What Is ERP? Uncover the Core Functions and Workflow of Enterprise Resource Planning

What Is ERP?

ERP (Enterprise Resource Planning) is a system that integrates a company's material, human, financial, and information resources, providing real‑time cross‑departmental data to support decision‑making.

From an application perspective, ERP covers production planning, manufacturing, finance, sales, procurement and may also include quality management, laboratory management, business process management, product data management, distribution, transportation, and human‑resource management.

ERP vs. MES

While ERP focuses on resource planning, it does not provide fine‑grained control of the production process; that responsibility belongs to MES (Manufacturing Execution System).

Essence of ERP: Information Integration

ERP aims to eliminate duplicate data entry by integrating information internally (product R&D, core business, data collection) and externally (suppliers and partners).

Core Functions of an ERP System

Sales Management : manages customer information, sales orders and channels, enables sales forecasting and data analysis to improve performance.

Technical Management : online management of BOM and process routes, supports multi‑level BOM, rapid Excel import, automatic product information generation, and drawing management.

Procurement Management : handles purchase requests, orders, quality inspection and receipt, optimizes procurement flow and reduces costs.

Production Planning : plans production based on sales orders, inventory and capacity, issues work orders and ensures orderly manufacturing.

Production Execution : monitors the entire production process, tracks work orders and material consumption, and resolves issues to ensure quality and efficiency.

Inventory Management : monitors raw materials, work‑in‑process and finished‑goods inventory, enables precise stock‑taking, safety stock settings and turnover analysis.

Financial Management : records accounts payable/receivable, customer/supplier reconciliation, income‑expense tracking, and provides dashboards for financial decision‑making.

ERP Process Flow

ERP supports two main process types: planning processes (Master Production Schedule, Material Requirements Planning) and execution processes (procurement, production, sales).

For a manufacturing company producing product A, the ERP workflow is:

Generate a Master Production Schedule (MPS) to determine quantity and timing.

Run Material Requirements Planning (MRP) to identify needed materials, quantities and timing.

Execute purchase orders, produce the product, and fulfill sales orders.

Cost and finance teams perform cost control and accounting verification.

Typical Industries

ERP systems are most commonly applied in the manufacturing sector, though they can be adapted to other industries.