ERP: Enterprise Resource Planning - that is behind it

In many medium-sized and large companies, ERP systems are the backbone of the company. We explain the importance of the concept and show you how it is implemented in the company.

ERP is an entrepreneurial task

The abbreviation ERP stands for Enterprise Resource Planning - in good English: business resource planning. This means the timely and needs-based planning and control of all resources occurring in the company.

• Operational resources include resources such as machines, buildings, the vehicle fleet, but also licenses and knowledge. This also includes material that is particularly important for production, capital, personnel and information and communication technology. The latter has become indispensable in the age of advancing digital transformation.
• All resources must be planned and controlled in such a way that they are available in the right amount, at the right time and in the right place.
• The focus here is on business added value, which should be as high as possible. For this, the processes, also called business processes, have to be optimally coordinated.

A little example

Suppose a factory produces cars. The following - very simplified - example shows which factors have to be considered in a single order and which things interrelate.

• The order shows how many cars of which model the customer would like to have delivered and when.
• Appropriate material is needed for production. These can be raw materials, but also parts that are manufactured by suppliers. So reliable suppliers are needed. The material has to be paid for. Accordingly, liquid funds are required.
• The machines on which the cars are produced must also be available. This means that they not only have to be functional, they must not be blocked by another order. And when the order has been produced, the machines should of course be used for another job.
• Finally, the personnel must also be available, taking into account working hours, vacation and illness, in order to operate the machines.
• All this information flows together in production planning. The production plan must be drawn up so that all cars are ready and delivered on the agreed date.
• With regard to delivery, logistics issues come into play. This is about planning the freight forwarder or possible capacities for temporary storage.
• If the customer has received the goods, he must pay for them. Then it is all about money and the tasks of accounting, which has to book all processes.

ERP software supports in all areas

The example shows that it is almost impossible to plan all components manually or with the help of simple Excel tables. For this reason there are powerful ERP systems nowadays that tackle the whole thing with computer support. ERP programs are usually very complex software solutions that cover and connect the business areas with individual modules.

• Typical modules are materials management (purchasing, storage, scheduling), production planning and control, and finance and accounting. The latter include accounting, fundraising and management, and payments.
• There are also modules for sales and marketing as well as for controlling. HR is usually managed in an integrated area. For example, payroll or time recording can be processed using the ERP system.
• By far the largest and world's leading ERP system is that of the German company SAP. It is used by over 400, 000 customers, fills thousands of data centers and employs countless IT service providers, system houses and consulting companies. SAP consists of much more than the usual modules. It covers almost every area of ​​the company and has special modules for various industries such as energy suppliers, healthcare or banks - to name just three examples.
• Large ERP programs are also offered by Oracle and Microsoft. What they all have in common is that they are very complex and expensive and require specially trained personnel on the user side and from system administrators. Smaller companies do not have to do without ERP applications. For example, SAGE can find appropriate solutions for the size of the company.

With a small company or a one-man company, an ERP solution is out of place. A free accounting program is often sufficient here. In the following article we give you an overview of the best free programs.