What is Enterprise Resource Planning?
The enterprise resource planning or ERP is an information system which is used by enterprises to integrate the various functions of the organization such as supply chain, finance, manufacturing, sales and marketing, planning etc. for a smooth functioning of the organization.
American Inventory and Production Control System (APICS) Definition
An accounting oriented information system for identifying and planning the enterprise-wide resources to make, ship and account for customer orders.
In simpler words, an ERP combines several management functions into a logically integrated system and facilitates the flow of information across these functions. It eliminates the need for different systems maintained by various units of the organization, by a centralized database.
Need for Enterprise Resource Planning (ERP)
There was a time in the 1960s-1970s that to manage business processes there were different systems maintained.
- It was difficult
- It was cumbersome
- It required Batch Updates
An ERP system emerged that integrated these business functions, which has a centralized database and was easier to handle, even as the company size grew.
ERP Software Modules
An ERP software generally consists of different modules, each module focussing on one area of the business.
Some common ERP Modules are listed in the table below as follows.
Modules in an ERP Software
Major Vendors of ERP Solutions
The major ERP Solutions' Vendors are as follows:
- The largest ERP solution provider with more than 75.000 customers
- The flagship Solution - R/3 (known for its sophistication and robustness)
- Next to SAP in ERP market breadth, depth, and share
- Offers a comprehensive, multilingual and multi currency solution, mostly through its channel partners
- First to implement internet computing model for developing and deploying its product
- Of recent origin and expanded through a number of acquisitions (major acquisition of SSA Global)
- Started by acquiring a host of ERP products like Navision, Solomon, Great Plain and Axapta
- Solutions are closely integrated with their office suit
Fortune 500 Companies' Need for ERP
Every Fortune 500 company faces excessive competition from other players in the market. With globalization, enhancing productivity has become crucial for their managements. This can be attained only with high levels of efficiency in the supply chain. This is where enterprise resource planning is playing a pivotal role, by integrating the interdependent components of the organization, harmoniously.
ERP Softwares Used by Fortune 500 Companies
A study has shown that about 90 percent of the Fortune 500 companies use enterprise resource planning system and of those around 70 percent of the use SAP, a leading enterprise resource planning software. SAP provides a fully integrated ERP Software. Another solution that is being used is the ERP software offered by Oracle. Some Fortune 500 companies that use enterprise resource planning software are:
- 3M (SAP)
- Audi (SAP)
- Ford Motor Co. (SAP)
- DaimlerChrysler Corp. (SAP)
- General Motors (SAP)
There are various modules in the enterprise resource planning software such has Human Resources, Finance, Production etc. These modules can be modified according to the company's needs.
Advantages of ERP
The Fortune 500 depend on an ERP system for the variety of advantages that it offers. One such advantage is that it can help with knowledge management, which is an emerging challenge for companies today.
If the data is mined properly, and assimilated in systematically, it can be the utmost importance, giving the company a competitive edge over the others. Other advantages such as increased transparency across the various departments of the organization, cohesive workflow among the departments, effective communication, secure systems, provision for the data back-up are few among the many.
New Concept of Cloud ERP
Recently, a new concept of cloud enterprise resource planning has come up, which is also being used by the Fortune 500 companies.
It eliminates traditional limits of the conventional enterprise resource planning software such as high capital in the form of hardware, staff training, etc.
It also has other advantages:
- Faster Implementation – Cloud ERP solutions are managed and hosted by a vendor, therefore, one does not need to set up or install any external hardware or software.
- Reduced Data Redundancy – The data redundancy reduces because there are multiple data backups that are taken conventionally.
- Instant Data Back-Ups – Ensures that the data of the organization is safe, and does not need multiple data backups.
- Reduced Costs as the IT team doesn't have to worry about servers, networking and operating system software support.
- Mobile Computing Made Easier - Authorizations are taken care of very easily, as complicated systems are removed.
- Superior Integration With Other Systems – The cloud was purposefully designed for easy interoperability, which adds the option for current or future usage of additional products.
Having an ERP system is not a luxury but a necessity. It is a must for survival in this competitive world.
— Alexis Leon
A proper enterprise resource planning software can open up endless possibilities for the company to improve its productivity by integrating the various functions of the organization. ERP has helped the Fortune 500 reach the position that they are at. Enterprise resource planning continues to help them gain a competitive advantage over the others in the industry.
© 2017 PGupta0919
PGupta0919 (author) on April 08, 2020:
Thanks for your feedback.
prateek mishra on April 02, 2020:
Nice information provided her for ERP System. Very helpful for organization to know how ERP System is essential for organizations. Keep posting, Thanks to autor for sharing such a nice information.
PGupta0919 (author) on May 30, 2018:
Thank you Obaba and Raj Purohit
Raj Purohit from India on May 30, 2018:
The need of a business totally depends upon the size of the business and scope of the chosen ERP software. As for businesses, with multiple locations and huge information to deal with, it is very important to have right synchronization.
Due to improper defining of requirements it has been observed that post implementation, 53 -percent of organizations achieved less than 50 - percent of the measurable benefits they expected from new ERP software.
The ERP software like SAP ( https://www.sap.com/india/index.html ), Deskera ( https://www.deskera.in/erp/ ) Oracle ( https://www.oracle.com/in/index.html ), not only provide the solution to big companies but also offers customized solution to the small companies.
Obaba on March 22, 2018:
As i read above about ERP software . This article enhance my knowledge about ERP software.
thank for writing keep writing.