Enterprise resource planning (ERP) is business management software, typically a suite of integrated applications that collect, store, manage, and interpret data from product planning, manufacturing, service delivery, marketing and sales, inventory management, and many other business activities.
ERP presents an integrated, comprehensive view of essential business processes, often as they take place, using common databases maintained by a database management system. ERP systems track business resources and commitments. The applications that comprise the system distribute collectively among the various departments data they individually provide. ERP functions facilitate information flow for all business areas and manages exterior stakeholder connections.
Enterprise system software is a multi-billion dollar industry producing components that support a variety of business functions. Information technology (IT) investments have become the largest capital expenditures in USA businesses over the past decade. Early ERP solutions were for large enterprises, but smaller businesses now use them as well.
ERP systems are vital to business organizations because they integrate varied functions and coordinate transactions. ERP systems run on various computer hardware and network configurations with database repositories.
Common ERP Functional Requirements
● An integrated system operating in or near actual real time without reliance on periodic updates
● A common database supporting all applications
● A consistent look and feel across modules
● System installation with elaborate application integration by the in-house IT department
Functional Areas of ERP (Modules):
● Financial Accounting
● Managerial Accounting
● Human Resources
● Supply Chain Management
● Project Management
● Customer Relationship Management
● Data Services
● Transactional database
● Management Portal
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Most ERP systems incorporate best business practices and vary in how easily users can modify them. Best practices ease compliance with International Financial Reporting Standards, Sarbanes-Oxley, or Basel II regulatory requirements and with de facto industry standards for electronic fund transfers, for example, as ERP software can codify transactions quickly and replicate them across multiple businesses under the same compliance requirement(s).
ERP business process management software allows use of a system of integrated applications to manage businesses and automate many back- office services. ERP software integrates product planning, development, manufacturing, marketing, and sales.
ERP software often requires dedicated teams to customize it, analyze the data output, and handle upgrades. Small business ERP applications are customized for particular businesses or industries.
Additional ERP Functional Requirements
ERP software typically consists of multiple software modules developed individually for what best meets specific needs and technical capabilities. Each ERP module focuses on one business area, product development or marketing, for example, while managing back-office activities and tasks:
● Distribution Process Management
● Supply Chain Management
● Price Configuration
● Financial Data Management
● Project Planning
● Redundant Task Reduction
● Business Needs Assessments
Some of the most common ERP modules are those for product planning, material purchasing, inventory control, distribution, accounting, marketing, finance, and human resources. ERP systems provide a central repository for information shared by all to improve communication of data across the entire organization.
ERP System Needs
● It must be unified with applications and interfaces easy to use and working seamlessly across multiple departments.
● A common database or multiple shared databases accessible through all applications
● Search and report utilities
● Scalability, customization, and easy integration of additional modules as needed
● Database and information management software for a single central or for multiple interconnected databases with data flow to and from all. The defined workflow makes data movement seamless. Database hosts can be local, remote, or cloud-based.
● Applications and interfaces with suitable read-only or edit access controls to process data. For ERP content, when a writer submits content for review, only the editor should have access to it to prevent duplication and conflict.
● Workflow management where data updates and actions follow a logical sequence based on business needs.
● Report generation usually available in either dashboard form or data-editing applications like spreadsheets on management, department, team, and individual levels is another important ERP need.
● Communication in ERP systems is by automated mail generation, instant messaging, chat, or general broadcasts at individual and group levels.
ERP and CRM (Customer Relationship Management)
ERP software for business process management streamlines operations and improves productivity. ERP databases share information across multiple departments and interconnects applications for specific business processes. As most ERP applications address back office requirements, human resource and other administrative departments benefit most.
CRM tracks customer data and interaction for front office processes. Typically, CRM supports conversion of marketing leads into sales by consolidating information that customers provide when completing forms, browsing websites, or making other contacts. ERP handles back office processes while CRM on front office sales. ERP reduces costs; CRM increases direct revenue.
The Bottom Line
ERP is a complex framework to implement and usually needs a dedicated vendor for implementation. Two big problems in ERP implementations are high costs and failures to maintain best practices. Careful valuation of vendors and free open-source solutions can control and mitigate costs and appropriate employee training can improve maintenance of best business practices. Proper initial assessment of needs, association with reputable vendors with sufficient expertise, and clarity on requirements from the start help implement efficient and effective ERP systems.