In the Past companies were small and all the different managerial functions managed by a single person, the decisions were made, keeping in mind the overall company objectives. But as companies grew, managing the entire operations became impossible for a single person. More and more people were brought in and the different business functions were given to different individuals. When the organization became larger, each person hired people to assist him/her and the various departments as we see now, evolved. The size of the departments began to increase as more and more people were required to do the job.
As the departments became large, they became closed 'and watertight. Each had their own set of procedures and hierarchy. People, at most levels within a department, would just collect and pass information upward. Thus information upward. Thus information was shared between departments only at the top level.
Although IT provided the perlect answer, in the haste, most developers ended up developing need-based, isolated and piecemeal information systems that were non-compatible . And it is no wonder then that IT implementations automated only the existing applications and not the business functions.
Most of this happened because IT was not integrated into the corpo~ate strategy. To draw real benefits from a technology as powerful as IT, one has to devise a system with a holistic view of the enterprise. Such a system has to work around the core activities of the organization, and should facilitate seamless flow of information across departmental barriers. Such systems can optimally plan and manage all the resources of the organization and hence, they can be called as Enterprise Resource Planning (ERP) systems.
An enterprise is a group of people with a common goal, which has certain resources at its disposal to achieve that goal. The group has some key functions to perform in order to achieve its goal. Resources included are money, manpower, materials, and all the other things that are required to run the enterprise. Planning is done to ensure that nothing goes wrong. Planning is
putting necessary functions in place and more importantly, putting them together.
Therefore , enterprise wide Resource Planning or ERP is a method of effective Planning of all the resoureces in an organization. There are many misconceptions about ERP. The first one is that ERP is a computer system. Yes, computers and IT are integral parts of an ERP system; but ERP is primarily an enterprise-wide system, which encompasses corporate mission, objectives, attitudes, beliefs, values, operating style, and people"who make-the organization.
The second misconception that ERP is for manufacturing organization alone. This assumption is basically due to the way in which ERP was historically developed from the methods of Material Requirement Planning (MRP) and Manufacturing Resource Planning (MRP-II), WhiJb are relevant manufacturing organizations. In the manufacturing industry. MRP became the fundamental concept of production ma,nagement and control in the mid 1970s (At this timeBOM (Bill of Materials) - which is purchase order management that utilizes parts list management and parts development - was the prevailing trend). And this concept unfolded from order inventory managment of materials to plant and personael planning and distribution planning, which in turn became MRP-II. This Incorporated financlal accounting, human resource management functions, distribution management functions and management accounting functions. It came to globally cover all areas of enterprise mainstay business and eventually, began to be called ERP. But in reality, the concept of enterprise-wide planning of resources is not limited to any particular segment of industry.
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