Enterprise Resource Planning (ERP) vs. Enterprise Systems (ES)
 

There’s a lot of sloppy terminology flying around today in the business press, and one misnomer is to label enterprise-wide transaction processing software systems as ERP. These software packages support effective resource planning and make much of it feasible, but they don’t truly do it. Plus these packages contain many business processes other than resource planning.

Therefore, we need to trot out another acronym that does refer to software: ES. This stands for Enterprise System or Enterprise Software. A general and widely used definition for an enterprise systems is: packages of computer applications that support many, even most, aspects of a company’s information needs. That makes sense to us. Now for another distinction: Not all ERP business functions are contained in the typical Enterprise Software (ES) suite.

Similarly, the typical ES contains software support for business processes that are not a part of ERP. In Figure 1-1, we can see that distinction graphically. Please note the three areas on that diagram.

The rightmost part of the figure refers to those functions contained within a typical ES that are not part of ERP; the leftmost area is for those ERP functions not normally supported by an ES; the area of overlap in the center references those ERP functions typically supported by Enterprise Software. Now let’s take a look at just what this ERP thing is all about.

Enterprise Resource Planning

The fundamentals of ERP are the same as with MRP II (Manufacturing Resource Planning). However, thanks in large measure to enterprise software, ERP as a set of business processes is broader in scope, and more effective in dealing with multiple business units. Financial integration is even stronger. Supply chain tools, supporting business across company boundaries, are more robust. For a graphical view of ERP, see Figure 1-2.

Let’s now look at a complete definition of ERP, based on the description we saw a few pages back:

ENTERPRISE RESOURCE PLANNING (ERP) predicts and balances demand and supply. It is an enterprise-wide set of forecasting, planning, and scheduling tools, which:

• links customers and suppliers into a complete supply chain,
• employs proven processes for decision-making, and
• coordinates sales, marketing, operations, logistics,purchasing, finance, product development, and human resources.

Figure 1 - 2

Its goals include high levels of customer service, productivity, cost reduction, and inventory turnover, and it provides the foundation for effective supply chain management and e-commerce. It does this by developing plans and schedules so that the right resources —manpower, materials, machinery, and money—are available in the right amount when needed.

Enterprise Resource Planning is a direct outgrowth and extension of Manufacturing Resource Planning and, as such, includes all of MRP II’s capabilities. ERP is more powerful in that it: a) applies a single set of resource planning tools across the entire enterprise, b) provides real-time integration of sales, operating, and financial data, and c) connects resource planning approaches to the extended supply chain of customers and suppliers.

The primary purpose of implementing Enterprise Resource Planning is to run the business, in a rapidly changing and highly competitive environment, far better than before.

Author, Related References and Literature
ERP Making It Happen, John Whiley and Sons.
Mission Critical, Thomas H. Davenport

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