Enterprise Resource Planning (ERP)
There are various ways in defining an Enterprise Resource Planning System. This is how it has been defined by American Inventory and Production Control System (APICS) dictionary:
Enterprise Resource Planning: An accounting oriented information system for identifying and planning the enterprise-wide resources to make, ship and account for customer orders.
Again in Internet encyclopedia, it has defined as An enterprise planning system is an integrated computer-based application used to manage internal and external resources, including tangible assets, financial resources, material and human resources.
Basically, an ERP combines several traditional management functions into a logically integrated system and facilitate the flow of information across these functions. It is designed to model and automate basic processes across the organization over a centralized database and eliminates the need of disparate systems maintained by various units of the organization.
Figure below shows how information is integrated into a typical organization using an ERP system.

ERP system is thus a mirror image of the major business processes of an organization.
Need for Enterprise Resource Planning - Why ERP ?
Separate systems were being maintained during 1960/70 for traditional business functions like Sales & Marketing, Finance, Human Resources, Manufacturing, and Supply Chain Management. These systems were often incongruent, hosted in different databases and required batch updates. It was difficult to manage business processes across business functions e.g. procurement to pay and sales to cash functions. ERP system grew to replace the islands of information by integrating these traditional business functions.
The successful implementation of an ERP system will have many advantages, as indicated below:
Conclusion
Although ERP provides many advantages; its implementation is a strategic decision, involving significant resources (both financial and human), proper evaluation and business process re-engineering. There must be a commitment from all levels. A failed implementation may lead to bankruptcy of an organization.
Related Articles
- Historical Evaluation of ERP
- ERP and e-Commerce
- ERP Vendors
- ERP Architecture
- Business Process Re-engineering

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