What is ERP? Insanely Simple Stuff You Must Know!


ERP stands for Enterprise Resource Planning. The name suggests that the software help organisations for resource planning. It is misleading as ERP have grown much more profound and prominent over the years. ERPs do much more than resource planning.

So, what is ERP?

It is a business software that manages end-to-end operational functions within an organisation.

Let us unwrap the purpose of ERP!

Organisations have many departments, e.g. Sales, Procurements, HR. These departments perform specific predefined functions. For example, HR undertaking hiring, Procurement deals with suppliers and fulfils resource demands. There is an interrelation among these functions. But, we often look at them in department silos.

You see, Sales drives procurement, and procurement triggers Account payable functions. It is one ecosystem broken into virtual boundaries of departments.

ERP provides a unified platform to support the entire ecosystem within the organisation. The whole organisation use one system to enter data, process information, and receive outputs. The ERP acts as a central source for workflows, automation within every department.

For example, the Sales department use ERP to send sales quotes, proposals to the prospect. After proposal acceptance, the Operation Manager books resources and material within ERP. The allocated resources complete the work and report time and material in ERP. The Operations Manager finalise the invoice and send to the customer. The finance department uses ERP to ensures the customer pays the invoice on time.

You can see that how these departments work seamlessly using one ERP platform.

In summary, ERP meets the end-to-end functional needs of the entire organisation.

Let us now look at the structure and packaging of ERP software!

ERP Packaging

ERP is a collection of integrated modules that share a common data model. You can choose to use only one module or multiple modules together at once.

For instance, an enterprise may want to use the Financial module only. Later may decide to use Sales Management and Supply Chain modules. Each of these modules works seamlessly.

Typically examples of the modules are:

What is ERP?
ERP Packaging – What is ERP?

ERPs are designed with common industry practices in mind. So, ERP already has standard ways to process information. We call them out of box functions. For example, ERP has a set way to convert a prospect to a customer. ERP handles complex calculations such as Material requirements, scheduling, routing with a click of a button.

So, consider ERP as building blocks of integrated modules. Each module has a prepackaged solution to meet your business needs.

I hope this gives you a basic understanding of ERP.

If your organisation turnover is over $10M, seriously think about implementing ERP. It is a vital resource for the sustainability and growth of your business.

Do not stop here!

Research ERPs that your competitors are using. Search for ERPs that are market leaders within your industry. Take the next step and discover what ERP has to offer, how much it will cost and how quickly you can recover the cost!

Good luck with your ERP journey! Trust me; it is worth it!