Information technology has transformed the way we live and the way we do business. ERP, or Enterprise Resource Planning, is one of most widely implemented business software systems in a wide variety of industries and organizations. In this short article, we'll try to concisely explain the basic yet important concepts relevant to ERP.
What is ERP - ERP is the acronym of Enterprise Resource Planning. ERP definition refers to both ERP software and business strategies that implement ERP systems. ERP implementation utilizes various ERP software applications to improve the performance of organizations for 1) resource planning, 2) management control and 3) operational control. ERP software consists of multiple software modules that integrates activities across functional departments - from product planning, parts purchasing, inventory control, product distribution, to order tracking. Most ERP software systems include application modules to support common business activities - finance, accounting and human resources.
ERP Systems - ERP is a lot more than a piece of computer software. A ERP System includes ERP Software, Business Processes, Users and Hardware that run the ERP software. An ERP system is more than the sum of its parts or components. Those elements engage together to achieve a common objective - improve and improve organizations' business processes.
History of ERP - Business Resource Planning (ERP) is the evolution of Manufacturing Requirements Planning (MRP) II in 1980s, while MRP is the advancement of Inventory Management & Control developed in 1960s. ERP has actually broadened from coordination of manufacturing processes to the combination of enterprise-wide backend processes. In terms of innovation, ERP has progressed from legacy implementation to more versatile tiered client-server architecture.
Advantages of ERP - ERP software tries to integrate business processes throughout departments onto a single enterprise-wide info system. The major benefits of ERP are improved coordination across functional departments and increased efficiencies of working. The application of ERP systems help facilitate everyday management also. ERP software systems is initially and ambitiously designed to support resource planning part of strategic preparation. In reality, resource preparation has been the weakest link in ERP practice due to the intricacy of tactical planning and absence of appropriate combination of ERP with Decision Assistance Systems (DSS).
ERP Failures - We could not conclude our brief guide to ERP without discussing ERP failures. The failure of multi-million dollar ERP projects are reported every so often even after 20 years of ERP application. We have actually recognized the four elements of an ERP System - 1) ERP software, 2) Business Processes that ERP software supports, 3) Users of ERP systems, and 4) Hardware and Operating Systems that run ERP applications. The failures in several of those 4 components might trigger the failure of an ERP project.
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