What is ERP - Enterprise Resource Planning?

ERP is an industry acronym for Enterprise Resource Planning. Broadly speaking, ERP refers to automation and integration of a company's core business to help them focus on effectiveness & simplified success.

An ERP System automates and integrates core business processes such as taking customer orders, scheduling operations, and keeping inventory records and financial data. ERP systems can drive huge improvements in the effectiveness of any organization by:

• Assisting you in defining your business processes and ensuring they are complied with throughout the supply chain;
• Protecting your critical business data through well-defined roles and security access
• Enabling you to plan your work load based on existing orders and forecasts
• Providing you with the tools to give a high level of service to your customers
• Translating your data into decision making information

Benefits of ERP for your Business

1. Integration across all business processes - To realize the full benefits of an ERP system it should be fully integrated into all aspects of your business from the customer facing front end, through planning and scheduling, to the production and distribution of the products you make.
2. Automation enhances productivity - By automating aspects of business processes, ERP makes them more efficient, less prone to error, and faster. It also frees up people from mundane tasks such as balancing data.
3. Increase overall performance - By integrating disparate business processes, ERP ensures coherence and avoids duplication, discontinuity, and people working at cross purposes, in different parts of the organization. The cumulative positive effect when business processes integrate well is overall superior performance by the organization.
4. Quality Reports and Performance  Analysis - Analysis on ERP will enable you to produce financial and boardroom quality reports, as well as to conduct analysis on the performance of your organization.
5. Integrates across the entire supply chain - A best of breed ERP system should extend beyond your organization and integrate with both your supplier and customer systems to ensure full visibility and efficiency across your supply chain.

Advantages

The fundamental advantage of ERP is that integrated myriad businesses processes saves time and expense. Management can make decisions faster and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include:

• Sales forecasting, which allows inventory optimization.
• Chronological history of every transaction through relevant data compilation in every area of operation.
• Order tracking, from acceptance through fulfillment
• Revenue tracking, from invoice through cash receipt
• Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced).

ERP systems centralize business data, which:

• Eliminates the need to synchronize changes between multiple systems—consolidation of finance, marketing, sales, human resource, and manufacturing applications
• Brings legitimacy and transparency to each bit of statistical data
• Facilitates standard product naming/coding
• Provides a comprehensive enterprise view (no "islands of information"), making real–time information available to management anywhere, any time to make proper decisions
• Protects sensitive data by consolidating multiple security systems into a single structure

Disadvantages

• Customization can be problematic. Compared to the best-of-breed approach, ERP can be seen as meeting an organization’s lowest common denominator needs, forcing the organization to find workarounds to meet unique demands.
• Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activities.
• ERP can cost more than less integrated or less comprehensive solutions.
• High ERP switching costs can increase the ERP vendor's negotiating power, which can increase support, maintenance, and upgrade expenses.
• Overcoming resistance to sharing sensitive information between departments can divert management attention.
• Integration of truly independent businesses can create unnecessary dependencies.
• Extensive training requirements take resources from daily operations.
• Due to ERP's architecture (OLTP, On-Line Transaction Processing) ERP systems are not well suited for production planning and supply chain management (SCM).
• Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and money.

Some ERP software packages

• Oracle 
• SAP 
• Microsoft Dynamics 
• Sage Software