Enterprise resource planning

Enterprise resource planning (ERP)
systems attempt to integrate several data sources and processes of an organization into a unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. A key ingredient of most ERP systems is the use of a unified database to store data for the various system modules.

The two key components of an ERP system are a common database and a modular software design. A common database is the system that allows every department of a company to store and retrieve information in real-time. Using a common database allows information to be more reliable, accessible, and easily shared. Furthermore, a modular software design is a variety of programs that can be added on an individual basis to improve the efficiency of the business. This improves the business by adding functionality, mixing and matching programs from different vendors, and allowing the company to choose which modules to implement. These modular software designs link into the common database, so that all of the information between the departments is accessible in real time.

Origin of the term
MRP vs. ERP — Manufacturing management systems have evolved in stages over the past 30 years from a simple means of calculating materials requirements to the automation of an entire enterprise. Around 1980, over-frequent changes in sales forecasts, entailing continual readjustments in production, as well as the unsuitability of the parameters fixed by the system, led MRP (Material Requirement Planning) to evolve into a new concept : Manufacturing Resource Planning (or MRP2) and finally the generic concept Enterprise Resource Planning (ERP)

The initials ERP originated as an extension of MRP (material requirements planning then manufacturing resource planning) and CIM (computer-integrated manufacturing) and was introduced by research and analysis firm Gartner. ERP systems now attempt to cover all basic functions of an enterprise, regardless of the organization's business or charter. Non-manufacturing businesses, non-profit organizations and governments now all 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).

Examples of modules in an ERP which formerly would have been stand-alone applications include: Manufacturing, Supply Chain, Financials, Customer Relationship Management (CRM), Human Resources, Warehouse Management and Decision Support System.

Overview
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 example, one may choose to use human resource management system from one vendor, and the financial systems from another, and perform the integration between the systems themselves.
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.[citation needed]
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.[citation needed]

Before
Prior to the concept of ERP systems, it was not unusual for each department within an organization to have its own customized computer system. For example, the human resources (HR) department, the payroll department, and the financial department might all have their own computer systems.

Typical difficulties involved integration of data from potentially different computer manufacturers and systems. For example, the HR computer system (often called HRMS or HRIS) would typically manage employee information while the payroll department would typically calculate and store paycheck information for each employee, and the financial department would typically store financial transactions for the organization. Each system would have to integrate using a predefined set of common data which would be transferred between each computer system. Any deviation from the data format or the integration schedule often resulted in problems.

After
ERP software, among other things, combined the data of formerly separate applications. This simplified keeping data in synchronization across the enterprise, it simplified the computer infrastructure within a large organization, and it standardized and reduced the number of software specialties required within larger organizations.

source : http://en.wikipedia.org/wiki/Enterprise_resource_planning