Enterprise resource planning (ERP) is business management software—typically a suite of integrated applications—that a company can use to collect, store, manage and interpret data from many business activities, including: Order Management, Purchasing, Order Fulfillment, Inventory Management, Resources Management, Financial Accounting, Sales and Marketing and Service delivery.

ERP provides an integrated view of core business processes, often in real-time, using common databases maintained by a database management system. ERP systems track business resources—cash, inventory, assets—and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across the various departments (purchasing, sales, accounting, etc.) that provide the data. ERP facilitates information flow between all business functions, and manages connections to outside stakeholders.

IT investments have become the largest category of capital expenditure in over the past decade. Though early ERP systems focused on large enterprises with manufacturing plants, smaller enterprises increasingly use ERP systems.

The ERP system is considered a vital organizational tool because it integrates varied organizational systems and facilitates error-free transactions and production.

ERP meets Cloud Computing

The evolution of business and IT assets and operations is a continuous process. The Internet has created new opportunities and computing access channels that enable market developments hitherto constrained by geography and performance limitations. Cloud computing provides a new business paradigm for resources. It enables organizations to create and use IT and business services on-demand from optimal sources to maximize utilization and cost-effectiveness. This can be between enterprises or within a single enterprise. SMB are one of the biggest beneficiaries of Integrated ERP solutions and the Cloud. Basically businesses now can take advantage of highly effective applications and infrastructure without the need for CAPEX. With a small monthly cost, businesses can utilize Business Efficiency Solutions that otherwise only larger and well-capitalized companies had access to. We call it the “Business Efficiency Cloud”. 

Our term “moving to the Business Efficiency Cloud ” refers to an organization moving away from a traditional CAPEX model (buy the dedicated hardware and depreciate it over a period of time) to the OPEX model (use a shared cloud infrastructure and pay as one uses it). The present availability of high-capacity networks, low-cost computers and storage devices as well as the widespread adoption of hardware virtualization, service-oriented architecture, and autonomic and utility computing have led to a growth in cloud computing. Companies can scale up as computing needs increase and then scale down again as demands decrease.

Characteristics of an ERP

ERP (Enterprise Resource Planning) systems typically include the following characteristics:

  • An integrated system that operates in (or near) real time without relying on periodic updates
  • A common database that supports all applications
  • A consistent look and feel across modules
  • A ‘Dashboard’ type interface for Management and Performance Metric ans Statistics

Functional areas of ERP

An ERP system covers the following common functional areas. In many ERP systems these are called and grouped together as ERP modules. There is no hard and fast rule in the grouping as long as the grouping makes operational sense. Below is an example of groupings of ERP functionality:

  • Financial accounting: General ledger, fixed asset, payables, payments, receivables and collections, cash management, financial consolidation
  • Management accounting: Budgeting, costing, cost management, activity based costing
  • Human resources: Recruiting, Taining, Attendance, Payroll, Benefits, Appraisals and Performance Management
  • Manufacturing: Engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, manufacturing process, manufacturing projects, manufacturing flow, product life cycle management
  • Order Processing: Sales Order entry, Inventory, Shipping, Sales analysis and Reporting, Sales commissions,
  • Supply chain management: Vendor / Supplier management, Quotations, Product purchasing, Inventory, Claim processing, Warehousing (receiving, putaway, picking and packing).
  • Project management: Project planning, resource planning, project costing, work breakdown structure, billing, time and expense, performance units, activity management
  • Customer relationship management: Sales and marketing, Sales Force Automation, commissions, service, warranty management, customer contact, call center support, Customer satisfaction surveys for quality improvement — CRM systems are in essence Business Support systems (BSS) integrated with ERP systems.