Enterprise resource planning Enterprise resource planning (ERP) systems integrate internal and external management information across

an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. ERP systems can run on a variety of computer hardware and network configurations, typically employing a database as a repository for information The transformation of ERP into a cloudbased model has been relatively slow, but as cloud computing makes other inroads into the enterprise environment some functionality is being moved to the cloud Origin of "ERP" In 1990 Gartner Group first employed the acronym ERP[4] as an extension of material requirements planning (MRP), later manufacturing resource planning[5][6] and computerintegrated manufacturing. Without supplanting these terms, ERP came to represent a larger whole, reflecting the evolution of application integration beyond manufacturing.[7] Not all ERP packages were developed from a manufacturing core. Vendors variously began with accounting, maintenance and human resources. By the mid1990s ERP systems addressed all core functions of an enterprise. Beyond corporations, governments and nonprofit organizations also began to employ ERP systems.[8] Expansion ERP systems experienced rapid growth in the 1990s because the year 2000 problem and introduction of the Euro disrupted legacy systems. Many companies took this opportunity to replace such systems with ERP. This rapid growth in sales was followed by a slump in 1999 after these issues had been addressed.[9] ERP systems initially focused on automating back office functions that did not directly affect customers and the general public. Front office functions such as customer relationship management (CRM) dealt directly with customers, or ebusiness systems such as ecommerce, egovernment, etelecom, and efinance, or supplier relationship management (SRM) became integrated later, when the Internet simplified communicating with external parties.[citation needed] "ERP II" was coined in the early 2000s. It describes webbased software that allows both employees and partners (such as suppliers and customers) realtime access to the systems. The role of ERP II expands from the resource optimization and transaction processing of traditional ERP to leveraging the information involving those resources in the enterprises efforts to collaborate with other enterprises, not just to conduct e-commerce buying and selling.[10] Compared to the first generation ERP, ERP II is said to be more flexible rather than confining the capabilities of the ERP system within the organization, it is designed to go beyond the

corporate walls and interact with other systems. "Enterprise application suite" is an alternate name for such systems. Characteristics ERP (Enterprise Resource Planning) systems typically include the following characteristics:

An integrated system that operates in real time (or next to real time), without relying on periodic updates.[citation needed] A common database, which supports all applications. A consistent look and feel throughout each module. Installation of the system without elaborate application/data integration by the Information Technology (IT) department.[11]

Finance/Accounting General ledger, payables, cash management, fixed assets, receivables, budgeting, consolidation[disambiguation needed] Human resources Payroll, training, benefits, 401K, recruiting, diversity management Manufacturing Engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow, activity based costing, product life cycle management Supply chain management Order to cash, inventory, order entry, purchasing, product configurator, supply chain planning, supplier scheduling, inspection of goods, claim processing, commissions Project management Costing, billing, time and expense, performance units, activity management Customer relationship management Sales and marketing, commissions, service, customer contact, call center support Data services Various "selfservice" interfaces for customers, suppliers and/or employees Access control

Management of user privileges for various processes Components

Transactional database Management portal/dashboard Business intelligence system Customizable reporting External access via technology such as web services Search Document management Messaging/chat/wiki Workflow management

There are various ways in defining an Enterprise resource Planning System. This is how it has been defined by American Inventory and Production Control System (APICS) dictionary: Enterprise Resource Planning: An accounting oriented information system for identifying and planning the enterprise-wide resources to make, ship and account for customer orders. Again in Internet encyclopedia, it has defined as: An enterprise planning system is an integrated computer based application used to manage internal and external resources, including tangible assets, financial resources, material and human resources. Basically, an ERP combines several traditional management functions into a logical integrated system and facilitate flow of information across these functions. It is designed to model and automate basic processes across the organization over a centralized database and eliminates the need of disparate systems maintained by various units of the organization. Figure below shows how information is integrated in a typical organization using a ERP system.

ERP system is thus a mirror image of the major business processes of an organization.
Need for Enterprise Resource Planning - Why ERP ?

Separate systems were being maintained during 1960/70 for traditional business functions like Sales & Marketing, Finance, Human Resources, Manufacturing, and Supply Chain Management. These systems were often incongruent, hosted in different databases and required batch updates. It was difficult to manage business processes across business functions e.g. procurement to pay and sales to cash functions. ERP system grew to replace the islands of information by integrating these traditional business functions. The successful implementation of an ERP system will have many advantages, as indicated below:

Business integration and Improved Data Accuracy: ERP system is composed of various modules/ sub modules where a module represents a particular business component. If data is entered in one module such as receiving, it automatically updates other related modules such as accounts payable and inventory. This updating occurs at real time i.e. at the time a transaction occurs. Since, data needs to be entered only once at the origin of transaction, the need of

multiple entries of the same data is eliminated. Likelihood of duplicate/ erroneous data is, therefore, minimized. The centralized structure of the data base also enable better administration and security provisions, which minimizes loss of sensitive data. Planning and MIS: The various decision support tools like planning engines and simulations functions, form integral part of an ERP system which helps in proper utilization of resources like materials, human resources and tools. Constrained based planning help in drawing appropriate production schedules, thereby improving operation of plant and equipment. As a part of MIS, an ERP system, contains many inbuilt standard reports and also a report writer which produce ad hoc reports, as and when needed. Improved Efficiency and Productivity: In addition to provision of improved planning, ERP system provides a tremendous boost to the efficiency of day to day and routine transactions such as order fulfillment, on time shipment, vendor performance, quality management, invoice reconciliation, sales realization, and cash management. Cycle time is reduced for sales to cash and procurement to pay sequences. Establishment of Standardized Procedures: ERP system is based on processes of international best practices, which are adopted by the organizations during implementation. Department silos are purged and maverick practices are done away with. Because of top down view available to management, chances of theft, fraud and obsolescence are minimized. Flexibility and technology: Due to globalized environment, where production units, distribution centers and corporate offices reside in different countries, organizations need multi currency, multi language and multi accounting modes, in an integrated manner. These provisions are available in most of the ERP systems, particularly in products offered by tier 1 and tier 2 vendors. ERP vendors are also quick to adopt latest technologies, from mainframe to client server to internet. Unlike a bespoke system, Upgrading to latest technology for a running ERP system is uncomplicated, involving mostly adoption of service packs and patches.

Conclusion

Although ERP provides many advantages; its implementation is a strategic decision, involving significant resources (both financial and human), proper evaluation and business process reengineering. There must be commitment from all levels. A failed implementation may lead to bankruptcy of an organization.