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ERP Definition - A Systems Perspective

Dr. Bruce Zhang
2005-03-08

What is ERP

ERP is the acronym of Enterprise Resource Planning. ERP utilizes ERP software applications to improve the performance of organizations' resource planning, management control and operational control. ERP software is multi-module application software that integrates activities across functional departments, from product planning, parts purchasing, inventory control, product distribution, to order tracking. ERP software may include application modules for the finance, accounting and human resources aspects of a business.

ERP vs. CRM and SCM

CRM (Customer Relationship Management) and SCM (Supply Chain Management) are two other categories of enterprise software that are widely implemented in corporations and non-profit organizations. While the primary goal of ERP is to improve and streamline internal business processes, CRM attempts to enhance the relationship with customers and SCM aims to facilitate the collaboration between the organization, its suppliers, the manufacturers, the distributors and the partners.

ERP Definition - A Systems Perspective

ERP, often like other IT and business concepts, are defined in many different ways. A sound definition should several purposes:

  1. It answers the question of "what is ... ?".
  2. It provides a base for defining more detailed concepts in the field - ERP software, ERP systems, ERP implementation etc.
  3. It provides a common ground for comparison with related concepts - CRM, SCM etc.
  4. It helps answer the basic questions in the field - benefits of ERP, the causes of ERP failure etc.
A definition of ERP based on Systems Theory can server those purposes.
ERP is a system which has its goal, components, and boundary.

The Goal of an ERP System - The goal of ERP is to improve and streamline internal business processes, which typically requires reengineering of current business processes.

The Components of an ERP System - The components of an ERP system are the common components of a Management Information System (MIS).

  • ERP Software - Module based ERP software is the core of an ERP system. Each software module automates business activities of a functional area within an organization. Common ERP software modules include product planning, parts purchasing, inventory control, product distribution, order tracking, finance, accounting and human resources aspects of an organization.
  • Business Processes - Business processes within an organization falls into three levels - strategic planning, management control and operational control. ERP has been promoted as solutions for supporting or streamlining business processes at all levels. Much of ERP success, however, has been limited to the integration of various functional departments.
  • ERP Users - The users of ERP systems are employees of the organization at all levels, from workers, supervisors, mid-level managers to executives.
  • Hardware and Operating Systems - Many large ERP systems are UNIX based. Windows NT and Linux are other popular operating systems to run ERP software. Legacy ERP systems may use other operating systems.
The Boundary of an ERP System - The boundary of an ERP system is usually small than the boundary of the organization that implements the ERP system. In contrast, the boundary of supply chain systems and ecommerce systems extends to the organization's suppliers, distributors, partners and customers. In practice, however, many ERP implementations involve the integration of ERP with external information systems.



Related Topics
History and Evolution of ERP
ERP Systems - ERP Software, Business Processes, Users and Hardware

 



 
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