What Is an ERP System?

By Contributing Writer

An Enterprise Resource Planning (ERP) software system automates 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 reduces warehouse and inventory costs, and results in less waste of materials, time and resources. ERPs also give management access to global business intelligence.

History

ERPs developed in the 1960s to manage inventory. In the 1970s and 1980s they evolved into Material Requirement Planning (MRPs and MRPII) systems. In the 1990s, 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: over half fail due to inadequate training and follow up as well as resistance from employees.