What is ERP?
Enterprise resource planning software, or ERP, doesn't live
up to its acronym. Forget about planning it doesn't do much
of that and forget about resource, a throwaway term. But remember
the enterprise part. This is ERPs true ambition. The software
attempts to integrate all departments and functions across a
company onto a single computer system that can serve all those
departments particular needs.
Building a single software program that serves the needs of
people in finance as well as it does the people in human resources
and in the warehouse is a tall order. Each of those departments
typically has its own computer system optimized for the particular
ways that the department does its work. But ERP combines them
all together into a single, integrated software program that
runs off a single database so that the various departments can
more easily share information and communicate with each other.
That integrated approach can have a tremendous payback if companies
install the software correctly.
Take a customer order, for example. Typically, when a customer
places an order, that order begins a mostly paper-based journey
from inbox to inbox throughout the company, often being keyed
and rekeyed into different departments computer systems along
the way. All that lounging around in inbox causes delays and
lost orders, and all the keying into different computer systems
invites errors. Meanwhile, no one in the company truly knows
what the status of the order is at any given point because there
is no way for the finance department, for example, to get into
the warehouses computer system to see whether the item has
been shipped. "You'll have to call the warehouse"
is the familiar refrain heard by frustrated customers.
ERP vanquishes the old standalone computer systems in finance, HR, manufacturing and the warehouse, and replaces them with a single
unified software program divided into software modules that roughly approximate the old standalone systems. Finance, manufacturing and t
he warehouse all still get their own software, except now the software is linked together so that someone in finance can look into the
warehouse software to see if an order has been shipped. Back in the 90s ERP was developed as a tightly integrated monolith, but
most vendors software has since become flexible enough that you can install some modules without buying the whole package.
Many companies, for example, will install only an ERP finance or HR module and leave the rest of the functions for another day.