What Exactly is ERP Software?

ERP is a term you hear a lot in business circles. You may have heard it associated with the accounting department, supply chain people, or even the sales force. But, what exactly is it? If you own or manage a growing business, knowing what ERP software is and what it does is critical for your future.

The Power of a Single System

The letters E-R-P stand for enterprise resource planning, a term that is really not all that accurate into what the software does.
What does it take to run a business? Here’s a partial list of common tasks performed by businesses around the globe:

  • Keep inventory accurate
  • Manage orders
  • Handle accounting and bookkeeping
  • Deal with employees
  • Provide customer service
  • Sell products

ERP software integrates the essential functions of a business into one system. It uses a central database to manage all the information for the business. That means that the sales force has the same view into a customer’s account information that the accounting and order departments do.
Another desired feature of ERP systems is centralized reporting and automation. With a single system, there is no need to pull data from disparate sources into a single spreadsheet just for basic reporting.
Plus, automation allows information to be transferred seamlessly between business functions without any manual re-keying required. This reduces the chance of human error and delays in processing.
Many ERP systems offer a centralized dashboard that gives employees the ability to see performance on key metrics, often in near real time.

Where Did ERP Come From?

The origins of ERP go back to manufacturing in the 1960s and 1970s. Programmers had the challenge of creating software that monitored inventory, tracked manufacturing, schedule production, and reported status. By the 1980s, these systems grew to incorporate many other manufacturing-related functions and eventually started handling back-office functions like accounting and HR.
It was 1990 when Gartner coined the term enterprise resource planning for these highly integrated systems. These systems formed the basis for modern ERP solutions.

The Value of ERP

With ERP, there are essentially no barriers between departments or business functions. Everyone is working off the same information no matter what function they are performing.
An ERP system offers real-time data reporting, which allows companies to get ahead of problems and make rapid improvements. It helps businesses comply with regulatory requirements while also reducing financial risk. It automates key business operations such as moving customer orders to the fulfillment team and moving procurement orders to the accounts payable team.
Are you ready to learn more about how ERP software could help your business? Contact us now at Michell Consulting Group.