What is ERP? Explained in a simple and understandable way
ERP stands for Enterprise Resource Planning. What is behind it is especially important for companies, because it is about software-based resource planning in a company. We explain what ERP software can do and how it is used in companies.
ERP: explained in a simple and understandable way
The abbreviation ERP stands for "Enterprise Resource Planning", which means "company resource planning". It is a software that supports companies in resource planning. Cross-departmental processes can be efficiently controlled with the software. For this purpose, databases are created for the different areas of a company and linked together. ERP software includes subroutines for the following company branches:
- Procurement: Whether in industry or a small shop - purchasing can be managed with ERP software.
- Production: After purchasing, the purchased goods are further processed. The two areas are closely linked and are coordinated with each other using ERP.
- Materials management: An overview of available and required material can also be created and managed with ERP software.
- Sales: Of course, the most important part of a company or business is managed with ERP. Sales figures are documented and synchronized with materials management, production and purchasing.
- Finance: All income and expenses are documented in the ERP software.
- Human resources: Especially in larger companies, personnel management can no longer be implemented without a software solution such as ERP.
ERP software: A simple application example
In order to clarify the advantages of an ERP program, we present the ERP-controlled processes at an automobile manufacturer in a simplified manner:
- Most automobile manufacturers produce in batches, which means that with a certain number of orders for a car model, batch production begins.
- This puts sales first. Orders are received from the automobile manufacturer that are recorded and documented by the ERP program for sales. The data is then forwarded to material management in the form of material requirements and, if necessary, to purchasing.
- The data is also forwarded to personnel management - employee deployment for production is planned. Order numbers go to the finance department as income and material and working hours as expenses.
- Last but not least, the production of the ordered cars is planned. This task is again performed by special software.
- Through such or similar processes, the use of resources in a company can be efficiently controlled and planned in the long term.
ERP software: These solutions exist
- There is simple ERP software for medium-sized companies, some of which are also offered free of charge and cover all standard company branches.
- For more demanding companies there are paid ERP solutions from providers such as SAP and Microsoft.
- In addition to stand-alone software, browser-based solutions are also available. This has the advantage that customers and suppliers can enter orders and deliveries directly via a company's ERP software.
- Large companies often rely on ERP software from their own IT or specially tailored systems that are also suitable for managing companies with more than 2, 500 employees.
In the next article we will present you an ERP alternative: SAP Business All-in-One.