Information Technology Reference
In-Depth Information
As defined in Chapter 4, enterprise resource planning (ERP) is a set of integrated programs
that manage a company's vital business operations for an entire multisite, global organization.
Recall that a business process is a set of coordinated and related activities that takes one or
more types of input and creates an output of value to the customer of that process. The
customer might be a traditional external business customer who buys goods or services from
the firm. An example of such a process is capturing a sales order, which takes customer input
and generates an order. The customer of a business process might also be an internal customer
such as a worker in another department of the firm. For example, the shipment process
generates the internal documents workers need in the warehouse and shipping departments
to pick, pack, and ship orders. At the core of the ERP system is a database that is shared by
all users so that all business functions have access to current and consistent data for operational
decision making and planning, as shown in Figure 9.6.
Figure 9.6
Enterprise Resource Planning
System
An ERP integrates business
processes and the ERP database.
ERP
database(s)
Production and supply
chain management
Customer relationship
management and sales ordering
Financial and
managerial accounting
An Overview of Enterprise Resource Planning
ERP systems evolved from materials requirement planning systems (MRP) developed in the
1970s. These systems tied together the production planning, inventory control, and pur-
chasing business functions for manufacturing organizations. During the late 1980s and early
1990s, many organizations recognized that their legacy transaction processing systems lacked
the integration needed to coordinate activities and share valuable information across all the
business functions of the firm. As a result, costs were higher and customer service poorer than
desired. Large organizations, members of the
Fortune
1000, were the first to take on the
challenge of implementing ERP. As they did, they uncovered many advantages as well as
some disadvantages summarized in the following sections.
