What Is an ERP System?

An Enterprise Resource Planning (ERP) software system is used to automate the processes and resources of a company. ERPs are commonly used in manufacturing because of the complex chain of events that must occur after a manufacturer receives an order from a customer.

Benefits

An ERP can reduce warehouse and inventory costs, and result in less waste of materials, time, and resources. ERPs also give management access to global business intelligence.

History

ERPs developed in the 1960’s to manage inventory. In the 1970’s and 1980’s they evolved into Material Requirement Planning (MRPs and MRPII) systems. In the 1990’s, they expanded and became end-to-end solutions.

Types

The major ERP software packages are made by SAP, BAAN, JD Edwards, Oracle, Siebel, and PeopleSoft.

Upside

One ERP can manage an entire business, allowing companies to react faster to market changes.

Downside

Although all ERPs are customizable, they are inflexible. Also, the failure rate is quite high: most studies indicate that over half fail due to inadequate training and follow-up, as well as resistance from employees.