Enterprise Resource Planning (ERP) systems are enterprise software that allows organizations to integrate their business operations and improve productivity. It is an independent software application aimed at enhancing the efficiency of various business operations. The prime function of an ERP software is the integration of different business processes, such as accounting, marketing, sales, and human resource management.
Information related to business processes is extracted and analyzed so that decision-making process can be facilitated. An integrated information system is shared across an enterprise, meaning that all departments are given access to a central server system so that they can acquire the information required to carry out their respective operations. In this way, an ERP system makes it possible for a company to eliminate errors and save time. For instance, a food inspector carrying out an inspection while having the access to an ERP system can quickly enter and process the inspection data.
The 1990s birthed rapid development in enterprise resource planning systems. Initially, companies used these systems to perform basic back-office operations. Front-office operations such as e-commerce, e-government, and customer relation management were later integrated into the system. It was the rapid development of communication methods that made it possible for organizations to effectively communicate with external parties. Some of the benefits of ERP systems are:
- It enhances the standard of a business by performing business processes smoothly to result in a better output and customer service.
- It supplies important information and data to high-level management. By doing so, it facilitates the decision-making process.
- It eliminates the factor of rigidity and makes a business more receptive to changes. In other words, a business can perform its functions with more flexibility.
- A business becomes a more cohesive unit. Cohesiveness improves a business both internally and externally.
- ERP systems make data more secure, allowing companies to ensure that important data is not compromised.
- Employees can share and focus on all mediums of data. ERP systems function as a platform where workers have the freedom to collaborate.
- Easy to track various business processes such as revenue, billing, inspection, audit, output, and sales.
Functional areas of Enterprise Resource Planning systems
Elimination of inconsistency and replication is extremely important for any business. ERP systems are modules designed to share information across an enterprise and minimized the chances of errors and duplication. Some of the important functional areas of enterprise resource planning systems are:
- Supply Chain Management – ERP platform for supply chain management supports inspection, scheduling, order processing, purchasing, and production.
- Marketing and Sales – There are several sales related tasks that can be automated by ERP systems, such as shipping and competitor analysis. Marketing managers can track goals and achievements. Furthermore, workers can communicate with customers in order to streamline order delivery and tracking.
- Human Resource Management – ERP module for HR department contains tools that process data related to recruiting, training, payroll, retirement etc.
- Finance – Tasks related to finance and accounting, like budgeting, cash management, and costing, are automated through an ERP module. Automation of these tasks allows a company to manage data efficiently and ensure financial regulations.
- Manufacturing – An ERP module can be designed to streamline manufacturing processes, manages quality control, engineering, workflow and other manufacturing related tasks.