What Is Enterprise Resource Planning (ERP)?

Enterprise resource planning (ERP) is a process used by companies to manage and integrate the important parts of their businesses. Many ERP software applications are important to companies because they help them implement resource planning by integrating all of the processes needed to run their companies with a single system. An ERP software system can also integrate planning, purchasing inventory, sales, marketing, finance, human resources, and more.

KEY TAKEAWAYS

. ERP software can integrate all of the processes needed to run a company.
. ERP solutions have evolved over the years, and many are now typically web-based applications that users can access remotely.
. Some benefits of ERP include the free flow of communication between business areas, a single source of information, and accurate, real-time data reporting.
. An ERP system can be ineffective if a company doesn't implement it carefully.

Benefits of Enterprise Resource Planning (ERP)

Businesses employ enterprise resource planning (ERP) for various reasons, such as expanding business, reducing costs, and improving operations. The benefits sought and realized by one company may be different from another; however, there are some worth noting.

Integrating and automating business processes eliminates redundancies, improves accuracy, and improves productivity. Departments with interconnected processes can now synchronize work to achieve faster and better outcomes.

Some businesses benefit from enhanced reporting of real-time data from a single source system. Accurate and complete reporting help companies adequately plan, budget, forecast, and communicate the state of operations to the organization and interested parties, such as shareholders.

ERPs allow businesses to quickly access needed information for clients, vendors, and business partners, contributing to improved customer and employee satisfaction, quicker response rates, and increased accuracy rates. Associated costs often decrease as the company operates more efficiently.

Departments are better able to collaborate and share knowledge; a newly synergized workforce can improve productivity and employee satisfaction as employees are better able to see how each functional group contributes to the mission and vision of the company. Also, menial, manual tasks are eliminated, allowing employees to allocate their time to more meaningful work.

Special Considerations

An ERP system doesn't always eliminate inefficiencies within the business. The company needs to rethink the way it's organized, or else it will end up with incompatible technology.

ERP systems usually fail to achieve the objectives that influenced their installation because of a company's reluctance to abandon old working processes that are incompatible with the software. Some companies are also reluctant to let go of old software that worked well in the past. The key is to prevent ERP projects from being split into many smaller projects, which can result in cost overruns.