The letters ERP stand for Enterprise Resource Planning, but this term means a lot of different things to a lot of different people. It can be hard to tell exactly what it’s purpose is suppose to be. The sheer volume of professional software applications available can be intimidating, and too many options are confusing. ERP packages are a single software solution that meets all of the organizational needs of a business, and they have become standard in modern companies.
The Basic Concept
ERP software is usually a package of multiple applications that solve common problems. In any organization, there are different roles and job functions that employees specialize in. Your sales staff makes contact with customers and initiates relationships. Your customers service department supports the client’s needs. Your warehouse staff keeps track of your assets and handles logistics. Each of these business units relies on similar information and must work together as a team. An ERP system links the data and processes of these departments together to reduce your company’s overall operating costs.
Where Did ERP Tools Come From?
The first systems were originally developed to streamline manufacturing. By controlling the precise movement of materials as they travelled through an assembly line, producers discovered that they could reduce waste. The next logical development was to integrate the supply chain and build software tools that organize the flow of materials throughout the entire process. Sales, procurement, and service departments also discovered that they could increase their productivity by integrating their databases with the rest of the company.
Today ERP tools are used in every single department in an organization. These software packages have applications that control and track finances and accounting as well as materials. They can store information about customers and the employees they interact with them. The data accumulated is easy to analyze and reports are generated that are used by marketing and strategy teams to build the business plans that set the course of action for the company’s future.
The Nuts and Bolts
In its simplest incarnation, an ERP system is just a set if interlinked databases with a user friendly interface. Most staff members work with the information through a dashboard or set of menus.
A database requires the hardware to support it. This means that a company must have access to a computer server, digital storage capabilities, and network components. These hardware devices can be expensive to purchase and maintain. In the past this has limited the access to these tools to just large scale companies.
Communication technology has gotten faster and more reliable than ever. This enables smaller firms to contract with service providers for their ERP software needs. Storing their data on remote systems using cloud technology lets smaller companies take advantage of the same organizational power of computerized tools that the bigger corporations use.
Data and Reporting
Flexible and powerful data tools keep decision makers informed and make it easier for employees to collaborate. This lowers costs and helps an organization stay competitive. The data made available from an ERP system can be used to create reports and forecasts that managers used to make major decisions. Finding and eliminating waste makes these systems essential for any size business.
An ERP system may have different capabilities depending on the software developer and the industry. Generic systems are available, but industry specific and customizable platforms are worth the time and effort to implement. Given the speed and demands that most firms face in a contested market, an ERP system is essential to maintain a competitive edge.