ERP is an acronym for Enterprise Resource Planning, and it refers to an integrated software package that supports all of a company's functional areas. Thus, it can handle the transactional requirements of the accounting, customer service, manufacturing, sales, warehousing, and other departments. Many ERP systems also accept data from a company's customers and suppliers for supply chain management purposes, so that the system essentially exceeds the traditional boundaries of a corporation.
The great advantage of an ERP system is that all corporate data is integrated, so that data is only entered into the system once (as opposed to the "silo" approach that is still common in most companies, where information is entered into the separate software packages used by each department). With an integrated ERP system, companies find that their transaction error rates decline, while many tasks that formerly required manual effort are now entirely automated. Also, subject to security issues, employees can access information in other departments that was previously difficult to obtain, or only with the help of special programming by the IT department.
The downside of an ERP system is its extreme complexity. The software requires a great deal of time to set up, as well as to convert a company's existing data into it. Also, because ERP systems can only be configured in a limited number of ways, most companies will find that they must alter their operating procedures to fit the software, rather than altering the software to fit their procedures. These changes call for a large training expenditure, and may result in resistance from those employees accustomed to the old system. These issues call for an implementation budget in the millions of dollars, and several years of intensive effort to complete.