Overview

What this chapter is about

A modern business is made up of many departments — purchasing, production, stores, sales, accounts, finance, human resources, and more. In the past, each department kept its own records in its own way: the stores clerk had one register, the accounts clerk had another, and the sales team had a third. When these records did not agree, the business lost time, money, and confidence. If a customer asked, 'Is this item in stock, and when will you deliver?', no single person could answer with certainty, because the information was scattered across separate, disconnected systems.

Enterprise Resource Planning (ERP) is the answer to this problem. It is a single, integrated software system that ties all the departments of an organisation together around one common database. When a sale is recorded, the stock is reduced, the accounts are updated, and the production plan is adjusted — all at the same time, automatically, from one entry. Everyone in the organisation looks at the same up-to-date information.

This chapter explains what ERP means and the idea behind it, how ERP software evolved over the decades, the main functional modules it contains (such as finance, human resources, production, supply chain, and customer relationship management), the benefits it offers and its limitations, how an ERP system is put into use in an organisation (implementation), and the growing role of ERP in business and commerce. The treatment follows the standard, well-established approach to the subject at the Standard XII level, and describes ERP generically — as a class of software — without recommending any particular vendor or brand.

Note on scope: Maharashtra's Information Technology (Commerce) syllabus draws on the same universal principles of business computing and information systems that are taught nationally. The concepts explained here are the general, vendor-neutral principles of ERP; they are not specific to any single software product.