by Justin Manucci

Created on: November 18, 2010   Last Updated: November 20, 2010

Enterprise Resource Planning integrates all departments and functions throughout an organization into a single information technology (IT) system so that employees can make decisions by viewing enterprise wide information on all business operations.

Enterprise resource planning systems serve as the organization’s backbone in providing fundamental decision-making support. In the past, departments in an organization generally made decisions separately from each other, but ERP systems provide a foundation for collaboration between departments, enabling people in different business aspects of the organization to communicate openly. Enterprise resource planning systems are largely popular in businesses today in order to store critical knowledge used to make decisions that drive performance. ERM systems can help a business obtain operational efficiencies, lower costs, improve supplier and customer relations, and increase revenues and market shares.

The main core of the ERP system is a central database that collects information from and feeds information into all the ERP systems individual application components. This supports diverse business functions, including anything from accounting, manufacturing, marketing, and human resources. When a user enters or updates information in the system, that information is then updated throughout the entire system automatically. ERP Systems can also help automate business processes, such as order fulfillment, by taking an order from a customer, shipping the purchase, and then billing for it.

The three main components of ERP are Accounting and Finance, Production and Materials Management, and Human Resources.

Accounting and finance ERP components manage accounting data and financial processes within the enterprise with functions such as general ledger, accounts payable, accounts receivable, budgeting, and asset management. ERP systems can help monitor a customer’s credit or tab on their account, and help make sure it remains below the credit limit when they place new orders.

Production and materials management ERP components handle the various aspects of production planning and execution such as demand forecasting, production scheduling, job cost accounting, and quality control. Companies must forecast sales projections, make sure manufacturing is run on a tight schedule to maximum productivity, and more in order to remain a successful business.

Human resources ERP Components track employee information including payroll, benefits, compensation, and performance assessment, and sure compliance with legal requirements of multiple jurisdictions and tax authorities. These resources can help identify employee strengths, weaknesses, and specific traits about each employee. Being able to share this information can become extremely critical, especially being able to share it with a department such as the Accounting and Finance department, as they may need access to some of this information for their work.

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