Enterprise Resource Planning

Enterprise Resource Planning (ERP) is defined by Baltzan as "a single IT system used by businesses in integrating information and functions in different departments so that employees have access to real-time information to accurately make a business decision".

ERP has two key components:

(1)  A central database where the information are gathered and then transmitted to modules is the heart of the ERP.  When a user changes any information in one module the whole ERP system gets updated automatically

(2) The evolution of ERP started in the early 90’s with its original purpose was for materials planning, has evolved in the 2000’s to include warehousing, distribution, and order entry.  In addition to its previous intended uses, ERP system now currently includes project management, knowledge management, workflow management, CRM, human resource management, portal capability and integrated financials which are collectively called ERP II.  

Baltzan also emphasized that ERP can be further divided into core ERP components which are included in a traditional ERP component and is mainly used in internal operations and there’s extended ERP components which are additional components that are not in the traditional one and mainly used in external operations.  The core ERP components include Accounting and Finance, Production and materials management, and Human Resources.  Business Intelligence, Customer Relationship Management, Supply Chain Management and Ebusiness are included in the extended ERP components.   

(A detailed description of the core and extended ERP components can be obtained from Business Driven Information Systems by Baltzan and Phillips.) 

Core ERP Components

Accounting and finance ERP components handles the accounting data and financial process functions such as general ledger, accounts payable, accounts receivable, budgeting, and asset management.

Production and materials management ERP components deals with the various aspects in production planning and execution such as demand forecasting, production scheduling, job cost accounting, and quality control.

Human resources ERP components monitor employee information such as payroll, benefits, compensation, and performance assessment, and assure compliance with the legal requirements of multiple jurisdictions and tax authorities.

Extended ERP Components

Business Intelligence ERP component collects information that are being used by the whole organization, organize it, and applies analytical tools to assists managers in making decisions.

Customer Relationship Management ERP components provides an overall information regarding customer data and interactions with customer so that organizations can be more responsive to their needs.  These components typically include contact centers, sales force automation, and marketing functions.

Supply Chain Management ERP components assists organization’s supply chain from its acquisition of raw materials to receipt of finished goods by customer by organizing a plan, scheduling control, and optimization.

Ebusiness ERP components has two primary features: Elogistics and Eprocurement.  Elogistics is mainly about the transportation and storage of goods and Eprocurement is the B2B purchase and sale of suppliers and services over the Internet.

Top 5 ERP SoftwareMicrosoft Dynamics AX 2009, SAP R/3, SAP Business One, Infor ERP XA, and Net Suite.


Baltzan, P. & Phillips, A. (2009). Business Driven Information System.  New York. McGraw-Hill.