Enterprise resource planning (ERP) is a category of software designed to help businesses orchestrate and coordinate a broad set of strategic and operational activities to improve business efficiency.
ERP provides an integrated view of data from multiple sources so that business users can get up-to-date, accurate status information and participate in ongoing business processes at the optimal time. Usually organized into modules, ERP is particularly useful in large enterprises with complex, cross-functional business processes.
The “R” in ERP refers to the critical resources, notably materials, people, equipment, energy, and cash, to accomplish the work that needs to be done. These resources are tracked against commitments, such as orders or accounts payable, in order to make sure supply and demand will be accommodated with minimal waste and cost.
This resource-oriented objective of ERP reflects its origin as a tool for the manufacturing industry. Over several decades, commercial ERP vendors have added capabilities that prove useful in many other industries as well.
Most ERP systems are sold in modules. Customers buy the modules that deliver the business functionality they need, such as:
Supply chain—Helps ensure the right raw materials are on hand—or schedule to be on hand—so that commitments can be fulfilled on time and on budget.
Accounting—Includes tools to effectively see and manage receivables, payables, general ledger, and other routine accounting functions.
Human resources—Manages the end-to-end lifecycle of employee events, from recruiting to retirement, as well as employee-related costs, including payroll, benefits, training, and retention programs.
Customer relationship management—While CRM is a standalone software category, many ERP systems include CRM as a module.
The objective of ERP is efficiency. By helping employees take the right actions at the right time, organizations can save money, go to market more quickly, provide better customer service, and improve performance against virtually any key performance indicator.