There are five major reasons why companies use ERP applications.

  1. Integrate financial information.
    When the CEO analyzes the company's overall performance, various versions of the truth may appear. Finance has one set of revenue numbers, sales has another, and the different business units each have their own claims of how much they contributed to revenues. An ERP system creates a single version of the truth that cannot be questioned because everyone in the company is using the same system.

  2. Integrate customer order information.
  The ERP system is the place where customer orders are stored from the time a customer service representative receives it until the loading dock ships the merchandise and finance sends an invoice. By having this information in one system, rather than spread across a hodge-podge of databases that can't communicate with each other, companies can track orders more easily and coordinate manufacturing, inventory and shipping among many different locations at the same time.

  3. Standardize and speed-up business processes.
  ERP comes with standard methods for automating business processes. Standardizing those processes and using a single, integrated computer system can save time, increase productivity and reduce cost.

  4. Reduce inventory.
  An ERP system helps business processes flow more smoothly, and it improves visibility of the order fulfillment process inside the company. That can lead to reduced inventories of the material used to make products, and it can help companies better plan deliveries to customers, reduce the finished good inventory at the warehouses and shipping docks. All this is done with supply chain software, an integral part of most ERP systems.

  5. Standardize HR information.
  Especially in companies with multiple business units, HR may not have a unified, simple method for tracking employees' time and communicating with them about benefits and services. ERP can fix that.