What Is an ERP System

ERP is an acronym for enterprise resource planning system or in simpler terms a manufacturing system software architecture that can run a wide variety of business applications as well as house data in a secure environment. This software runs through a central server that can be connected to client machines providing access from remote points. Basically ERP systems are fully integrated internal and external information management systems for entire organizations. Through these systems, finance, accounting, sales, services, customer relationships and manufacturing data can be stored and retrieved for evaluation and other purposes.

Through an ERP system, the flow of information is integrated and facilitated through all business functions within the boundaries of the organization and all the data can be directed to external shareholders in a secure platform. All the data flowing through an ERP system is stored in a database which is the primary repository for information. The main advantage of ERP systems is their ability to operate in real time. Updated data in the server can be viewed at any time, and from any location. The integrated database employed in ERP systems is what makes this possible as it supports all the applications that run in the organization.

The history of ERP can be traced back to 1990 when the Gartner Group first used the acronym ERP as a reference to an extension of material requirements planning (MRP) or computer integrated manufacturing. Later on ERP would come to represent a larger part of the computerized manufacturing process with a perspective on the development of applications that were beyond manufacturing. From this point onwards, not many ERP applications were developed with a manufacturing core. Vendors of the system began to integrate accounting, maintenance as well as human resources in their systems. As early as 1995, ERP systems were addressing the core functions of any business and not manufacturing alone.

Governments, corporations and even non-governmental organizations now use ERP systems to administer and keep track of the core functionalities. This was attributed to the growth in popularity of the system in the early 2000s. The introduction of the Euro which disrupted legacy systems and also the early problems faced in 2000 contributed much to the popularity of the systems. At this point, the systems generally focused on back office functions such as accounting and finances. They did not affect the customer and it was not until recently that ERP systems began incorporating front office operations such as customer relationship management and e-business functions as part of their core functions.

The key features of ERP systems are:

Transactional Database

This is a database that records the financial aspects of every core function of the business. This database avails information to users in real time.

Management Dashboard

This is portal that allows input of information as well as viewing of information in real time for operators of the system. Through the dashboard, a person can distribute information to all the departments concerned as well as address issues that raise concerns.

Best practices have been incorporated into ERP systems meaning that vendors have incorporated what they view as best practices for each business process.