Enterprise Resource Planning (ERP)

The term ERP originally implied systems designed to plan the use of enterprise-wide resources. Although the initialism ERP originated in the manufacturing environment, today's use of the term ERP systems has much broader scope. ERP systems typically attempt to cover all basic functions of an organization, regardless of the organization's business or charter. Businesses, non-profit organizations, nongovernmental organizations, governments, and other large entities utilize ERP systems.

To be considered an ERP system, a software package must provide the function of at least two systems. For example, a software package that provides both payroll and accounting functions could technically be considered an ERP software package.

However, the term is typically reserved for larger, more broadly based applications. The introduction of an ERP system to replace two or more independent applications eliminates the need for external interfaces previously required between systems, and provides additional benefits that range from standardization and lower maintenance (one system instead of two or more) to easier and/or greater reporting capabilities (as all data is typically kept in one database).

Some organizations — typically those with sufficient in-house IT skills to integrate multiple software products — choose to implement only portions of an ERP system and develop an external interface to other ERP or stand-alone systems for their other application needs. For instance, the PeopleSoft HRMS and financials systems may be perceived to be better than SAP's HRMS solution. But conditions continue to change, with Oracle’s acquisition of PeopleSoft in 2004, leaving the market unsure of the final result. In addition, other competitors are entering the HRMS arena, namely Lawson Software and Workday, Inc. Recently, Lawson was named the winner of an HCM “battle” between Workday, Lawson and Oracle. Also, some may perceive SAP's manufacturing and CRM systems as better than PeopleSoft's equivalents. In this case these organizations may justify the purchase of an ERP system, but choose to purchase the PeopleSoft HRMS and financials modules from Oracle, and their remaining applications from SAP.

This is very common in the retail sector^{[citation needed]}, where even a mid-sized retailer will have a discrete Point-of-Sale (POS) product and financials application, then a series of specialized applications to handle business requirements such as warehouse management, staff rostering, merchandising and logistics.

Ideally, ERP delivers a single database that contains all data for the software modules, which would include:

Manufacturing

Engineering, Bills of Material, Scheduling, Capacity, Workflow Management, Quality Control, Cost Management, Manufacturing Process, Manufacturing Projects, Manufacturing Flow

Supply Chain Management

Inventory, Order Entry, Purchasing, Product Configurator, Supply Chain Planning, Supplier Scheduling, Inspection of goods, Claim Processing, Commission Calculation

Financials

General Ledger, Cash Management, Accounts Payable, Accounts Receivable, Fixed Assets

Projects

Costing, Billing, Time and Expense, Activity Management

Human Resources

Human Resources, Payroll, Training, Time & Attendance, Rostering, Benefits

Customer Relationship Management

Sales and Marketing, Commissions, Service, Customer Contact and Call Center support

Data Warehouse

and various Self-Service interfaces for Customers, Suppliers, and Employees

Enterprise Resource Planning is a term originally derived from manufacturing resource planning (MRP II) that followed material requirements planning (MRP). MRP evolved into ERP when "routings" became a major part of the software architecture and a company's capacity planning activity also became a part of the standard software activity.^{[citation needed]} ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and accounting for a company. Enterprise Resource Planning or ERP software can aid in the control of many business activities, like sales, marketing, delivery, billing, production, inventory management, quality management, and human resource management.

ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K problem in their legacy systems. Many companies took this opportunity to replace their legacy information systems with ERP systems. This rapid growth in sales was followed by a slump in 1999, at which time most companies had already implemented their Y2K solution.

ERPs are often incorrectly called back office systems indicating that customers and the general public are not directly involved. This is contrasted with front office systems like customer relationship management (CRM) systems that deal directly with the customers, or the eBusiness systems such as eCommerce, eGovernment, eTelecom, and eFinance, or supplier relationship management (SRM) systems.

ERPs are cross-functional and enterprise wide. All functional departments that are involved in operations or production are integrated in one system. In addition to manufacturing, warehousing, logistics, and information technology, this would include accounting, human resources, marketing, and strategic management.

ERP II means open ERP architecture of components. The older, monolithic ERP systems became component oriented.

EAS — Enterprise Application Suite is a new name for formerly developed ERP systems which include (almost) all segments of business, using ordinary Internet browsers as thin clients.

Before

Prior to the concept of ERP systems, departments within an organization (for example, the human resources (HR)) department, the payroll department, and the financial department) would have their own computer systems. The HR computer system (often called HRMS or HRIS) would typically contain information on the department, reporting structure, and personal details of employees. The payroll department would typically calculate and store paycheck information. The financial department would typically store financial transactions for the organization. Each system would have to rely on a set of common data to communicate with each other. For the HRIS to send salary information to the payroll system, an employee number would need to be assigned and remain static between the two systems to accurately identify an employee. The financial system was not interested in the employee-level data, but only in the payouts made by the payroll systems, such as the tax payments to various authorities, payments for employee benefits to providers, and so on. This provided complications. For instance, a person could not be paid in the payroll system without an employee number.

After

ERP software, among other things, combined the data of formerly separate applications. This made the worry of keeping numbers in synchronization across multiple systems disappear. It standardised and reduced the number of software specialties required within larger organizations.