What is ERP Software?

Enterprise Resource Planning (ERP) software systems are designed to facilitate, integrate and organize information across numerous departments of business, and can include customer service, accounting, sales, finance, human resources, manufacturing, and any other business data, both qualitative and quantitative. Developed out of the need for sophisticated data processing in the manufacturing industry, ERP Software has evolved into an information management tool for companies and organizations in any business or industry. The name Enterprise Resource Planning (ERP) is deceiving in that it's less about resource planning, and more about making information available and meaningful to each and every department and end-user. By cultivating data from all aspects of a business and rapidly organizing it into reporting systems, companies are better able to evaluate the health of their business and able to respond faster, develop more accurate forecasts, and plan better.

A brief history of ERP Software

In the 1960s, manufacturers worked to develop software to manage inventory control. These software systems that were developed were mostly custom and proprietary, and based on traditional inventory practices. In the 1970's, the scope of these systems expanded into what was then known as MRP (Material Requirement Planning), which sought to integrate a greater level of the manufacturing process into the system, including planning, procurement, and assembly in addition to inventory.

During the 1980s, companies sought the integration of distribution information with manufacturing data, and so the capabilities of MRP systems were extended and MRP-II (Manufacturing Resources Planning) was developed.

During the rapid growth period of the 1990s, companies experienced unprecedented growth by expanding into new markets and through acquisitions. To manage this growth, owners and executives desired holistic reporting of their business's health. ERP solutions were developed to create an information system that integrated information across the entire enterprise.

ERP Software has lead to the standardization and streamlining of business processes by giving companies the ability to recognize and implement their unique best practices (defined as: the specific processes and systems identified as performing exceptionally well in improving an organization's performance and efficiency in targeted areas).Today, companies who've realized the internal benefits of ERP Software are looking to ERP-II to enable further information exchange between their customers, suppliers, and partners.

Why is ERP Software necessary?

As a company grows and becomes more complex organizationally, the task of providing accurate and timely information to management and decision-makers becomes ever more difficult. In addition, increasing market expectations and competitive pressures are requiring more detailed business analysis and quicker and more accurate decision making and responses. To meet these challenges, companies have customarily tended toward a band-aid approach, relying on individual departments and lines of business to develop target-specific solutions to meet their specific business and information needs. While incremental gains have been realized with individual fixes, companies may be missing the opportunity to enact best practices across all departments through standardization. As well, individual fixes tend to be inefficient due to duplicated efforts amongst departments, increased maintenance costs due to disparate technologies, and increased administrative and management costs.

In order to make the best decisions for a company, management needs the most up-to-date and accurate information. Companies with multiple data systems that organize information into varying formats face the arduous task of translating and transferring information from one department and format to another, which can be time consuming and lead to inaccuracies. With ERP solutions, the system draws from a single database, which eliminates much, if not all, of the time spent integrating information and significantly prevents inaccuracies in the reporting process.

What are the benefits of ERP?

ERP Software solutions create an integrated system of information and communication across the enterprise. Companies are then better able to understand their business and respond to issues that arise immediately and accurately. In addition, ERP Software provides the framework for standardizing business processes and allow management to implement best practices company-wide.

If designed and implemented properly, an ERP Software solution can automate business processes, increase the accuracy of sales, inventory and production data, allow for timelier reporting, and pave the road for better information-driven decisions. Additional benefits from ERP Software include:

Improved flow of communication between departments
Reduced administrative costs
Reduced IT maintenance and hardware costs
Increased customer service and client satisfaction

ERP Software provides the structure for companies to manage growth, maximize efficiencies through standardization and enable timely and accurate reporting for decision making. The following section will help you decide whether ERP Software is right for your company, how to evaluate a solution and strategies for smoother implementation. Read more >