Definition of ERP (Enterprise Resource Planning) – ERP stands for Enterprise Resource Planning. According to the definition in the American Inventory and Production Control System (APICS) dictionary, what is meant by ERP or Enterprise Resource Planning is an Accounting-oriented Information System to identify and plan company resources to create, send and calculate customer orders.
While the definition of ERP on Wikipedia is Information systems intended for manufacturing and service companies whose role is to integrate and automate business processes related to aspects of operations, production and distribution in the concerned company.
Some also say that ERP is a system of enterprise planning based on integrated computer applications that are used to manage the company’s internal and external resources. The company’s resources include tangible, financial, material, and human resources assets .
So basically, ERP (Enterprise Resource Planning) combines several management functions into an integrated system and facilitates all information flow in the management function. ERP is designed to automate the basic processes throughout the organization through a centralized database and eliminate the need for different systems that are managed by various work units in an organization.
Please to also read What is MRP (Material Requirement Planning).
Benefits of implementing ERP (Enterprise Resource Planning)
In organizations or companies that do not implement ERP systems, generally use a separate database system. Where each work unit has its own database, such as Marketing which has a marketing database, production has marketing data, Human Resources or HRD has its own HRD database, Purchasing has its own purchasing database and the Finance department has its own financial database. Such separate systems have different databases and often mismatches occur making it difficult to manage. ERP (Enterprise Resource Planning) was developed to replace these separate systems to be integrated so that management is more effective and efficient.
The following below are some of the benefits that can be enjoyed by organizations that have successfully implemented ERP or Enterprise Resource Planning.
- Better Business Integration and Data Accuracy. ERP system consists of various Modules and Sub-modules that can represent certain business components. If the data entered in a module (for example material acceptance data) then other modules such as “Payment” and “Inventory” will be automatically updated as well. This renewal occurs in “real-time” or just at the time of the transaction. The data entered only needs to be entered once, namely at the time of the transaction so there is no need for data entry in the other modules. Thus, the need for multiple data entry can be eliminated and the possibility of data typing errors and duplicate data can also be minimized.
- Planning and Management of Information Systems, ERP systems have good decision support tools such as planning tools and simulation tools that can help management to more precisely utilizing its resources such as materials, human resources, and machines or work equipment. In presenting reports, ERP systems can produce the standard reports required by management and these reports can be accessed by management whenever needed.
- Increased Efficiency and Productivity, In addition to providing better planning, ERP systems can also improve efficiency in daily routine activities such as ordering, shipping, supplier performance, quality management, cash management, and sales realization. With an ERP system, the cycle of selling to cash and paying to suppliers can be shortened.
- Establishment of Standardization Procedures, ERP systems are based on international best practice processes adopted by the organizations that implement them. Work becomes more structured so it does not depend on specific individuals or workers.
Main Modules on ERP
As mentioned earlier, the ERP system consists of various Modules and Sub-modules that represent business components. The modules or sub-modules can be chosen according to the needs of the organization that wants to implement them. The following are some of the main modules or basic modules that are most often found in ERP systems.
- Human Resource Module
- Inventory Module (Inventory Module / Inventory)
- Sales and Marketing Module
- Purchase Module
- Finance and Accounting Module
- Customer Relations Management Module
- Manufacturing Module
- Supply Chain Management Module
In addition to the modules above, there are actually many more modules or sub-modules that are made according to the needs of each organization.