An Introduction to Enterprise Resource Planning (ERP) Systems

Regardless of your industry, the need for effective time and resource management and efficiency are integral to productivity. Automating core processes through insightful, streamlined business tools and management systems gives even the smallest company the edge over its competitors while providing scalability as a company grows.

In general, enterprise resource planning (ERP) systems mean different things to different types of companies, and an ERP for mid-market companies might focus on different processes compared to an ERP solution for a big corporation. ERP software is defined as providing the integrated management of the core processes necessary to most businesses and organizations. While some are staples, such as financial/accounting, sales management, and inventory management, other core processes will depend on the industry. For example, an ERP solution designed for manufacturing will include some processes that one designed for retail would not, and vice versa.

There are also hundreds of modules available to customize a system to better fit specific verticals or industry niches. Obviously, this requires a great degree of understanding and specialization required, many companies are choosing to hire erpnext consultants to help streamline the process. All ERP solutions are built to allow seamless integration of core functions and provide automation to free staff and business owners to focus on essentials like business building and product development.

Could your company benefit from an ERP? You can click here to read more about ERP software.

What is an Enterprise Resource Planning System?

It’s tempting to think of an ERP system as a piece of software or a program that runs a specific segment of your business, like inventory control or accounting software. But, unlike stand-alone business applications, those functions are just a portion of what an ERP can do for your company.

Enterprise resource planning is a system of modules that cover a range of core functions:

  • Managing finance and accounting, including compiling budgets and allocating funds
  • Human resource management, which can include payroll, scheduling, and more
  • Purchasing and inventory management
  • Quality control
  • Sales management
  • Manufacturing and production
  • Supply chain management

An ERP solution integrates management, staff, and equipment oversight into a single information repository that stores all the data of each transaction within each process generated. These processes can be customized by sector or industry through suites of applications and modules that can be integrated and shared across the entire enterprise to every department. Previously thought to be solely for large enterprises, small to medium businesses can also benefit from these systems, in virtually any industry, such as:

  • Oil and gas
  • Retail
  • Higher education
  • Health care
  • Hospitality
  • Finance

How do ERPs Work?

Enterprise resource planning systems are intended to address specific business requirements while covering a broader range of functioning than the average business software or app. They’re compatible with a range of hardware and network configurations, and – depending on your ERP software selection – you can integrate your existing warehouse management app, sales infrastructure, e-commerce system, and other applications into the ERP system. This provides precise, robust business optimization and functionality that can be customized or segmented in a configuration that’s right for the needs of your company.

What are the Advantages of Using ERP?

The right ERP solution can revolutionize the way you store, process, and evaluate data, but that’s just the beginning of the benefits. Regardless of your industry or the size of your company, the right ERP system offers five main benefits. An ERP system can allow you to:

Stay up to date with technology

Government agencies spent more than $108 billion updating their technology in 2017, and small and midsize businesses (SMBs) have nowhere near such budgets. Newer ERPs often incorporate emerging technologies such as machine learning and artificial intelligence (AI), and other innovations that function by analyzing historical data and evolving how your business systems perform. Using such cutting-edge technology reduces the need for costly upgrades and helps keep your capabilities fresh, keeping your business competitive.

Integrate your business functions into one system

Instead of relying on differing reports from department heads or hunting for software that’s compatible with existing apps and programs, an ERP allows seamless, enterprise-wide integration across the board from one central reporting platform. You can segment processes by department or any other configuration that suits your needs. This allows all information to be shared immediately by those who need it and enables decision-making that’s based on unified, consistent, and current data.

Streamline core functions

During the evaluation process that’s part of a properly structured software selection project, you will have discussed with various department heads and other stakeholders what existing systems and processes are functioning properly and which can be improved. In addition to integrating previously siloed functions, an ERP system also automates many transactions through that integration. For example, a completed sales order from the sales department will automatically trigger a customer billing by the finance department, a shipping order, and an update to the inventory.

With stand-alone systems, each of those transactions would have had to have been communicated separately to each of those departments, which not only takes up valuable employee time but also raises the chances of delays, errors, and redundancies. By combining a robust, integrated system with automation, you can reach business goals more quickly and greatly improve overall company efficiency.

Perform data analysis

Data is one of the most valuable forms of business capital—if you’re able to organize, extract, and analyze it in a meaningful way. ERP solutions use a single, centralized database to store all data and modern data analytics can parse and analyze that data. This allows business managers to identify emerging trends, spot potential bottlenecks, probe for security vulnerabilities, and gain insights into the organization’s financial health. Many ERP systems even include business intelligence (BI) and data analysis tools that will help you make decisions that are data-driven and measurable.

Cater to customer expectations

Whether you’re a business-to-business (B2B) or business-to-consumer (B2C) company, all of these benefits point towards improving the main reason you’re in business: serving your customers. Today’s customers have more choices than ever in vendors and service providers. The more you can improve how you meet their expectations, the better your odds of edging out the competition. An ERP system that supports all your requirements gives you that competitive edge.

Choosing the Right ERP

With all of the choices and modules available, choosing the right system for your business can be a challenge. Before you invest in ERP software, sit down with the appropriate department heads and other stakeholders, and key personnel. You’ll need to discuss the goals and priorities of your organization, which processes would benefit from ERP integration, and your budgetary constraints.

However, this is not an area where being frugal is an advantage. An ERP system is an investment in increased productivity that offers a great return on investment (ROI) in terms of money and time savings.

Whether you’re the owner of an up-and-coming SMB or you just need some assistance with your data and process management, an ERP system may be the solution you’ve been looking for. They offer a level of flexibility that allows a high degree of customization, and an ERP can be scaled up or down as the needs of your business to evolve. Such a system also offers money and time savings for companies that are experiencing periods of rapid growth by eliminating downtime and the need for frequent investments in new discrete software solutions or upgrades.