Enterprise resource planning (ERP) is one software suite in which a company's sales, warehouse, purchasing and finance teams read and write the same records of orders, stock and money. It is usually just called the ERP. Large and mid-sized companies in every industry run on one.
Before ERP, each team kept its own system. Sales kept the orders in one, the warehouse kept the stock in another, and finance kept the accounts in a third. Every evening, someone copied numbers from one system to the next, and the numbers rarely matched. An ERP puts all of these records into one database. So a change made by one team is seen by every other team at once.
Take, for example, a pump manufacturer in Kolhapur. A distributor orders 50 water pumps at ₹12,000 each. The sales team enters the order in the ERP's sales module. The ERP checks the stock and finds 30 pumps ready, so it reserves them for this order. For the other 20, it reads the bill of materials, the list of parts that make one pump. It finds that the store has only 8 motors. So it creates a purchase request for 12 more motors, and the purchasing team turns it into a purchase order to a supplier. When all 50 pumps are shipped, the ERP raises the invoice: ₹6,00,000, plus 18% GST of ₹1,08,000, a total of ₹7,08,000. At the same moment, it posts the entries to the ledger: the amount the distributor owes, the sale, and the GST the company must pay to the government. Posting means recording each entry against the right account.
That is the main idea of an ERP. One action by one team creates the correct records for every other team.
The ERP does not do everything itself. Customers and deals are tracked in the CRM, which sends each confirmed order to the ERP. Salaries come from HR and payroll software. Buying from suppliers can be run in procure-to-pay software. These systems are joined to the ERP through an integration platform. At the end of the month, finance closes the books in financial close software.
The ERP is the company's system of record. So changing it is slow and risky. Most large suites are now sold as SaaS, rented and run in the vendor's cloud, but many older installations still run in the company's own data centre. Who may approve what inside the ERP is checked with tools such as SAP access control.