Definition of Enterprise Resource Management (ERP)

Definition of Enterprise Resource Management (ERP)
Enterprise Resource Management (ERP) represents the type of software organizations use to manage day-to-day business activities such as accounting, purchasing, project management, risk management, compliance, and supply chain operations. The full ERP suite includes enterprise performance management, software that helps you plan, budget, forecast, and report on your organization's financial results.

ERP systems bring together multiple business processes and enable the flow of data between them. By collecting shared transaction data from multiple sources, ERP systems eliminate data redundancy and provide data integrity as a single source.

Today, ERP systems are critical to managing thousands of businesses across all sizes and industries. For these companies, ERP is as essential as light-on electricity.

Industry-leading ERP

What is an ERP system, and how can these solutions manage the day-to-day business activities of organizations such as accounting, finance, procurement, project management, supply chain, and manufacturing?

ERP Fundamentals
ERP systems are typically designed around a single defined data structure (schema) with a common database. This normalizes the information used throughout the enterprise and builds on common definitions and user experiences. These core configurations are then interconnected with business departments (e.g., finance, human resources, engineering, marketing, operations), connectivity systems, and business processes driven by workflows of those who use them. Simply put, ERP is a means of integrating people, processes, and technology across modern enterprises.

For example: Think of a company that procures parts and components from multiple vendors to create a car. ERP systems can be used to track requests and purchases of these products and ensure that each component of the entire procurement-payment process uses uniform, clean data associated with enterprise workflows, business processes, reporting and analysis. When the ERP is properly deployed to the car manufacturer, components such as "front brake pads" are uniformly identified by part name, size, material, source, lot number, supplier part number, serial number, cost and specification, along with other descriptions and data-based items. Because data is the lifeblood of any modern enterprise, ERP makes it easy to collect, organize, analyze, and distribute this information to any system needed to best perform its roles and responsibilities.

ERP also ensures that these data fields and attributes are rolled up to the correct account of the company's total ledger so that all costs are tracked and displayed correctly. If one software system (or spreadsheet set) refers to the front brake pad as "front brake" and the other to "front pad", it can be difficult to determine whether the car manufacturer should switch annual expenditures on the front brake pad or negotiate for a better price.

The core principle of ERP is a central collection of data for broad deployment. Instead of multiple standalone databases with infinite inventory of disconnected spreadsheets, ERP systems bring order to chaos by allowing everyone, from CEOs to unpaid employees, to create, store and use the same data derived from a common process. With a secure, centralized data store, everyone in your organization can be confident that the data is accurate, up-to-date, and complete. Data integrity is guaranteed for everything done across the organization, from quarterly financial statements to outstanding bond reports, without relying on error-prone spreadsheets.

ERP Software
Business Value of ERP
In today's business world, it is impossible to ignore the impact of ERP. As enterprise data and processes are integrated into ERP systems, enterprises can achieve significant revenue savings by coordinating separate departments and improving workflows. Examples of specific business benefits include:

Improve business insight with real-time information generated from reports
Reduce operating costs through streamlined business processes and best practices
Improved collaboration from users sharing data from contracts, purchase requests, and purchase orders
Increase efficiency through common user experience across many business functions and well-defined business processes
Consistent infrastructure, from back-office to front-office, where all business activities look and feel the same
Higher user adoption in general user experience and design
Reduce risk through enhanced data integrity and financial control
Reduce management and operational costs through a unified and integrated system
ERP Best Practices Guide
Make Better Business Decisions with Oracle ERP Cloud
Organizations have always sought to balance the high cost and complexity of traditional ERP with the need for custom functionality and flexibility while meeting business needs. Learn how Oracle ERP Cloud provides connected teams, integrated data, and real-time insights to help you and your finance team make the best business decisions. With ERP delivered as a service in the cloud, organizations can be prepared for the future and surpass change.
Brief History of ERP
From paper cards to mobile devices
The history of ERP goes back more than 100 years. In 1913, engineer Ford Whitman Harris developed a model called Economic Order Quantity (EOQ), a paper-based manufacturing system for production scheduling. For decades, EOQ has been the standard for manufacturing. Tool manufacturer Black and Decker changed the situation completely in 1964 when it became the first company to adopt a Material Requirements Planning (MRP) solution that combines EOQ concepts with mainframe computers.

MRP remained the manufacturing standard until the manufacturing resource plan (called MRP II) was developed in 1983. MRPI II used "modules" as a core software architecture component and featured integrated core manufacturing components, including purchase, BOM, scheduling and contract management. For the first time, a variety of manufacturing operations have been integrated into a common system. MRP II also provided an attractive vision for how organizations can leverage software to share and consolidate enterprise data and increase operational efficiency with better Facebook, reduced inventory and reduced waste. As computer technology evolved throughout the 1970s and 1980s, concepts similar to MRP II were developed to handle business activities beyond manufacturing, financial integration, customer relationship management and human resource data integration. By 1990, technology analysts had the name of this new category of business management software: Enterprise Resource Planning.

ERP's Past: From the 1990s to the New Millennium
From On-premise to Cloud
ERP adoption increased rapidly from the 1990s to the early 21st century. At the same time, ERP system implementation costs began to rise. The hardware needed to run the software was typically on the premises of a company with a large system in the server room. Both hardware and software licenses required capital investment and were depreciated for five to ten years. Additionally, organizations almost always wanted to customize their ERP systems to meet specific requirements, requiring additional software consultants and training costs.

Meanwhile, ERP technology has evolved to embrace the Internet with new features such as embedded analysis. Over time, many organizations have discovered that on-premise ERP systems cannot keep up with new technologies such as the latest security requirements or smartphones.

Cloud ERP—New ERP Delivery Model
SaaS(Software as a Service)
Cloud Start - Software-as-a-Service (SaaS) delivery model, especially for ERP. When ERP software is delivered as a service in the cloud, it runs on a remote server network, not inside the company's server room. Cloud providers use on-premise systems to patch, manage, and update their software several times a year instead of making costly upgrades every five to ten years. Cloud can reduce both additional operational expenditures (OpEx) and investment expenditures (CapEx) by eliminating the need for companies to purchase software and hardware or hire additional IT staff. Instead, these resources can be invested in new business opportunities, and organizations are always up to date with the latest ERP software. Employees can shift their focus from IT management to high value-added tasks such as innovation and growth.

What is SaaS ERP?
Seven Reasons to Move to an ERP Cloud Solution
Companies can't retire on-premise systems and make a complete transition to the cloud at once. Even if you switch, it's not something you can do simply. However, ignoring all the benefits of enterprise resource management with cloud solutions and maintaining that process is no longer an ideal path. Why should we consider using cloud applications when replacing or strengthening an on-premise system?

1 Adopting the newly evolving SaaS technology right away
Next-generation technologies such as artificial intelligence (AI), unlike traditional systems, enable cloud-based systems to quickly improve functionality ?????? without periodic updates. Today, ERP systems continue to be much easier to manage and use without additional or new input from end users.

2 Extend the value of existing ERP systems
Strengthening and integrating existing software into cloud applications can help you augment, enhance, and complement important tasks.