ERP, which stands for enterprise resource planning, is a company-dedicated software that collects, manages and coordinates information into an integrated data flow across the company. ERP has a range of built-in modules that are effective in helping with the company's everyday activity. Business units that ERP helps with include marketing, inventory management, quality management, finance management, delivery and sales.

Modular Design

The modular design of an ERP system incorporates various distinct business modules such as manufacturing, financial, accounting and distribution, with each module taking care of the functions of a particular section or department of an organization. Although these modules are totally separate, they're integrated in such a manner as to provide a seamless flow of data between the various modules. This enlarges the operational transparency provided for by the standard interface. The separate modules work in real-time with online and batch-processing capabilities.

Central Common Database

Having a common centralized database management system, also called a DBMS, is an important characteristic of a good ERP system. All the data is entered and stored only once and then used by all the departments and modules simultaneously. This helps eliminate the inherent flaws associated with using a distributed database. The distributed database structure creates a lot of duplicity and redundancy of data, with risks of inconsistencies in the data increasing exponentially.

Flexible and Open Design

Because organizations are almost always dynamic in nature, ERP systems offer a lot of flexibility to respond to the ever-changing needs of the enterprise. These systems have an open system architecture, allowing them to attach or detach any module as and when required without affecting the other modules. A good ERP system should support connectivity to other business entities in the organization and shouldn't be confined within the boundaries of the organization. The system should also be Internet-enabled.

Automatic Generation of Information

An ERP system provides business intelligence tools such as executive information systems, decision support systems, easy warning systems, data mining and reporting to enable people to improve decision making, resulting in overall enhancement of business processes. All financial and business information is generated automatically from the data already entered once into the common centralized database of the ERP system, without any further instructions. A good ERP system has a collection of all the best business practices that are applicable worldwide.