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| Tech Update |
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ERP fundamentals
Benefits and applications
By Adrian Mello
February 7, 2002
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The unified nature of an ERP system can lead to significant benefits, including fewer errors, improved speed and efficiency, and more complete access to information. With better access to information, employees and managers alike can gain a better understanding of what's going on in the enterprise so they make better business decisions. For example, an ERP system could let buyers in the purchasing department quickly adjust material orders when they see an increase or decrease in customer orders. The result? They'll either ensure that orders are met on a timely basis or save on inventory expenses.
Prior to ERP systems, companies stored important business records within many different departments. Each department often used different systems and techniques to manage that information. Information might also be duplicated many times within an organization without necessarily being identical or similarly up-to-date. Some of this information might only have been on paper, making it difficult to access it across the organization. For example, a customer might call sales to inquire about the progress of an important order. Instead of answering the question by quickly referring to a shared database, the sales rep would be forced to track down the order by making multiple calls to the company's manufacturing or shipping departments.
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icated many times within an organization without necessarily being identical or similarly up-to-date. Some of this information might only have been on paper, making it difficult to access it across the organization. For example, a customer might call sales to inquire about the progress of an important order. Instead of answering the question by quickly referring to a shared database, the sales rep would be forced to track down the order by making multiple calls to the company's manufacturing or shipping departments.
ERP systems originated to serve the information needs of manufacturing companies. Over time, though, they have grown to serve other industries, including health care, financial services, the aerospace industry, and the consumer goods sector. With this growth, ERP systems, which first ran on mainframes before migrating to client/server systems, are now migrating to the Web and include numerous applications. IDC defines an ERP product as one that helps automate a company's business process by employing an integrated user interface, an integrated data set, and an integrated code set. IDC tracks about 100 vendors offering products that meet this definition. Dennis Byron, IDC's vice president of ERP and industry applications research, estimates that there are probably 1,000 companies globally that meet this definition.
When most people refer to the "core" ERP applications or "modules," they mean the back-office capabilities to manage human resources, accounting and finance, manufacturing, and project-management functions. However, major ERP suites from the likes of Oracle, PeopleSoft, and SAP now provide much more--including modules for sales force automation, business intelligence, customer relationship management, and supply chain management. (See "A who's who of ERP" for profiles of ERP vendors, the applications they provide, and the markets they serve.)
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