What is ERP?

By Neil Zawacki
Updated: September 09, 2011

What is ERP?

Many people have heard the term ‘ERP’ used in a conversation but don’t fully understand what it means. This article will provide information about the process and the different advantages it can provide.

ERP (Enterprise Resource Planning) is a type of software that can manage multiple business processes at the same time. It integrates all of the corporate data into a centralized database and operates in real time conditions. This means that whenever information is modified within the system, all the other people who work at the business will immediately see the change.

ERP solutions tend to be divided into several different software modules. These include CRM (Customer Relationship Management), Business Intelligence, Financial Management, HCM (Human Capital Management), Manufacturing Operations, and SCM (Supply Chain Management). The modular approach allows companies to pick the features they need and ignore the ones they can do without.

The Human Capital Management module, for example, generally includes tools for payroll, time and labor tracking. The Manufacturing Operations module, on the other hand, will usually provide utilities that assist with work-order management and materials requirement planning. Supply Chain Management modules tend to assist with warehouse management and the flow of materials.

There are several advantages to adopting an ERP solution. The first is the unified database – this reduces cycle time and provides fast access to important data. ERP can also lower operational costs and reduce the amount of paper and postage used by your company. Other common benefits include superior inventory management, greater access to vendors, and a higher level of organizational transparency.

ERP also tends to come features that are useful for small businesses. Most ERP solutions have the ability to measure KPIs (Key Performance Indicators) among staff members. Other have travel administration utilities that can make sure that employees are following corporate travel policies. The majority of ERP solutions can also keep track of financial data in multiple types of currencies and languages, allowing a business to conduct business in foreign countries without at much difficulty.

ERP does have a few disadvantages that should be kept in mind. The first is that it tends to be somewhat expensive to purchase a complete ERP system. If you want to modify the system to meet specific needs, the prices rises even more. In addition, some ERP solutions are known to have compatibility issues with old legacy systems. You may thus have to update your PCs and servers if you want to implement the software at your place of business.

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