What is Enterprise Resource Planning

What is Enterprise Resource Planning?

Enterprise Resource Planning (ERP) is a type of business software that essentially takes all the different types of software a business needs and merges them all into one. This allows multiple sectors of the business access to the same information with a lot less work.

ERP developed through several stages from the 1960s; by the 1970s, Material Requirements Planning (MRP) had combined manufacturing inventory and reconciling with production. Over the next few decades, ERP evolved and continues to evolve thanks to cloud computing. Here’s a look at what ERP is and where it’s headed.

Understanding the Concept of ERPs

A metaphor to make a little more sense of the concept of ERPs: One of the biggest downfalls of the different branches of government has been their inability to coalesce information. On a smaller level, even within each state different branches of human services and justice departments fail to communicate in a large way. For example, the police department, the Department of Human Services, Child Protective Services, etc use -- for the most part -- different software.

Current projects should give rise in the near future to a single system allowing all of these organizations to have access to the same information, rather than having to sift through communication responses and wait weeks for answers to questions.

Management Information System Integration

The corporate world, on the other hand, has it figured out. While ERP is itself a type of software, its development has also allowed companies that help businesses implement ERP software to rise. Enterprise Resource Planning systems allow a business to combine its most important parts into one, neat piece of software. Investopedia reports some of these parts as “planning, purchasing, inventory, sales, marketing, finance and human resources.”

When all the parts of the business are tidied together in a single package, it allows all those parts of the business access to each other. Not just inventory management like the ERP of the ‘60s, but everything from the front of the business to ecommerce to marketing. Work in purchasing and need a look at a spreadsheet that, by rights, belongs in the sales section of the business? No problem for ERP software.

What’s Next for ERP?

The concept of clouds, those intangible beasts of memory that float around on the internet and let you store all your pictures and files and access them from the seven different pieces of technology you own, has also impacted ERP. In this regard, “the cloud” is generally referred to as “Software-as-a-Service” (SaaS) or “cloud computing.” Cloud computing makes ERPs less pricey and much easier to start up and use.

Additionally, Oracle Netsuite reports, and “perhaps even more importantly, cloud ERP enables real-time reporting and BI, making them even valuable to executives and staff seeking visibility into the business.”

The Purpose of ERP

At its simplest, Enterprise Resource Planning makes it much, much easier for any size business, not just enterprises, to access the different parts of the enterprise quickly. This means you can look at other areas of the business and see exactly what and how they’re doing right now. Employees can see what can be done to improve current numbers, and even make sure all parts of the business are sticking to the rules and not running unnecessary risks.

Essentially, all parts of the business can be automated, and, perhaps most importantly, when the whole business works together, it makes it that much easier for employees and customers to access what they need.

Last Updated: February 13, 2018