Enterprise resource planning (ERP) software helps integrate management, staff and equipment, combining all aspects of the business by grouping manufacturing component with management functions (such as accounting, human resources [HR], manufacturing management, and customer relationship management [CRM]) into a coherent whole.
Enterprise Resource Planning Risks:
Organizations without effective ERP software run the risk of company-wide inefficiencies such as:
- uneconomical use of resources
- miscommunication between departments
- errors in financial maintenance and production cost tracking
Benefits of ERP Software:
- Improved coordination across functional departments
- Increased business efficiencies
- Reduced operating costs
- Facilitation of day-to-day management
- Better accessibility to data providing up-to-the-minute access to information
- Providing information for decision making and managerial control
- Tracking actual costs of activities and perform activity-based costing
- Supporting the resource planning portion of strategic planning.
Enterprise Resource Planning Business Drivers and Benefits:
ERP systems aid in the control and communication of business activities, such as:
- Efficient handling of order processing and production scheduling
- Management and analysis of business processes within an interactive environment
- Synchronization of departmental activities with the requirements and output from production facilities and monitoring, sharing, and tracking of information throughout the organization
Some organizations — typically those with sufficient in-house IT skills to integrate multiple software products — choose to implement only portions of an ERP system and develop an external interface to other ERP or stand-alone systems for their other application needs. For example, one may choose to use a human resource management system from one vendor, and financial systems from another, and perform the integration between the systems themselves.