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 software is made up of many software modules. Each ERP software module mimics a major functional area of an organization. Common ERP modules include modules for product planning, parts and material purchasing, inventory control, product distribution, order tracking, finance, accounting, marketing, and HR. An ERP system has a service-oriented architecture with modular hardware and software units or "services" that communicate on a local area network. The modular design allows a business to add or reconfigure modules (perhaps from different vendors) while preserving data integrity in one shared database that may be centralized or distributed.

ADVANTAGES OF ERP: General: Integration among different functional areas to ensure proper communication, productivity and efficiency Design engineering (how to best make the product) Order tracking, from acceptance through fulfilment The revenue cycle, from invoice through cash receipt Managing inter-dependencies of complex processes bill of materials Tracking the three-way match between purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced) The accounting for all of these tasks: tracking the revenue, cost and profit at a granular level. Create a new foundation on which next-generation applications can be developed Replace creaky legacy systems Provide greater control Improvements through adoption of best practices

Sales and Distribution It optimizes inventory management. It anticipates customer demands. Streamlines the Order to Cash process. Strengthen the customer loyalty. Grows online presence and sales.

Purchasing Better and accurate procurement. Reduces purchase and inventory cost. Helps in evaluating vendors. Tracks returns

Manufacturing Focuses on manufacturing efficiency Streamline production planning. Manages sub contractors. Optimizes inventory management. Helps in meeting regulatory mandates.

Accounts

Handles multiple companies from single accounts. Maintains general ledger, journal entries etc. Automatic, real time postings. Handles taxes conveniently. Generates real time reports.

DISADVANTAGES OF ERP: Problems with ERP systems are mainly due to inadequate investment in ongoing training for the involved IT personnel - including those implementing and testing changes. ERP systems can be very expensive Many of the integrated links need high accuracy in other applications to work effectively. A company can achieve minimum standards, then over time "dirty data" will reduce the reliability of some applications. Once a system is established, switching costs are very high for any one of the partners (reducing flexibility and strategic control at the corporate level). The blurring of company boundaries can cause problems in accountability, lines of responsibility, and employee morale. Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software. Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.

The system may be too complex measured against the actual needs of the customers.