Emergence of ERP System
Enterprise Resource Planning or ERP is one the most common term used among corporate world, business school and in the technology structure. There are several definitions of the ERP, but the term can be best understood if each word is looked at individually.
Enterprise refers to any organization with aspiration and business motive. In any organization, there are several resources in form of human capital, plant, machinery, capital, etc. Every organization is looking at ways to use all resources in optimal manner and to get the most out of them. Therefore, for effective utilization of these resources, organization needs to set about controls and check points around them. These control and check points are known as strategic planning, for example, inventory planning, sales planning, human-resource planning, financial planning, etc.
ERP software looks to combine all the resource planning and execution at the corporate level. This facilitates tracking of resources and supplementing executive decision.
ERP is an integrated information system which utilizes a central database and has a common computing platform, which assists in effective resource planning to ensure business transactions.
Advent of Enterprise
The last couple of decades or so has seen the emergence of techniques to improve productivity. However, with the advent of information technology, ERP has been in the forefront in organizational success.
Traditionally, all organizations were built of different departments undertaking distinct task such as manufacturing, sales, operations, human resource, finance, etc. A thought prevailed that if individual departments could meet their respective goals, organization will also meet its objective. However, it has been observed that different departments have their own objectives and productivity metrics. These departmental objectives may not align to the overall organizational objective.
For example, sale team makes a commitment of next-day delivery when the distribution team may not be ready for that task. So there were always inter-department conflicts plaguing the organization.
This led in the development of enterprise approach towards management. Under enterprise approach, the whole organization works towards a single set of objective; all the departments need to develop their objective in line with the organizational objective. The whole organization works as a single unit with departments working as a sub-unit.
Enterprise Resource Planning System
As organization started moving towards enterprise approach, focus started shifting from function to process. Delivering customer delight became not just a sales function, but is part of the performance delivery process. This change of focus reorganized company structures. Earlier individual department had their own system catering to their own needs and demand. This led to duplication of data, lack of integration between department/systems and continuity in flow of information.
ERP system looks at the process as a whole. For example, a goods receipt will lead to update in stock inventory, update in purchase order history, update accounts payable, and update need of inspective of new stock.
ERP system leads to removal of data duplication as one entry or activity can be captured just once, and this record cannot be accessed without proper authorization.
ERP systems lead to standardization of data as entry fields are not left to user discretion. ERP System helps in data tracking from origin to destination.
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