Enterprise resource planning (ERP) consists of technologies and systems companies use to manage and integrate their core business processes. Enterprise resource planning software offers single system solutions that integrate processes across the business. Such applications allow for users to interact within a single interface, share information, and enable cross-functional collaboration.
Understanding Enterprise Resource Planning
You can think of an enterprise resource planning system as the glue that binds together the different computer systems for a large organization. Without an ERP application, each department would have its system optimized for its specific tasks. With ERP software, each department still has its system, but all of the systems can be accessed through one application with one interface.
ERP applications also allow the different departments to communicate and share information more easily with the rest of the company. It collects information about the activity and state of different divisions, making this information available to other parts, where it can be used productively.
ERP applications can help a corporation become more self-aware by linking information about the production, finance, distribution, and human resources together. Because it connects different technologies used by each part of a business, an ERP application can eliminate costly duplicate and incompatible technology. The process often integrates accounts payable, stock control systems, order-monitoring systems, and customer databases into one system.
ERP offerings have evolved over the years from traditional software models that make use of physical client servers to cloud-based software that offers remote, web-based access.
A company could experience cost overruns if its ERP system is not implemented carefully.
Benefits of Enterprise Resource Planning (ERP)
Businesses employ enterprise resource planning (ERP) for various reasons, such as expanding business, reducing costs, and improving operations. The benefits sought and realized by one company may be different from another; however, there are some worth noting.
Integrating and automating business processes eliminates redundancies, improves accuracy, and improves productivity. Departments with interconnected processes can now synchronize work to achieve faster and better outcomes.
Some businesses benefit from enhanced reporting of real-time data from a single source system. Accurate and complete reporting help companies adequately plan, budget, forecast, and communicate the state of operations to the organization and interested parties, such as shareholders.
ERPs allow businesses to quickly access needed information for clients, vendors, and business partners, contributing to improved customer and employee satisfaction, quicker response rates, and increased accuracy rates. Associated costs often decrease as the company operates more efficiently.
Departments are better able to collaborate and share knowledge; a newly synergized workforce can improve productivity and employee satisfaction as employees are better able to see how each functional group contributes to the mission and vision of the company. Also, menial, manual tasks are eliminated, allowing employees to allocate their time to more meaningful work.