What is Enterprise Resource Planning?

Before the advent of Systems Integration, different departments within an organization developed their own computer systems, each one operating separately using its own applications and data. Each department relied on the others to transfer key information. Data items such as employee numbers would be generated in one system, then passed on and entered manually into the other applications.

This was problematic. Because it was a manual process, the synchronizing of key information was slow and unreliable. Mistakes occurred, leading to additional complications as erroneous data propagated throughout the organization.

Enterprise Resource Planning (ERP) standardizes and reduces the number of software specialities required in large organizations.

How does Enterprise Resource Planning (ERP) overcome Systems Integration problems?

ERP combines the data used by different applications and eliminates the need for multiple interfaces between software applications. It resolves the issue of synchronizing key information.

It's no wonder ERP seemed like the Holy Grail of Systems Integration at one time. Just use one big system with one large database to run all parts of your business and your problems will disappear!

The reality, however, is somewhat different. The incidence of failure with large-scale ERP projects is high. ERP projects typically exceed either their delivery and budget estimates, usually both. These problems have arisen for a number of reasons, but the common denominator is that ERP projects try to do too much in a single application.

What applications does ERP typically include?

The ERP systems of today generally cover one or a number of the following:

1. Manufacturing
   Bills of material, scheduling, quality control, cost management.

2. Supply Chain Management
   Inventory, order entry, purchasing.

3. Financials
   General ledger, cash flow, accounts payable, accounts receivable.

4. Projects
   Costing, billing, expenses.

5. Human Resources
   Payroll, benefits, training.

6. Customer Relationship Management (CRM)
   Sales and marketing, commissions

7. Data Warehouse, Reporting, Data Mining

It's not uncommon for an organization to mix and match different components of competing ERPs. For example, a company may choose SAP as their primary ERP supplier but also opt for Peoplesoft's (now owned by Oracle) Human Resources and Financial products which are highly regarded in the marketplace.

In reality, few organizations rely on ERP to support all of their business functions. There will always be specialized areas where a separate application is the better option. Whenever specialized applications are required or a combination of different ERP modules from different vendors are used, an organization must rely on mainstream systems integration techniques and vendors to achieve an integrated solution.