Enterprise resource planning
Enterprise resource planning (ERP) is the integrated management of main business processes, often in real time and mediated by software and technology. ERP is usually referred to as a category of business management software—typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from many business activities. The finance module in particular is essential to a suite of applications meeting the definition of an ERP system. The finance module provides the system of record for the organisation; recording the commercial impact of the business operations in the General Ledger. ERP systems can be local-based or cloud-based. Cloud-based applications have grown rapidly since the early 2010s due to the increased efficiencies arising from information being readily available from any location with Internet access. However, ERP differs from integrated business management systems by including planning all resources that are required in the future to meet business objectives. This includes plans for getting suitable staff and manufacturing capabilities for future needs. ERP provides an integrated and continuously updated view of core business processes, typically using a shared database managed by a database management system. ERP systems track business resources—cash, raw materials, production capacity—and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data. ERP facilitates information flow between all business functions and manages connections to outside stakeholders. Estimates of the size of the global ERP market range between USD $78 and $81 billion in 2026 . Though early ERP systems focused on large enterprises, smaller enterprises increasingly use ERP systems. The ERP system integrates varied organizational systems and facilitates error-free transactions and production, thereby enhancing the organization's efficiency. However, developing an ERP system differs from traditional system development. ERP systems run on a variety of computer hardware and network configurations, typically using a database as an information repository. == Origin == Business and technology research and advisory firm Gartner is credited for first using the acronym ERP in the 1990s. The term captured a functional extension of two manufacturing-based concepts, material requirements planning (MRP) and manufacturing resource planning (MRP II). Without replacing these terms, ERP came to represent a larger whole that reflected the evolution of application integration beyond manufacturing. Not all ERP packages are developed from a manufacturing core; ERP vendors variously began assembling their packages with finance-and-accounting, maintenance, and human-resource components. By the mid-1990s ERP systems addressed all core enterprise functions. Governments and non–profit organizations also began to use ERP systems. An "ERP system selection methodology" is a formal process for selecting an enterprise resource planning (ERP) system. Existing methodologies include: Kuiper's funnel method, Dobrin's three-dimensional (3D) web-based decision support tool, and the Clarkston Potomac methodology. == Expansion == ERP systems experienced rapid growth in the 1990s. Because of the year 2000 problem many companies took the opportunity to replace their old systems with ERP. ERP systems initially focused on automating back office functions that did not directly affect customers and the public. Front office functions, such as customer relationship management (CRM), dealt directly with customers, or e-business systems such as e-commerce and e-government—or supplier relationship management (SRM) became integrated later, when the internet simplified communicating with external parties. "ERP II" was coined in 2000 in an article by Gartner Publications entitled ERP Is Dead—Long Live ERP II. It describes web–based software that provides real–time access to ERP systems to employees and partners (such as suppliers and customers). The ERP II role expands traditional ERP resource optimization and transaction processing. Rather than just manage buying, selling, etc.—ERP II leverages information in the resources under its management to help the enterprise collaborate with other enterprises. ERP II is more flexible than the first generation ERP. Rather than confine ERP system capabilities within the organization, it goes beyond the corporate walls to interact with other systems. Enterprise application suite is an alternate name for such systems. ERP II systems are typically used to enable collaborative initiatives such as supply chain management (SCM), customer relationship management (CRM) and business intelligence (BI) among business partner organizations through the use of various electronic business technologies. The large proportion of companies are pursuing a strong managerial targets in ERP system instead of acquire an ERP company. Developers now make more effort to integrate mobile devices with the ERP system. ERP vendors are extending ERP to these devices, along with other business applications, so that businesses don't have to rely on third-party applications. As an example, the e-commerce platform Shopify was able to make ERP tools from Microsoft and Oracle available on its app in October 2021. Technical stakes of modern ERP concern integration—hardware, applications, networking, supply chains. ERP now covers more functions and roles—including decision making, stakeholders' relationships, standardization, transparency, globalization, etc. == Functional areas == An ERP system covers the following common functional areas. In many ERP systems, these are called and grouped together as ERP modules: Financial accounting: general ledger, fixed assets, payables including vouchering, matching and payment, receivables and collections, cash management, financial consolidation Management accounting: budgeting, costing, cost management, activity based costing, billing, invoicing (optional) Human resources: recruiting, training, rostering, payroll, benefits, retirement and pension plans, diversity management, retirement, separation Manufacturing: engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, manufacturing process, manufacturing projects, manufacturing flow, product life cycle management Order processing: order to cash, order entry, credit checking, pricing, available to promise, inventory, shipping, sales analysis and reporting, sales commissioning Supply chain management: supply chain planning, supplier scheduling, product configurator, order to cash, purchasing, inventory, claim processing, warehousing (receiving, putaway, picking and packing) Project management: project planning, resource planning, project costing, work breakdown structure, billing, time and expense, performance units, activity management Customer relationship management (CRM): sales and marketing, commissions, service, customer contact, call center support – CRM systems are not always considered part of ERP systems but rather business support systems (BSS) Supplier relationship management (SRM): suppliers, orders, payments. Data services: various "self-service" interfaces for customers, suppliers or employees Management of school and educational institutes. Contract management: creating, monitoring, and managing contracts, reducing administrative burdens and minimising legal risks. These modules often feature contract templates, electronic signature capabilities, automated alerts for contract milestones, and advanced search functionality. === GRP – ERP use in government === Government resource planning (GRP) is the equivalent of an ERP for the public sector and an integrated office automation system for government bodies. The software structure, modularization, core algorithms and main interfaces do not differ from other ERPs, and ERP software suppliers manage to adapt their systems to government agencies. Both system implementations, in private and public organizations, are adopted to improve productivity and overall business performance in organizations, but comparisons (private vs. public) of implementations shows that the main factors influencing ERP implementation success in the public sector are cultural. == Best practices == Most ERP systems incorporate best practices. This means the software reflects the vendor's interpretation of the most effective way to perform each business process. Systems vary in how conveniently the customer can modify these practices. Use of best practices eases compliance with requirements such as International Financial Reporting Standards, Sarbanes–Oxley, or Basel II. They can also help comply with de facto industry standards, such as electronic funds transfer. This is because the procedure can be readily
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