What is ERP?

What is an ERP system?

An ERP system is software that integrates functions related to sales, marketing, production, logistics, accounting, and staffing throughout an organization to enable the effective running of business processes. In order to increase efficiency and competitiveness, company managers today attempt to conceive in terms of business processes that integrate the functional domains. Information sharing between functional domains and with business partners is essential to this integration. This functionality is offered by ERP software through the use of a single shared database.

Companies that make and sell products have business processes that involve four main functional areas:

1.  Marketing and Sales (M/S)

2. Supply Chain Management (SCM)

3. Accounting and Finance (A/F)

4.  Human Resources (HR). 

These areas of operation perform the following functions:

• • Marketing and Sales develops products, sets product prices, promotes products through advertising and marketing, takes customer orders, supports customers, and creates sales forecasts.

  • Supply Chain Management develops production plans, orders raw materials from suppliers, receives the raw material into the facility, manufactures products, maintains facilities, and ships products to customers.

  • Accounting and Finance perform financial accounting to provide summaries of operational data in managerial reports and also is responsible for tasks such as controlling accounts, planning and budgeting, and cash-flow management.

  • Human Resources recruits, hires, trains, and compensates employees, ensures compliance with government regulations, and oversees the evaluation of employees.

Each functional area is served by an information system. Information systems capture, process, and store data to provide the information needed for decision-making. Employees working in one functional area often need data from other functional areas. Ideally, functional area information systems are integrated, so shared data are accurate and timely.

What ERP means 

Enterprise Resource Planning (ERP) systems are core software programs used by companies to integrate and coordinate information in every area of the business. ERP (pronounced “E-R-P”) programs help organizations manage company-wide business processes, using a common database and shared management reporting tools. Generally, we can say it is a system of record of an organization to efficiently manage all its processes in an integrated manner.