ERP stands for enterprise resource planning. And, an ERP System is a set of software applications that ensure a company runs as efficiently as possible. The ERP System does this by centralizing all the varied data sources and differing processes of a business into one information-sharing system. An ERP System is designed to deal with all the basic functions of a specific venture no matter how that business is structured. The software functionality runs in a way that a business’ entire operation can be controlled because an ERP system permits all parts of a company to work as a compatible whole. This type of management results in increased productivity, improved product quality, and reduced costs, thereby making the organization more competitive against other like companies.
Because an ERP system is capable of delivering integrated sales order management, procurement, inventory management, financial management, advanced planning, customer relationship management, business intelligence, and manufacturing management, it also has to manage databases where all the necessary data for each of the various system units is stored. Originally, ERP systems were developed for the manufacturing industry to help simplify the labyrinth process required, at that time, before an order from sales was able to be translated into delivery of the customer’s order and payment could be collected. As such, the ERP System orchestrates the complex chain of events that have to happen for a specific manufacturer to receive an order, manufacture the product, and then deliver the correct, finished product to the customer on time.
For a business, the prime objective of using an ERP system is to join data and processes together so as to boost work flow, improve performance, and increase profit. Most businesses in the manufacturing industry search for the perfect ERP system; one that will manage all its functions- such as manufacturing, finance, human resources, supply chain management; inventory, projects, customer relationships, and data warehouse. Yet for many larger companies this is just not possible because nothing perfectly fits all their operational needs. Their way out of this dilemma has been to implement a first, principal ERP to which stand-alone modules can later be added. This is particularly helpful as a business grows and changes.
Existing ERP systems can be complex and difficult to implement correctly. Often, the vendors of the systems will supply consultants to help with transitioning the existing process and existing data into a new system. Still –caveat emptor- because most studies indicate that over half of all ERP implementations end up being considered failures.