What is ERP?

What is Enterprise Resource Planning & how does it work?

In today’s world of IT, we come across the term ERP. ERP stands for Enterprise Resource Planning. In simple terms, ERP is nothing but integrated management of core business processes through software and modern IT tools almost in real time. We explain what is ERP in detail here.

The enterprise resource planning software provides key detail of all the business information at a glance by combining various business modules. Traditionally various business owners keep track of accounts, inventory, wages, and procurement individually on large spreadsheets. The practice of keeping records in such a way is often confusing and complex. To solve this problem enterprise resource planning come into existence.

The enterprise resource planning works by integrating all those spreadsheets on a single platform. Thus, it provides all business information at a glance. This reduces complications and errors. A simple graphical illustration gives detail information about all the business processes. So, the business administrator can take informed decision in a timely manner.

History of ERP

In earlier days, the ERP systems traditionally focussed on manufacturing. In those days the material requirement planning (MRP) systems were popular. Then MRP 2 came into existence. In those days these systems were totally focused on manufacturing. As computer and internet evolved, these systems evolved too. As a result, a broader term was coined called the enterprise resource planning. Gartner group used the term ERP for the first time in the 1990s.

The scope of enterprise resource planning systems is vast. It covers more fields than traditional manufacturing. More and more companies started working on enterprise resource planning systems. The core processes like human resource management, maintenance, finance, and accounting also began integrating into one software.

The basics of ERP

The ERP largely depends on the collection of a large amount of data on the single platform. This data is then processed and shown to different individuals in the enterprise. The most important feature of such a system is a common database and availability of this data for multiple activities.

Hence, the same data can be derived through common processes by multiple users from company heads to clerks and employees at the same time. The data structure in these systems enables error-free access to the data and you can rely on this data, as this data is complete and up to date.

These systems also allow users to create, store and use data from one place. It also gives deeper access to all process running in the enterprise. The wide distribution and access to the data give more efficiency and trackability, improving performance at the same time. So, the error-prone datasheets are no more required. Thus, the enterprises get more confident of its decisions based on enterprise resource planning.

Advantages of ERP systems.

The most important advantage in enterprise resource planning is to the users. The users can access meaningful insights at a single glance. The whole organization can collaborate and work together at the same time irrespective of location. The trackability in the system improves the efficiency of the enterprise.

In addition, maintaining large data is not an easy task and often requires significant money but in the case of ERP, the operational cost is reduced drastically. Furthermore, you can have the same infrastructure all over the enterprise. The seamless infrastructure improves robustness, accuracy, and workflow.

Furthermore, enterprise resource planning systems are not prone to errors. Hence, it reduces the risk as the user can take accurate decisions. The user adopts to new technology more easily and integrates with the system seamlessly, improving the work culture all around the enterprise. Furthermore, everything operates in real time. So, you can make decisions swiftly irrespective of the size of the organization.

ERP today and tomorrow.

During the early days of adoption, ERP systems were generally located on the business premises. As the companies grow, the infrastructure cost goes up to maintain and operate the enterprise resource planning systems. The cost includes hardware, software, consulting and custom coding.

The increase in cost leads to the new generation of enterprise resource planning software. The ERP resides in the cloud. The use of internet and smartphone is also a reason to move to the cloud as the internet provides flexibility to most of the organizations.

The cloud enterprise resource planning system stores data in the cloud and make it available on-the-go to any device at any time. The cloud reduces the cost of maintaining the infrastructure. The organizations can invest in other growth opportunities as the cost of maintaining infrastructure is very less.

The current and future generation of enterprise resource planning systems are built for the businesses of any size. In today’s world, the big organizations as well as the smallest shopkeeper can use ERP. Thanks to the internet and the cloud. The small business owner can leverage the advantage of using enterprise resource planning systems previously used by a handful of big organizations.

In today’s fast world, no one has the time to fumble around spreadsheets and inventories. Everyone wants a simple interface and free-flowing information on-the-go. They also want to share the information with their colleague/s more easily. So, cloud ERP with AI is a way forward.

Video courtesy: Oracle