Enterprise resource planning (ERP) software attempts to integrate all departments and functions of a company into one single computer system.¹ Each department usually has its own computer system optimized for the ways that the department does its work; enterprise resource planning combines them all together.¹
Integration can have a significant impact if companies install the programs correctly. For example, consider a customer’s order: when a customer places an order, the order begins on paper and travels around a company being entered into various department’s computer systems.¹ This can cause delays and lost orders. Additionally, not one single person knows the true and complete status of an order. Enterprise resource planning unites all the departments together so that data only has to be entered once eliminating these issues.
There are five main reasons why companies undertake enterprise resource planning.¹ The first is to integrate financial information. Finance has its own set of revenues, sales has another, and different departments all have their own as well. Enterprise resource planning creates a single version of the financial information that cannot be questioned. The second reason is to integrate customer order information. From the moment the sales team enters a customer’s order, it stays in the enterprise resource planning system until the product is shipped out. This helps coordinate manufacturing and other departments.
A third reason to undertake ERP is to standardize and speed up manufacturing processes. Manufacturing companies often find that multiple business units across a company all use different computing systems. Using a single system can save time, increase productivity, and reduce head counts. The fourth reason to use enterprise resource planning is to reduce sitting inventory. ERP systems help increase the visibility of order fulfillment processes, which can lead to reduced inventories of the stuff used to make products. The last reason to undertake enterprise resource planning initiatives is to standardize HR information. In companies with multiple business units, human resources needs ERP technology to track employees’ time and commitment.
1. Koch, Christopher and Wailgum, Thomas. (April 17, 2008). ERP Definitions and Solutions. Retrieved from: http://www.cio.com/article/40323/ERP_Definition_and_Solutions