What Is Enterprise Resource Planning (ERP)?

Enterprise resource planning (ERP) is a process used by companies to manage and integrate the important parts of their businesses. Many ERP software applications are important to companies because they help them implement resource planning by integrating all of the processes needed to run their companies with a single system. An ERP software system can also integrate planning, purchasing inventory, sales, marketing, finance, human resources, and more.

You can think of an enterprise resource planning system as the glue that binds together the different computer systems for a large organization. Without an ERP application, each department would have its system optimized for its specific tasks. With ERP software, each department still has its system, but all of the systems can be accessed through one application with one interface.

ERP applications also allow the different departments to communicate and share information more easily with the rest of the company. It collects information about the activity and state of different divisions, making this information available to other parts, where it can be used productively.

ERP applications can help a corporation become more self-aware by linking information about the production, finance, distribution, and human resources together. Because it connects different technologies used by each part of a business, an ERP application can eliminate costly duplicate and incompatible technology. The process often integrates accounts payable, stock control systems, order-monitoring systems, and customer databases into one system.

ERP offerings have evolved over the years from traditional software models that make use of physical client servers to cloud-based software that offers remote, web-based access.