ERP (Enterprise Resource Planning) Overview covers What isERP, Brief history of ERP, Why is it necessary, MarketLeaders and the future of ERP.
What is ERP?
Enterprise Resource Planning or ERP is an industry term forintegrated, multi-module application software packages thatare designed to serve and support multiple businessfunctions. An ERP system can include software formanufacturing, order entry, accounts receivable and payable,general ledger, purchasing, warehousing, transportation andhuman resources. Evolving out of the manufacturing industry,ERP implies the use of packaged software rather thanproprietary software written by or for one customer. ERPmodules may be able to interface with an organization's ownsoftware with varying degrees of effort, and, depending onthe software, ERP modules may be alterable via the vendor'sproprietary tools as well as proprietary or standardprogramming languages.
Brief History of ERP
The focus of manufacturing systems in the 1960's was onInventory control. Most of the software packages then(usually customized) were designed to handle inventory basedon traditional inventory concepts. In the 1970's the focusshifted to MRP (Material Requirement Planning) systems thattranslated the Master Schedule built for the end items intotime-phased net requirements for the sub-assemblies,components and raw materials planning and procurement.
In the 1980's the concept of MRP-II (Manufacturing ResourcesPlanning) evolved which was an extension of MRP to shopfloor and Distribution management activities. In the early1990's, MRP-II was further extended to cover areas likeEngineering, Finance, Human Resources, Projects Managementetc i.e. the complete gamut of activities within anybusiness enterprise. Hence, the term ERP (EnterpriseResource Planning) was coined.
Why is it Necessary?
By becoming the integrated information solution across theentire organization, ERP systems allow companies to betterunderstand their business. With ERP software, companies canstandardize business processes and more easily enact bestpractices. By creating more efficient processes, companiescan concentrate their efforts on serving their customers andmaximizing profit.
Market Leaders
The top five ERP vendors, SAP, Oracle Corporation,Peoplesoft, Inc. (now Oracle Corp.), JD Edwards & Company,and Baan International, account for 64 percent of total ERPmarket revenue. These vendors continue to play a major rolein shaping the landscape of new target markets, withexpanded product functionality, and higher penetrationrates. SAP dominates the $6.7 billion ERP applicationsmarket in Europe with 39% market share. Oracle andPeopleSoft come second and third respectively, followed bySAGE Group and Microsoft Business Solutions.
The Future of ERP
Industry analysts expect that every major manufacturingcompany will buy the software, which ranges in cost -- withmaintenance and training -- from hundreds of thousands ofdollars for a small company to millions for a large company.AMR Research of Boston says consolidation among the majorplayers will continue and intensify. ERP vendors areexpected to put more effort into e-commerce, CRM and SCMinitiatives, with leaders redirecting between 50% and 75% oftheir R&D budget to these projects.
According to Gartner research group, the rapid evolution ofERP has already lead to a new corporate must-have, ERP II,which is supposed to help businesses gain more competitiveedge in the future. The major difference is that ERP IIinvolves collaborative commerce, which enables businesspartners from multiple companies to exchange informationposted on eCommerce exchanges.
In the next tutorial we will talk about popular ERP Productsand the Modules and Application related to them.
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