Enterprise Resource Planning is a holistic approach to managing the collective operations of a business. ERP is used to create efficiencies among business units such as engineering, accounting, marketing, and sales. One of the key goals of ERP is to quickly provide managers with the latest data about each of the business units for efficient decision making.
The structuring of ERP processes began in earnest in the 1990s as a way to effectively plan manufacturing and associated accounting operations. Software applications were quickly developed to automate the ERP processes. These tools ranged in functionality but had begun to be called ERP systems. ERP systems have now become a subset of management information systems.
ERP systems are often utilized to integrate internal and external business operations. The internal company functions are the back office operations that allow the business to be managed efficiently. These often include business divisions such as human resources, legal, finance, engineering, and marketing. In many companies these business divisions operated in a semi-autonomous manner as decentralized business units prior to the implementation of ERP systems.
External business functions include front end operations involving customer and vendor relations. ERP systems allow more efficient transactions involving sales data, customer information, and preferred vendor data. ERP systems are not necessarily used as inventory management systems; however, the trend data that can be easily derived from ERP systems may help managers and planners forecast product demand through analysis.
Many applications have been developed over the last 20 years to fulfill the idea of having one application suit all business divisions and customer relationships. Some applications are free ware like OpenPro, and others are proprietary versions. These applications may be written in a variety of software languages for many different platforms. Most ERP systems are designed to be easily installed and rely on robust databases.
ERP systems definitely have some pointed advantages. The system provides greater visibility among operating business divisions which lead to greater customer satisfaction. For instance, a customer calling a sales representative about a late order will typically not get the run around. The sales person can give an honest explanation and may be empowered to remedy the problem on the spot.
Some areas of ERP that are constantly improving are system implementation and security. Migrating to a single software system from many decentralized systems is often very difficult. Features that employees are accustomed to using may not be there anymore, and files may not export easily to the new system. Additionally, ERP systems represent single points of failure and may require enhanced IT security features.