January 29, 2022

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Enterprise Resource Planning (ERP) Meaning, Examples

Enterprise Resource Planning (ERP) Meaning, Examples
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Information systems for businesses have gone beyond traditional styles. In recent times, entities rely on computer base applications to solve their business processes, and enterprise resource planning software is the latest application in vague.

Definition of Enterprise Resource Planning

Enterprise Resource Planning (ERP) is an information system that automates and integrates core business processes. It allows for data sharing and information flow among different functions of an organization. It also integrates common business practices in the application.

Key Explanations of Enterprise Resource Planning

ERP is an information system. This means it is a system that collects data from various sources, processes them, and gives out information as output. Generally, there are two types of information systems in the business world. The management information system and the accounting information system. Enterprise resource planning is available on both systems. Although, our focus is on AIS.

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ERP automates business processes. Automation reduces the time that would have been spent by staff to input such data. For example, in the banking sector, an ERP will automate interest charges on customers’ loans. So, there will be no need for staff to compute it for every customer. Also, ERPs are known to automate certain types of tax. These include sales tax (VAT) and withholding tax.

It integrates key business processes. Several business processes can be combined as one. So, instead of different employees handling those activities. An employee can do a task and the result will be similar.

Enterprise resource planning makes data sharing easy. Since most ERPs are web-based, authorized employees can access similar data at different locations. Also, employees in a marketing function do not need to request certain data from operation staff. He or she can access them at a goal.

A problem with ERP is that it is expensive to build in-house. So most organizations buy commercialized types. This results in another challenge. What exactly? The commercial ERP software is not customized to suit your business. Therefore, the organization will adjust its process to suit the software or make some modifications to the ERP.

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A reason for this is that modifying enterprise resource planning applications is expensive. And the expected results may not be attained after modification. To solve this challenge, some organizations buy bolt-in software to complement the ERP. However, the best option has always been adjusting the entity’s business processes to suit the ERP.

Examples of ERP applications modules

The following are examples of ERP application modules organizations use.

  • Asset Management
  • Financial Accounting
  • Human Resources
  • Industry-Specific Solutions
  • Plant Maintenance
  • Production Planning
  • Quality Management
  • Sales and Distribution
  • Inventory Management

Conclusion

Enterprise resource planning (ERP) is an information system that encourages data sharing and automation of business processes. Most management and accounting information systems used by entities in recent times are ERPs. More so, it is expensive to build ERP for an organization, therefore the use of commercial ERP from companies like Oracle, SAP, and SAGE.

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