP is a strategy to handle resources and business processes of an enterprise to maximize its productivity. ERP software is one which helps you to implement ERP strategy in your enterprise. In layman terms, one can manage his entire business using single software.

Some of the major business processes are

1) Sales

2) Distribution

3) Planning

4) Manufacturing

5) Marketing.

Typical ERP software integrates all of the above business processes for optimum functioning and production in large firms like Colgate Palmolive. For example take a soap manufacturing firm XSoaps. The various departments in the XSoaps are sales, distribution, procurement, manufacturing, human resources etc and there are separate software applications for each department. Suppose if a customer places an order for 10000 units of soap, the manufacturer has to check the whether the product is available in the inventory. If not available then raw materials are to be procured to manufacture the product. It is lugubrious process to check each of the individual software for information manually. In the event above we have to give the client information about availability which requires the department of sales to probe for information in inventory systems. If there is no real time updating of information on the availability of goods, two customers may place orders on the same product simultaneously. Also if different softwares are used for different department, they might not be able to coordinate efficiently. Take a second scenario where an employee leaves the organization. The finance department must be informed quickly to stops any transactions of the employee & all of his access ids must be disables so that others may not use them. Suppose if a raw material is purchased it must be updated instantly in the inventory section.

ERP systems aid in the control and communication of business activities, such as

§ Efficient handling of order processing and production scheduling

§ Management and analyses of business processes within an interactive environment

§ Synchronization of activity within departments, such as human resources or finance, with the needs and output from production facilities

§ Monitoring, sharing, and tracking information throughout the organization

§ Maintaining records of warehoused goods

§ Dynamic control of the purchasing of raw materials

§ Automation of data entry processes

§ Synchronization of order entry, quote processing, and reporting

§ Reduction of the amount of time assembly lines are down, the costs of carrying inventory, production costs, and record keeping errors

§ Obtaining the most value from company resources and equipment

There are many ERP softwares available. They are costly. Even the basic client costs you millions of dollars. Most of the industries which implement ERP are large & mid-size industries. Disregarding the costs of implementation & software license the benefits of ERP are huge. Of the ERP vendors SAP is most famous and has large revenues. There is an excellent article on Wikipedia about ERP, access it here