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HomeMiscellaneous Management TopicsERP System: Six Main Components

ERP System: Six Main Components

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An organization is comprising of many departments, processes and functions. All components of the organization work together as single entity to achieve the goals of the organization. Enterprise resource software (ERP) is an integrated software, that integrates many small modules of the organization and make all the modules act in a synchronized manner, to give optimum performance. These small modules are called the components of the ERP system. ERP is capable of managing many functions of the organization like finance, manufacturing, supply chain, marketing, customer support, etc. ERP system provides many benefits to the organization and help organization to work smoothly and efficiently.

Before moving ahead, let us first understand what is ERP?

What is ERP?

ERP stands for ‘Enterprise Resource Planning’. ERP is a software that integrates, automate and manage core business processes of an organization for optimum performance. An organization has many business processes like, finance, procurement, supply chain, operations, marketing, reporting, manufacturing, human resources, etc. There is a flow of data and information between the business processes of an organization. The flow of data should be smooth and streamlined so that the processes may run systematically and in co- ordination with each other. ERP software co- ordinates the flow of data between the business processes of an organization, streamlining the operations of the organization. The ERP software integrates all the businesses processes on one platform so that all the process may run in a synchronized manner to achieve the objectives of the organization.

Also read: How Enterprise Resource Planning (ERP) Can Transform Your Business!

Below are discussed six main components of ERP system:

Six Main Components of ERP System


Finance is one of the most important function of any organization. An ERP system keeps track of all the financial data like accounts receivable, accounts payable, general ledger, costs, budgets and forecasts. It helps keeping the record of all the cash flows and ensures that bills are paid in time. There are many financial transactions in an organization and keeping track of all the transactions manually may become complicated. ERP software provides a single centralized system, which can manage all the financial transactions and accounting for multiple businesses running under the organization.

Human Resources (HR)

Employees play a crucial role in the success of an organization. Keeping them happy and handling their all personal- related tasks is important. AN ERP system manages various tasks like automated payment of employees, leaves, attendance, trainings, performance appraisals, payment of taxes, promotions, etc.

Supply Chain Management

Supply chain management is the management of the flow of materials and information required from procurement of raw materials to the delivery of final product to the customer. It involves planning, procurement of raw materials, manufacturing, testing, marketing, warehousing and supply of finished products to the customers. An ERP software handles these processes in an optimum manner.


Planning, production, receiving orders and delivering the products to consumers, there are so many processes that are involved in this component. An ERP software helps manage all these activities efficiently.

Customer Relationship Management(CRM)

Making customers happy is crucial for sustainability and growth of an organization. This component of ERP software collects data about the customers and interact with them. The system collects consumer data from various sources and stores detailed information about the consumers like, purchase history, personal information and buying behavior pattern. The buyer’s purchase history is used to suggest additional purchases, which may be useful for the buyer.

Business Intelligence (BI)

Business intelligence has now become an integral part of the ERP software. The BI component collects data and performs analysis that can help the decision makers in taking the right decision and making the appropriate business strategy. This component enables the stakeholders to see a complete view of data and how the other components of the business are behaving.

Click here to know more about Business Intelligence.

Secondary Components

Besides the six main components of ERP as discusses above, it has some secondary components also which are discussed below in brief:

Risk Management

This component helps predicting the future risks and suggests risk mitigation or avoidance measures.

Event Management

Various events of the organization are managed with the help of this component.

Sales Order Management

From sales generation to billing, there are various activities involved in the sales order management. This component takes care of all the activities of the sales order management during the entire lifecycle of the sales orders.

Marketing Resources Management (MRM)

MRM integrates people, processes and technology to support entire marketing function of the organization.

Advance Planning System (APS)

This tool assists the management in planning of various activities and events. From tracking production cost to production and marketing of finished goods, planning is required, for which this tool may be greatly useful. This tool also optimizes the allocation of raw materials and other resources to the business processes.  


ERP system is very useful for the businesses, especially those are in the growing stage. Handling isolated business processes and functions is a tedious task for the management and many crucial information or data may have missed without the ERP system, which may ultimately affect the quality of decisions. ERP system does not give results immediately but it has the potential to transform your business in the long run by gradually improving all business areas of the organization.

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Rajesh Pant
Rajesh Pant
My name is Rajesh Pant. I am M. Tech. (Civil Engineering) and M. B. A. (Infrastructure Management). I have gained knowledge of contract management, procurement & project management while I handled various infrastructure projects as Executive Engineer/ Procurement & Contract Management Expert in Govt. Sector. I also have exposure of handling projects financed by multi-lateral organizations like the World Bank Projects. During my MBA studies I developed interest in management concepts.
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