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What is ERP software ?

ERP software means Enterprise Resource Planning systems. ERP systems are large computer systems that integrate application programs in accounting (i.e., accounts receivable), sales (i.e., order booking), manufacturing (i.e., product shipping) and the other functions in the firm.   This integration is accomplished with through a database shared by all the application programs. 

When you first see an ERP program, the application programs are similar to those with which you are already familiar.   So the production scheduling, billing a customer, processing a payroll and other tasks are done in ways that should be pretty familiar to those of you who have worked with these applications over the years.   So what is the big deal?   Integration!   ERP systems tie these, usually separate, applications together.   When a customer service representative takes a sales order it is entered in the common database and in the other applications where it is needed, for example, in the manufacturing backlog, the credit system and the shipping schedule.   No more carrying little pieces of paper back and forth. Or writing translation programs to get the information from one function to another.   Sounds great, right?   Read on!

ERP systems work in real-time, meaning that the exact status of everything is always available.   Further, many of these systems are global.   Since they can be deployed at sites around the world, they can work in multiple languages and currencies.   When they are, you can immediately see, for example, exactly how much of a particular part is on-hand at the warehouse in Japan and what its value is in Yen or Dollars.   This is a pretty amazing accomplishment.   Sound too good to be true?  It is --- all this doesn't come free. 

In addition to the technical details, the way the hardware and software are organized, and technically how the logic of the system functions, there is another aspect to understanding ERP. It is the management and implementation issues associated with the systems that may be the most important of all.   Whether you are considering the use of ERP, are faced (forced?) with implementation, or are just generally concerned about the management issues involved in using ERP systems, you should understand some of the tradeoffs involved.

We are all concerned about keeping up with new technology and the challenge that this poses.   The pervasive promotion and use of ERP systems suggest that, for this technology, we need to understand the scope of these systems and have a basic knowledge of how they work.   Fortunately, learning about ERP is not so much learning all-new concepts and ideas, but rather learning about new ways to do things that we already have been doing and the ERP terminology associated with them.   This means, whether you are a general manager, information system executive, an accountant, or a student, you already know more about how ERP works than you think you do, but you still need to learn the managerial issues associated with the degree of integration they support.                           << next page  >>