Enterprise resource planning (ERP) systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application. The purpose of ERP is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.
ERP systems can run on a variety of computer hardware and network configurations, typically employing a database as a repository for information.
History
Origin of "ERP"
In 1990 Gartner Group first employed the acronym ERP as an extension of material requirements planning (MRP), later manufacturing resource planning and computer-integrated manufacturing. Without supplanting these terms, ERP came to represent a larger whole, reflecting the evolution of application integration beyond manufacturing.Not all ERP packages were developed from a manufacturing core. Vendors variously began with accounting, maintenance and human resources. By the mid–1990s ERP systems addressed all core functions of an enterprise. Beyond corporations, governments and non–profit organizations also began to employ ERP systems.
Expansion
ERP systems experienced rapid growth in the 1990s because the year 2000 problem and introduction of the Euro disrupted legacy systems. Many companies took this opportunity to replace such systems with ERP.
ERP systems initially focused on automating back office functions that did not directly affect customers and the general public. Front office functions such as customer relationship management (CRM) dealt directly with customers, or e–business systems such as e–commerce, e–government, e–telecom, and e–finance, or supplier relationship management (SRM) became integrated later, when the Internet simplified communicating with external parties.
"ERP II" was coined in the early 2000s. It describes web–based software that allows both employees and partners (such as suppliers and customers) real–time access to the systems. The role of ERP II expands from the resource optimization and transaction processing of traditional ERP to leveraging the information involving those resources in the enterprise’s efforts to collaborate with other enterprises, not just to conduct e-commerce buying and selling.Compared to the first generation ERP, ERP II is said to be more flexible rather than confining the capabilities of the ERP system within the organization, it is designed to go beyond the corporate walls and interact with other systems. "Enterprise application suite" is an alternate name for such systems.
Two-tier enterprise resource planning
Two-tier ERP comprises software and hardware that allows these companies to run the equivalent of two ERP systems at once: one at the corporate level and one at the division or subsidiary level. For example, a manufacturing company uses an ERP system to manage the company across the organization. This company uses global or regional suppliers, production centers, and service providers to support the manufacturing company’s customers.
These suppliers, production centers, and service providers are independent companies that maintain their own brand and business model. These companies also have their own workflows and processes. Given the realities of globalization, enterprises continuously evaluate how to optimize their regional, divisional and product-based manufacturing strategies to support strategic goals and reduce time-to-market while increasing profitability and delivering value.[10] With two-tier ERP, these companies continue operating under their own business model separate from the manufacturing company. Since these companies' processes and workflows are not tied to manufacturing company's processes and workflows, they can respond to local business requirements in multiple locations.
Factors affecting enterprises adopting two-tier ERP systems are the globalization of manufacturing or the economics of sourcing in emerging economies.Two-tier ERP strategies give enterprises agility in responding to market demands and in aligning IT systems at a corporate level.
Characteristics
ERP (Enterprise Resource Planning) systems typically include the following characteristics:
An integrated system that operates in real time (or next to real time), without relying on periodic updates.
A common database, which supports all applications.
A consistent look and feel throughout each module.
Installation of the system without elaborate application/data integration by the Information Technology (IT) department.
Functional areas
The following are common functional areas covered in an ERP System. In many ERP Systems these are called and grouped together as ERP Modules:
Financial Accounting
General Ledger, Fixed Asset, Payables, Receivables, Cash Management, Financial Consolidation.
Management Accounting
Budgeting, Costing, Cost Management, Activity Based Costing
Human Resources
Recruiting, Training, Payroll, Benefits, 401K, Diversity Management, Retirement, Separation
Manufacturing
Engineering, Bill of Materials, Work Orders, Scheduling, Capacity, Workflow Management, Quality Control, Manufacturing Process, Manufacturing Projects, Manufacturing Flow, Product Life Cycle Management
Supply Chain Management
Supply Chain Planning, Supplier Scheduling, Order to Cash, Purchasing, Inventory, Product Configurator, Claim Processing
Project Management
Project Planning, Resource Planning, Project Costing, Work Break Down Structure, Billing, Time and Expense, Performance Units, Activity Management
Customer Relationship Management
Sales and Marketing, Commissions, Service, Customer Contact, Call Center Support - CRM systems are not always considered part of ERP systems but rather BSS systems . Specifically in Telecom scenario
Data Services
Various "self–service" interfaces for customers, suppliers and/or employees.
Access Control
Management of user privileges for various processes
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