To tell you frankly, don’t ever get carried away by high sounding terminologies such as ERP that stands for Enterprise Resource Planning software because there is not much of planning in it and so far as resource part is concerned, lesser said the better. But hang on to the enterprise part because that is where ERP is most relevant. As a matter of fact, it strives to integrate all departments and functions across a company onto a singular computer system, thus serving all those departments’ itemized needs individually and severally.

Even though it may seem a bit of a tough job to build a software program that can serve the needs of so many persons, such as those in finance department as also in HR and in the warehouse, yet ERP does it miraculously well.  Mind you, each of these departments has its own computer system optimized for the ways that the department does its work. Nevertheless, ERP combines them all together into a single, integrated software program that flows out of a single database so that all those departments can share information among them easily as also communicate with each other flawlessly. Needless to say, this integrated approach can help companies tremendously if the software is installed appropriately.

The issue may become clearer if we go through an example, such as a customer order. After a customer places an order, it (the order) begins a paper-oriented journey through various in-baskets around the company, usually getting keyed and rekeyed into various departments’ computer system along the way. However, this causes delays and there are chances of error creeping in due to so many keying operations. But the worst part of the whole story is that no one in the company actually knows the fate of the order or its current status at any given point till it is entered into the warehousing department’s computer that confirms its shipment.

However, ERP does away with the old standalone computer system in all these departments, while replacing these with single unified software program that again is divided into software modules that roughly matches the old standalone systems. Departments such as manufacturing, finance, warehouse, etc still get their own software, save and except that now these are linked together and as a result, a person in finance can check into the warehouse software to see whether an order has been shipped or not. Incidentally, many of the vendors’ ERP software is so flexible that you can install relevant modules even if you are not buying the whole package. Some companies, for instance, may just install an ERP Finance or HR module and leave the other functions for some other day.

How Can ERP Improve a Company’s Business Performance?

ERP’s strongest point entails the processing of an order – one that involves taking a customer order and processing it into invoice and revenue. And that’s precisely why it is often referred to as back-office software. It has nothing to do with up-front selling procedure (even though many ERP vendors have developed CRM software or have procured pure-play CRM providers that do it). Instead, ERP takes a customer and lays down a software roadmap for automating the various steps along the way towards fulfilling it. As soon as a customer service rep enters an order into an ERP system, he/she can have all the information required to complete the order that includes the customer credit rating and order history from the finance module, the company’s inventory levels from the warehouse module, as also the shipping dock’s trucking schedule from the logistics module, etc.

However, the biggest benefit of using ERP lies in the fact that persons in these different departments all see the same information and can update it. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, you need only log in to the ERP system and track it down. ERP can apply that same magic to the other major business processes, such as employee benefits or financial reporting.