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What is Enterprise Resource Planning (ERP)?

What is Enterprise Resource Planning (ERP)?

According to Thomas H. Davenport, a renowned expert in information technology and management, “Enterprise resource planning (ERP) systems are software packages that integrate all the information flowing through a company—financial and accounting information, human resource information, supply chain information, customer information.” 

Enterprise resource planning (ERP) is a tool that companies use to manage and connect key parts of their business. ERP software is important because it helps companies plan and organize resources by combining all the processes they need into one system. 

An ERP system can handle tasks like planning, buying inventory, sales, marketing, finance, human resources, and more, all in one place.

How Enterprise Resource Planning Platforms Work

How Enterprise Resource Planning Platforms Work

1. Evolution From Traditional Systems To Cloud-Based Solutions

Enterprise Resource Planning (ERP) systems have transitioned from traditional software reliant on physical servers and manual data entry to cloud-based platforms accessible via the web.

The responsibility of maintaining the platform typically lies with the company that developed it, while client businesses subscribe to its services.

2. Customized Application Selection And Integration

Businesses select the specific applications they require, tailored to their operational needs. The hosting company then installs these chosen applications onto the server rented by the client, facilitating integration with the client’s existing processes and data.

3. Seamless Integration And Data Accessibility

Once all departments are interconnected within the system, data is centralized and stored on the server. Authorized users can access this data instantaneously, enabling real-time insights and decision-making across the organization.

4. Insightful Reporting And Performance Analysis

Comprehensive reports featuring metrics, graphs, and other visual aids are generated to provide clients with insights into their business and departmental performance.

These reports aid in understanding and optimizing business processes for enhanced efficiency and effectiveness.

Types Of Enterprise Resource Planning Systems

Types Of Enterprise Resource Planning Systems

There are many different ERP solutions available to meet various business needs. While this list doesn’t include every type of ERP, it covers a wide range. Businesses looking to implement an ERP system should find useful options here, and several systems might be relevant for any situation.

On-Premise ERP

On-premise ERP systems involve buying software licenses and installing the ERP system directly on a company’s own servers. This gives companies complete control over the system and data since it’s stored on their premises. 

Customization and integration with existing systems can be more extensive, but this setup usually requires a dedicated IT team for maintenance, updates, and security.

Cloud ERP

Cloud ERP systems are hosted on remote servers and accessed via the internet. These systems, like SaaS products, offer better scalability, allowing businesses to easily adjust resources and features as needed without a large upfront investment in hardware. 

Cloud ERPs typically have a subscription-based pricing model, with updates and maintenance handled by the ERP provider, not the company itself.

Industry-Specific ERP

Industry-specific ERP systems are designed to meet the unique needs of particular industries. These systems include specialized modules, features, and best practices tailored to the industry’s complexities.

For example, a manufacturing company needs an ERP that focuses on inventory, supply chain management, and distribution. This type of ERP is very different from one used by a financial institution, which would have different priorities and features.

Open-Source ERP

Open-source ERP systems grant users access to the source code, empowering companies to customize, modify, or redistribute the software to better align with their unique requirements.

Implementing and maintaining open-source ERP systems often demands greater technical knowledge and resources compared to using commercial ERP solutions. 

Despite the challenges, open-source ERP solutions offer unparalleled flexibility and potential cost savings for businesses willing to invest in customization and maintenance.

Small Business ERP

Small business ERP systems are made for small and medium-sized businesses (SMBs). These systems aim to balance being specialized with providing essential functions at a lower cost. 

Because they are less complex, small business ERPs are usually easier to set up and need less customization than large enterprise ERPs.

Tiered ERP

Tiered ERP systems offer different levels of features and scalability to suit businesses of various sizes and complexities. Companies can select the tier that fits their current needs and budget, with the flexibility to upgrade or add modules as their needs grow. 

For example, a company expanding internationally might add a foreign currency module later.

Examples Of Enterprise Resource Planning 

Examples Of Enterprise Resource Planning 

Fulton & Roark

Men’s grooming product maker Fulton & Roark successfully adopted enterprise resource planning (ERP) to better manage inventory and financial data. Previously, the North Carolina company used spreadsheets for inventory and accounting software for financial records.

As the company grew, these methods became inefficient. Their old inventory system couldn’t handle changing costs, and the accounting software missed key financial metrics. This led to time-consuming manual processes and wasted resources.

To streamline operations, they chose the Oracle NetSuite ERP system. This allowed Fulton & Roark to quickly spot accounting errors related to inventory, cut costs by eliminating third-party financial evaluations, and improve financial reporting.


Cadbury, a worldwide candy maker famous for its chocolate Cadbury egg, also upgraded its computer system. The company faced challenges managing its many systems as it grew quickly and struggled with outdated warehouse management. 

To address this, Cadbury adopted a new system that combined its many applications, standardized procedures, and improved warehouse management. This overhaul removed barriers between departments, allowing for smoother and more coordinated work.

Unlocking Business Success with Sam SEO Philippines

Understanding the concept of Enterprise Resource Planning (ERP) holds significant importance as it forms the foundation of contemporary business operations, consolidating diverse processes into a cohesive system for optimal resource management and holistic supervision. 

Seeking guidance from professionals to grasp ERP is imperative as it guarantees informed decisions regarding its deployment and utilization. See how Sam SEO Philippines brings together teams, data, and real-time insights to help you and your finance team make smart business decisions. 

Final Thoughts

Enterprise resource planning (ERP) integrates business processes into a single system, giving companies a better overview to plan and allocate resources more effectively. Without ERP, departments often use separate systems, leading to isolated operations.

ERP systems facilitate communication and knowledge sharing across an organization, improve productivity and efficiency by integrating systems, and create stronger collaboration among teams and departments. However, switching to an ERP system can be ineffective if the company’s culture doesn’t adapt to the change and if the organizational structure isn’t reviewed to support it.


What Is Enterprise Resource Planning?

Enterprise resource planning, or ERP, is a system that connects different parts of a company by sharing information. The goal of an ERP system is to send important information from one area of the business to another. For example, an ERP system could automatically tell the purchasing department when the manufacturing department is running low on a certain raw material.

Why Is Enterprise Resource Planning Important?

ERP software provides a single system that integrates processes across the entire business. This allows users to interact within one interface, share information, and collaborate with others. ERP systems help increase productivity, teamwork, and efficiency.

What Are the 5 Main Components of ERP?

The components of an ERP system vary based on what the organization needs, but there are key features that every ERP should include. Usually, these are finance, human resources, logistics and manufacturing, supply chain management, and customer relationship management.

What Are the 2 Main ERP Applications?

The main ERP applications depend on the business and its industry. However, most companies benefit from supply chain management, logistics, and financial applications to help streamline their operations and reduce costs.


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