Enterprise Resource Planning (ERP) covers the techniques and concept employed for the integrated management of businesses as a whole from the viewpoint of the effective use of management resources to improve the efficiency of an enterprise.
ERP is the technological back bone of e business an enterprise wide transaction framework with links into sales order processing inventory management and control production and distribution planning and finance.
Kumar et al define enterprise resource planning ( ERP) systems as "configurable information systems packages that integrate information and information based processes within and across functional areas in an organization".
Typically before ERP implementation each department has its own computer system optimized for the requirements that a department needs. As shown in figure 1 each department will maintain separate databases and design application as per their functionalities. These will result in local optima and overall very poor results across all the department or within the company.
ERP combines all the business requirements of the company together into a single integrated software programs that runs off a single database so that various departments can more easily share information and communicate with each other. As shown in figure 2 conceptually ERP replace the old standalone computer systems in finance, HR manufacturing et. With a single software program that facilitates various functional modules. Thus everybody from the finance manufacturing purchasing etc, will still get their own advantages of software along with the added feature of availability of information across other departments to improve decision quality. For example someone in finance cause ERP to see if any sale order has been shipped from the warehouse so that can now confidently plan for working capital management for the next period.