Enterprise resource planning (ERP) applications are large-scale computer software programs companies will implement to improve business operations and automate individual processes. These systems differ from small-scale programs as ERP applications typically consist of several modules built around a transaction recording system. Most systems are quite expensive and commonly found in larger companies that have both the need for multiple application modules and the capital to pay for the implementation and support fees.
The transaction recording system in ERP applications works on both internal and external transactions. Internal transactions result from companies producing goods and services, hiring employees, purchasing services and resources from vendors or marketing products to consumers. External transactions include the acquisition of debt or equity financing, customer surveys or collecting information regarding government policies or the movements of competing companies in the economic market.
Modules found in ERP applications include human resources, accounting or finance, procurement, production, warehousing, or other systems, depending on the company implementing the application. Each module is self-contained and independent while being connected to the transaction recording system. The purpose for this methodology is to allow separation of each module if necessary, which allows organizations to grow slowly when implementing the entire application. Companies may also have geographic separation, meaning the company may only need the main accounting or finance module in the corporate office rather than all regional warehouse locations.
The implementation process for ERP applications is often quite lengthy and time consuming. Business owners, directors, and executives will meet with the ERP vendor and determine the best system that matches the company’s needs. After this decision, a time frame estimate will help the company determine how long the implementation process will take. Most companies break this process into stages in order to avoid major operational disruption or complications from the technological changeover. Companies with a preexisting computerized information system will typically spend more time transferring historical records into the new ERP system. This ensures no essential information is lost when switching from one system to the next.
Technical support and customer service is another important issue for ERP applications. These systems may require updates or upgrades in future months or years. Companies will need to use the ERP vendor’s support service to ensure the system maintains relevance and no security issues exist when transferring or holding the company’s business information. Support and service fees will often be an important factor when companies select an ERP application as these fees continue in part for the duration of time in which the system is operational.