A Full ERP Terminology Dictionary: 166 Terms Defined

erp defined

As early as the 1960s, businesses started using computers for their accounting and finance solutions [1]. When the manufacturing industry started booming in the 1980s, new software was invented to integrate all of these processes in one place. In the 1990s, ERP was introduced, combining accounting, finance, sales, manufacturing, inventory, human resources, and project management. Enterprise resource planning (ERP) refers to a type of software that organizations use to manage day-to-day business processes, such as accounting, procurement, FP&A, project management, risk management, and supply chain operations. ERP also integrates with front-office applications to build holistic views of customers, including customer relationship management (CRM) solutions. Additionally, cloud-based ERP applications are often embedded with next-generation technologies, such as the internet of things (IoT), blockchain, AI, machine learning, and digital assistants.

  • You can select an ERP system that best supports your organization’s goals and objectives by carefully considering these factors.
  • Since data is the lifeblood of every modern company, ERP makes it easier to collect, organize, analyze, and distribute this information to every individual and system that needs it to best fulfill their role and responsibility.
  • Some vendors of entry-level ERP sell to both small and midmarket (also called medium-sized) businesses — often lumped together as SMBs — and claim their products can “scale” to accommodate growth.
  • Spare parts – items held in stock as replacements to keep machinery, equipment, etc. working properly.
  • Some businesses benefit from enhanced real-time data reporting from a single source system.
  • Inventory Adjustment – Method to increase or decrease inventory outside the normal methods of receiving or issuing items.

Many modern ERP solutions can integrate with other customer- or business-facing tools. The most common method for integration is application programming interfaces (APIs), but other systems might use enterprise service bus (ESB) and integration platform-as-a-service (iPaaS). Blockchain technology, which enables secure and transparent data sharing across a distributed network, has the potential to significantly enhance supply chain management, financial transactions, and data integrity within ERP systems. By leveraging blockchain technology, organizations can improve their ERP systems’ security, transparency, and efficiency, unlocking new possibilities for collaboration and innovation. Finally, Human Resources modules in ERP systems can also support talent management activities, such as talent acquisition, learning and development, and career planning.

Increased Productivity

By understanding the key components, benefits, deployment options, and future trends of ERP systems, organizations can make informed decisions about the right ERP solution for their needs and ensure a successful implementation. As technology continues to advance and reshape the world of ERP, businesses that stay abreast of these developments will be well-positioned to thrive in the competitive landscape of the modern enterprise. Enterprise resource planning systems are complete, integrated platforms, either on-premises or in the cloud, managing all aspects of a production-based or distribution business. Furthermore, ERP systems support all aspects of financial management, human resources, supply chain management, and manufacturing with your core accounting function. ERP, or enterprise resource planning, is software designed to manage and integrate the functions of core business processes like finance, HR, supply chain and inventory management in a single system.

erp defined

Long term costs can be minimized through careful system testing and thorough documentation. Custom–integrated solutions typically run on workstation or server-class computers. Enterprise appliance transaction modules (EATM)—These devices communicate directly with plant floor equipment and with the ERP system via methods supported by the ERP system. EATM can employ a staging table, web services, or system–specific program interfaces (APIs). ERP systems connect to real–time data and transaction data in a variety of ways. These systems are typically configured by systems integrators, who bring unique knowledge on process, equipment, and vendor solutions.

Human Resources and Talent Management

Each option has its advantages and considerations, and organizations should carefully evaluate their specific needs and requirements before selecting a deployment model. Another important aspect of finance modules in ERP systems is their ability to support regulatory compliance. By integrating these financial functions within the ERP system, organizations can streamline their financial processes and ensure accurate and up-to-date financial data. One of the key advantages of ERP systems is their ability to provide real-time data, allowing leaders and managers to make informed decisions based on up-to-date information.

Finally, the best thing marketing can do for your business is to drive leads and conversions. You can use your company ERP to manage sales and inventory, but those things only matter if people are buying your products or services. From there, MRP was the new standard until 1983, when manufacturing resource planning (MRP II) came onto the scene. Now, MRP II integrated manufacturing and production components — billing, scheduling, contact information — into one software for the first time. This includes providing comprehensive training on the new system for all affected employees and ongoing support and resources to help them adapt to the new system.


You can talk to specific providers to make sure, but most modern solutions are meant to work with other tools. As technology progressed and need increased, companies knew that the system needed to catch up. In 1964, Black and Decker made waves by combining their material requirements planning (MRP) solution and EOQ concepts with a mainframe computer. Finally, organizations should periodically reassess their ERP performance and ROI to ensure that the system meets their needs and delivers the expected benefits. This may involve adjusting KPIs, revising goals and objectives, or seeking additional improvements and enhancements to the system. By continually evaluating and improving the performance of their ERP system, organizations can maximize their return on investment and ensure that their ERP system remains a valuable asset for the organization.

In addition to these core functions, procurement and sourcing modules can also support other related activities, such as contract management, supplier risk assessment, and spend analysis. In addition to handling day-to-day accounting tasks, finance modules in ERP systems also help organizations manage more strategic financial activities, such as budgeting, forecasting, and financial planning. This enables businesses to gain greater visibility into their financial performance and make more informed decisions about resource allocation and investment strategies.

The business value of ERP

ERP tools share a common process and data model, covering broad and deep operational end-to-end processes, such as those found in finance, HR, distribution, manufacturing, service and the supply chain. Generally, packages include finance, human resource, logistics and manufacturing, supply chain management, and customer relationship management. The future of ERP is shaped by emerging trends and technologies that promise to transform erp defined how organizations manage their business processes and make data-driven decisions. Some of the most significant emerging technologies influencing the current ERP landscape include artificial intelligence (AI), blockchain, augmented reality, and the Internet of Things (IoT). One of the key advantages of utilizing manufacturing and production modules is the ability to manage production schedules and resources more effectively.

CRM systems support front-office business functions, whereas ERP systems connect back-office functions. ERP software helps organizations gain a holistic view of their operations and identify potential opportunities for growth and improvement. In today’s fast-paced business environment, understanding “what is ERP” and leveraging it is crucial for organizations looking to stay ahead of the competition. In this comprehensive guide, we’ll explore the ins and outs of ERP, its evolution, key components, benefits, and future trends, helping you confidently navigate the ERP world. Legacy on-premises ERP solutions served companies well for decades, but that was then. On-premises ERP typically creates data silos; requires expensive, ongoing maintenance fees; and involves creating customizations.

Selecting an ERP solution

If the enterprise has engaged an ERP integration firm, its project managers should be part of the core program management team. Separately, vendors in the 1970s — including two startups, SAP and Baan — began developing https://www.bookstime.com/ mainframe software for managing financial processes on a single database. The modular, integrated business software grew to encompass other so-called back-office business functions, such as HR and accounting.

Customer Relationship Management (CRM) – Software that allows a company to capture, track and analyze customer interactions. Capacity Requirements Planning (CRP) – Calculating the production capacity needed to meet planned and actual demand. Bill of Material (BOM) – The raw materials that are used to build a finished good or subassembly. ABC Analysis – ABC analysis classifies part IDs by the value and the usage of the item. A strong marketing campaign can persuade people to sign up for email lists, try out demos, and ultimately make purchases from your business. With a top-tier marketing campaign, you can draw users to your website and engage them there.

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