What is ERP? SAP? - Simplified.

If you are in IT or Non-IT, you must have heard off ERP systems which stand for Enterprise Resource Planning.  Even if you have not heard about ERP, you must have heard off SAP/Oracle.

Simply defined ERP is an end to end IT application system. ERP software provides the tools (applications) to support all the functions in a Business environment.

Tools can be Reports, Interfaces (EDI), and workflow. Business functions can be Accounting, Purchasing, and Inventory etc.

To explore ERP, you need understand how a Business functions.

Visualize a grocery store Business. Think about all the functions or tasks need to run a retail store. The business owner has to procure Items (Purchasing/Procurement), Pay for the Items (Accounts Payables), track the items (Inventory), Store the Items (Warehousing), sell the items (General ledger), Collect the payments (Accounts Receivables), pay his employees and manage their careers (Human Resources systems) and at the end of the day, he/she needs to look whether he made a profit or loss in his business (Income statements/Balance Sheets)

Business owner would also like to know the status of the items at a given point in Time.

ERP Systems provide all the above functions and more.

You can extend the above example to any Business; most of the functions are the same.

All the above IT applications form the core of ERP systems. An ERP system stores all the Business data and also filters that data to provide meaningful information to the Business owners at any point in time.

ERP systems can automate most of the mundane functions in a business but at the same time provides visibility to each function. It would be nice to know, when a Bill is due, when can you expect items, how many items are being used, what are the back log orders and more.

The other way to look at ERP systems is by Function.

The commercially available ERP systems (SAP/Peoplesoft/Oracle) break down their systems by Procurement, SCM (Supply Chain Management), HCM (Human Capital Management) and Distribution.

ERP systems also takes care off Accounting Controls like, who has the authority to approve what amounts (Workflow), Minimize the Fraud (SOX controls in USA) and also provide instant information to Business owners.

ERP systems forms the backbone (Back Office) for IT systems in any Enterprise. Even if you are not working on ERP system, you can be sure, you are working on function which ties into an ERP system.

Next Blog, we will look at Job Functions related to an ERP system,