What Is ERP and Why
Do I Need It?
Enterprise Resource Planning (ERP) is an enterprise-wide information system that facilitates the flow of information and coordinates all resources and activities within the organization.

February, 2011

An Executive Whitepaper Presented by
Fourth Generation Software, makers of

What Is ERP and Why Do I Need It?

PAGE 2

Highlights:
•

ERP is an enterprise-wide information system that facilitates the flow of information and coordinates all resources and activities within the business organization.

•

Of all the software an organization can deploy, ERP has potentially the most direct impact on reducing costs.

•

ERP solutions are effective for reducing costs through improving efficiencies and decision-making. •

Competitive advantages arise to firms that can contain costs so that increased revenues translate into higher profits.

•

Effective solutions open to door to vast business process improvements as indicated by better customer service, smoother functioning business, decision support, eliminating IT barriers to growth, and the coordination of various business activities..

What Is ERP?
ERP stands for Enterprise Resource Planning. ERP is an enterprise-wide information system that facilitates the flow of information and coordinates all resources and activities within the business organization. Functions typically supported by the system include manufacturing, inventory, shipping, logistics, distribution, invoicing, and accounting. Some solutions now embed customer relationship management functionality. A wide variety of business activities including sales, marketing, billing, production, inventory management, human resource management, and quality control depend on these systems. The ERP system assists in managing the connections to outside stakeholders as well as enhancing performance management. It uses a centralized database and usually relies on a common computing platform. It provides the user a unified, consistent, uniform environment.

ERP solutions evolved from applications focused on materials requirements and resource planning and computer integrated manufacturing. The Enterprise Resource Planning term came about when software developers were searching for a name that would more aptly describe these broader systems. These new solutions provided functionality that encompassed other applications in addition to manufacturing.

What Is ERP and Why Do I Need It?

PAGE 3

Of all the software an organization can deploy, ERP has potentially the most direct impact on reducing costs. When asked in a 2010 survey conducted by the Aberdeen Group of Small and
Medium Businesses (SMBs) what factors drove them to implement an ERP solution, nearly half cited the need to reduce costs to improve operating margins. Improving customer service was the second most cited reason. The distribution of responses to this survey appears below in Figure
1.
Figure 1: Factors Driving ERP Adoption

Source: Aberdeen Group survey, August 2010

A survey conducted during much the same period by AMR Research confirms these findings.
Fifty percent of their respondents named cost reduction and improved efficiencies among their top two priorities.

Why Does the Small or Mid-Size Business Need ERP?
The best firms are hungry for proven methods to streamline operations and improve their customers’ experience to enhance their competitive position and drive growth – and the value of Enterprise Resource Planning (ERP) solutions is well established.

What Is ERP and Why Do I Need It?

PAGE 4

Competitive advantages arise to firms that can contain costs so that increased revenues translate into higher profits. A well-constructed and implemented ERP solution should reduce costs and increase productivity through improved operations. Standardizing business processes, which is required for the successful implementation of ERP, lays the groundwork for attaining improved efficiencies. An effective implementation of an ERP