Enterprise resource planning (ERP) is a process whereby a company, often a manufacturer, manages and integrates the important parts of its business. An ERP management information system integrates areas such as planning, purchasing, inventory, sales, marketing, finance and human resources.
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 materials, production 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. ERP facilitates information flow between all business functions and manages connections to outside stakeholders.
Enterprise system software is a multi-billion-dollar industry that produces components supporting a variety of business functions. IT investments have become the largest category of capital expenditure in the 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 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 in a closed environment. 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. This change, however, with a more open environment, requiring further scrutiny of ERP security features and internal company policies regarding security.
- ERP provides increased opportunities for collaboration. Data takes many forms in the modern enterprise, including documents, files, forms, audio and video, and 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.