Enterprise resource planning (ERP) software doesn’t live up to its acronym. Forget about planning — it doesn’t do much of that — and forget about resource, a throwaway term. But remember the enterprise part. This is ERP’s true ambition. It attempts to integrate all departments and functions across a company onto a single system that can serve all those different departments’ particular needs.
An ERP system combines software systems from departments like finance, human resources and warehouse management into a single, integrated software program that runs off a single database so that the various departments can more easily share information and collaborate.
It's a tall order to build a single software program that serves the needs of the finance department as well as it does human resources and warehouse management. Each of those departments typically has its own software system optimized for the particular ways that it works. But that integrated approach can have a tremendous payback if companies install the software correctly.
Take the ordering process, for example. Typically, when a customer places an order, that order begins a mostly paper-based journey from in-basket to in-basket around the company, often being keyed and rekeyed into different departments’ computer systems along the way. All that lounging around in in-baskets causes delays and lost orders, and all the keying into different computer systems invites errors. Meanwhile, no one in the company truly knows what the status of the order is at any given point because there is no way for the finance department, for example, to get into the warehouse’s computer system to see whether the item has been shipped. "You’ll have to call the warehouse" is the familiar refrain heard by frustrated customers.
by Thomas Wailgum