Enterprise Resource Planning (ERP) – part 1

ERP (Enterprise Resource Planning) is used along with the phrases ERP Software or ERP System, which manages all the functions and information of an organization’s business from shared data stores. It has modular hardware and software ‘services’ and units communicating on Local Area Network. These modules can be reconfigured, and the data integrity is preserving in a centralized or distributed shared database. ERP actually emerged as an extension of MRP (Material Requirements Planning), MRP II (Manufacturing Resource Planning), and CIM (Computer Integrated Manufacturing). Gartner, a research and analysis firm, introduced ERP in 1990. Nowadays, ERP systems cover all core functions of an organization, and are also found in non-profit and government organizations.

A software package should provide the functions of at least two systems, in order to be considered as an ERP system. For example, software package providing payroll and accounting functions. ERP presents a single database containing data for various software modules pertaining to areas such as:

Manufacturing - Bills of material, engineering, capacity, scheduling, quality control, workflow management, cost management, manufacturing process, flow, and projects
Supply chain management - Order entry, inventory, order to cash, product configurator, purchasing, supplier scheduling, supply chain planning, claim processing, inspections of goods, commission calculation
Financials - Cash management, general ledger, accounts receivable and accounts payable, fixed assets
Project management - Time and expense, billing, costing, activity management, performance units
Human resources - Payroll, training, human resources, rostering, time and attendance, benefits
Customer relationship management - Customer contact, sales and marketing, service, commissions, call center support
Data services - Variety of ‘self-service’ interfaces designed for suppliers, customers, and/or employees
Access control - Managing user privileges for different processes

MRP evolved into ERP due to the software design of ‘routings’, and the capacity planning activity was increasingly handled by software. ERP systems handle many functionalities of the organization, including logistics, manufacturing, inventory, invoicing, distribution, shipping, and accounting. ERP software typically controls many business activities such as production, marketing, sales, billing, delivery, quality management, inventory management, and human resource management.

During 1990, when companies faced Y2K problem, many of them replaced their information system with ERP systems. ERP systems also include front office systems like CRM and SRM systems. In ERP, all the functional departments are integrated into a single system. The earlier developed ERP software is now known as EAS (Enterprise Application Suite). ERP II is emerging as the next generation ERP software. Most vendors’ software packages of ERP contain ‘best practice’ function which provides for modification of business processes.

continue reading part 2