ERP (enterprise resource planning)

ERP stands for enterprise resource planning. It is a category of business software that runs an organization's core functions - typically finance, procurement, sales, operations and often human resources - from a single shared database, so that every department reads and writes the same records rather than keeping its own copy. The term came into general use in the early 1990s, extending the manufacturing planning software of the preceding decade beyond the factory floor into finance and distribution.

What an ERP system does

The defining feature is the shared record, not the module list. A sales order raised for a customer reserves the stock, creates the demand that a purchase order answers, posts to the sales ledger and appears in the operations plan, without anyone re-keying it. Because all of that is one dataset, the reported position is the same whichever part of the business is asked.

Typical modules cover sales and purchase ledgers, job or project costing, procurement and purchase order handling, inventory, manufacturing or works orders, and reporting. For a construction contractor an ERP might connect the job cost record to the materials purchase order, the subcontractor payment application and the invoice to the main contractor, so profit on each project is visible without a monthly reconciliation exercise. For an AV integrator it connects the project budget to equipment procurement and the stage invoice schedule.

ERP, CRM and the platforms in between

The three categories are easiest to separate by which part of the trading cycle they own.

• A CRM owns everything before the order: prospects, pipeline, conversation history, follow-up. It has no native place for a purchase order or a stock movement.
• An ERP owns everything after it, and usually the ledgers as well. Scope is its selling point and also its cost: implementation is a project measured in months, with configuration, data migration and training, and it is priced for organizations that need that depth.
• A mid-market business management platform sits between the two. It runs the operational lifecycle - quotation, job, purchase order, delivery, invoice - and syncs the ledger to an accounting package such as Xero rather than replacing it.

Company size is a weak guide on its own. The practical test is whether the cost of the integration you are missing has grown past the cost of the system that would supply it. A business with one buyer, one accounts person and a shared spreadsheet has an integration cost close to zero. A business where three people quote, two buy and nobody can say what a job made until the accountant closes the month is paying for that missing integration every week.

Zigaflow is a business management platform of that middle kind, covering quotes, jobs, purchase orders, delivery and invoicing without a full ERP implementation; how Zigaflow compares with ERP systems sets out where the line falls in practice.

For definitions of the surrounding terms, see cloud-based CRM for the front half of the cycle and quote-to-cash for the sequence an ERP or a platform is being asked to hold together.