Home / New Business Strategies / What is ERP? Briefly Describe Its Components, Benefits & Drawbacks?

What is ERP? Briefly Describe Its Components, Benefits & Drawbacks?

ERP, stands for Enterprise Resource planning system integrates complete information and different processes of an organization into unified system.

Mostly information is related to:

  • Product planning
  • Manufacturing or service delivery
  • Marketing and sales
  • Inventory Management
  • Shipping and payments

ERP provides and the view of core business processes, often in real time using common databases maintained by a database management system.

Following business resources are traced by ERP:

  • Raw Materials
  • Production Capacity
  • Purchase Orders
  • Payroll

Therefore ERP system is considered a vital organization tool.

Components of ERP

Some major components are described under

  1. Finance Resource Management

Finance resources management is resource of ERP gathers financial data from various functional departments and generates valuable financial reports such as balance sheets etc.


  1. Manufacture Resource Planning

ERP manufacturing management software allows to plan to execute and control production more effectively based on a wide variety of manufacturing modes.


  1. Customer Resource Planning

ERP is an industry acronym for resource planning, because broadly speaking, ERP refers to automation and integration of a company’s core business to help them and focusing on customer resources.

  1. Human Resource Management

Human resource module streamlines the management of human resource. It is a suite of integrated solution and comprise of four broad sections, mainly training, payroll and attendance.

  1. Supply Chain Management

             Supply chain management system integrates all aspects of operations managements logistics and   information technology to ensure continuous, on time resupply, it provides just your customers wants.

Benefits of ERP

  • ERP collects, manages and distributes information of all kinds to grow your business.


  • It can help regarding to measure, analysis and simulation capabilities, so that companies can make changes in demand or supply.


  • Inventory reduction is identified by organization through ERP system.



  • New ERP systems are prepared for internet enabled world with ecommerce capabilities for collaboration with supply chain partners.


  • Mostly ERP system is used to determine some operational difficulties’ like trouble in production, meeting, high costs etc.


  • ERP can improve quality and efficiency of business b managing all data.



  • ERP system provides security to protect the companies against external problems like embezzlement.


Drawbacks of ERP:

  • ERP system is much costly to install for any organization.


  • ERP system is not easy to use as it is thought.
  • It has also several limitations as they could not find any application in all activates of the companies.


  • ERP system is not able to take advantages of the services offered by the vendor.