People Innovation Excellence

What is ERP (Enterprise Resource Planning)?

Enterprise resource planning (ERP)  rapid growth in the 1990s. Because of the year 2000 problem and the introduction of the euro that disrupted legacy systems, many companies took the opportunity to replace their old systems with ERP is the integrated management of core business processes, often in real-time and mediated by software and technology. These business activities can include: product planning, purchase, manufacturing or service delivery, marketing and sales, inventory management, shipping and payment, and finance.

ERP is usually referred to as a category of business-management software typically a suite of integrated application that an organization can use to collect, store, manage and interpret data from these many business activities.the ERP is design to manage a breakdown of Information silos, because  Many information systems were developed for specific functional areas and did not communicate with systems in other functional areas. There are several of Core ERP modules. First is Financial Management for financial management these modules support for accounting,financial reporting, performance management, and corporate governance, they manage accounting data to general ledger, account payable, account receivable, fixed assets, tax, and many others. Second is Operation Management, these modules manage the various aspect of production planning and execution such a demand forecasting, procurement,inventory management, purchasing management,shipping, production planning, production scheeduling,quality control, distribution,transportation. Third is human resource Management, these modules support personnel addministration(inlud recruitment employee, workforce planning,performance management and reviews), time accounting, payroll,compensation, benefits accounting.

There are also extended ERP components, such as CRM, SCM, BI, and E-Business. CRM or Customer Relationship Management supports all aspect of customers’s relationship with the organization they help the organization to increase customer loyalty and retention, and improve profitability. SCM or Supply Chain Management manages the information flows between and amongg stages in a supply chain to maximize supply chain efficiency and effectiveness. SCM helps organization to plan, schedule, control, and optimize the supply chain of raw materials to the receipt of finished goods by customers. BI (Business Intelligent) collects information used throughout the organization, organize it, and apply analytical tools to assist managers with decesion making. By using ERP as E-business, customers and suppliers can access to ERP information including order status, inventory levels, and invoice reconciliation. They want this information in a simplified format that can be accessed via the Web. As a result, these modules privide two channels of access into ERP system information. One channel for customers(B2C) and one for supploers and partners (B2B).

There are several benefits of ERP systems, which are can make organizations more flexible, agile, and adaptive, improve managers’ ability to make better, more timely decisions, and improve customer service, production, and distribution. But ERP also has several Limitations, which are may require organizations to change existing business processes to fit the predefined business processes of the ERP software, and can be complex, expensive, and time consuming to implement. So, ERP is software that can integrate the planning, management and use of all resources of the organization.

Published at : Updated
Written By
Marisa Karsen
Subject Content Coordinator | Information System Laboratory, Binus University
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