Enterprise resource planning
Enterprise resource planning (ERP) is 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 many activities, including:
- Product planning, purchase
- Manufacturing or service delivery
- Marketing and sales
- Inventory management
- Shipping and payment
ERP provides an integrated view of core business processes, often in real-time, 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 multibillion-dollar industry that produces components that support a variety of business functions. IT investments have become the largest category of capital expenditure in 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 is considered a vital organizational tool because it integrates varied organizational systems and facilitates error-free transactions and production. However, developing an ERP system differs from traditional system development. ERP systems run on a variety of computer hardware and network configurations, typically using adatabase as an information repository.
ERP systems experienced rapid growth in the 1990s. Because of the year 2000 problem and the introduction of the euro that disrupted legacy systems, many companies took the opportunity to replace their old systems with ERP.
ERP systems initially focused on automating back office functions that did not directly affect customers and the public. Front office functions, such as customer relationship management (CRM), dealt directly with customers, or e-business systems such as e-commerce, e-government, e-telecom, and e-finance—or supplier relationship management(SRM) became integrated later, when the Internet simplified communicating with external parties.
"ERP II" was coined in 2000 in an article by Gartner Publications entitled ERP Is Dead—Long Live ERP II. It describes web–based software that provides real–time access to ERP systems to employees and partners (such as suppliers and customers). The ERP II role expands traditional ERP resource optimization and transaction processing. Rather than just manage buying, selling, etc. ERP II leverages information in the resources under its management to help the enterprise collaborate with other enterprises. ERP II is more flexible than the first generation ERP. Rather than confine ERP system capabilities within the organization, it goes beyond the corporate walls to interact with other systems.Enterprise application suite is an alternate name for such systems.
Developers now make more effort to integrate mobile devices with the ERP system. ERP vendors are extending ERP to these devices, along with other business applications. Technical stakes of modern ERP concern integration—hardware, applications, networking, supply chains. ERP now covers more functions and roles—including decision making, stakeholders' relationships, standardization, transparency, globalization, etc.
Functional areas of ERP
An ERP system covers the following common functional areas. In many ERP systems these are called and grouped together as ERP modules:
- Financial accounting: General ledger, fixed asset, payables including vouchering, matching and payment, receivables cash application and collections, cash management,financial consolidation.
- Management accounting: Budgeting, costing, cost management, activity based costing.
- Manufacturing: Engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, manufacturing process, manufacturing projects, manufacturing flow, product life cycle management.
- Order Processing: Order to cash, order entry, credit checking, pricing, available to promise, inventory, shipping, sales analysis and reporting, sales commissioning.
- Project management: Project planning, resource planning, project costing, work breakdown structure, billing, time and expense, performance units, activity management
- Customer relationship management: Sales and marketing, commissions, service, customer contact, call center support CRM systems are not always considered part of ERP systems but rather Business Support systems (BSS).
- Data services : Various "self–service" interfaces for customers, suppliers and/or employees.