What is an ERP (Enterprise Resource Planning)?

Definition

Enterprise Resource Planning (ERP) is a type of software system that organizations use to manage and integrate their core day-to-day business processes. An ERP system acts as a centralized database, connecting various departments and functions—such as finance, HR, manufacturing, and supply chain—into a single, unified platform. This allows for a seamless flow of data between different business activities.

Examples

An ERP system is typically composed of different modules that serve specific departments:

• Finance & Accounting: A finance manager uses the ERP to handle accounts payable, manage the general ledger, and generate financial statements.
• Human Resources (HR): An HR professional uses the ERP to manage employee records, run payroll, and track time and attendance.
• Supply Chain Management: A logistics coordinator uses the ERP to track inventory levels, manage warehouse operations, and process orders.
• Manufacturing: A plant manager uses the ERP to manage production scheduling, monitor shop floor activities, and handle procurement of raw materials.
• Popular ERP Vendors: Well-known examples of ERP systems include SAP S/4HANA, Oracle NetSuite, and Microsoft Dynamics 365.

Advantages/Benefits

• Integrated Information: Provides a single source of truth for the entire organization, eliminating data silos and ensuring everyone works with the same information.
• Improved Efficiency: Automates and streamlines core business processes, reducing manual effort and operational costs.
• Better Decision-Making: Offers comprehensive reporting and real-time data, giving leaders the insights they need to make more informed strategic decisions.
• Scalability: A robust ERP system can support a company’s growth, managing increased complexity and higher transaction volumes.

Related terms

• CRM (Customer Relationship management)
• SCM (Supply Chain Management)
• SaaS (Software as a Service)
• Business Process
• Centralized Database
• Automation