ERP or Enterprise Resource Planning is a class of software solutions that empowers companies to consolidate internal and external data and to manage essential business processes.
It is a recognized suite of software tools and processes that when used together, streamlines corporate systems, focusing employee time and the company's earnings where it can generate the best return.
An ERP is defined as a "method for the effective planning and controlling of all the resources required to take, make ship and account for custom orders in making, distributing or service company."
The ERP systems consist of software components called modules, each module focuses on important business functions. ERP is as indispensable as the electricity that keeps the light on.
Enterprise resource planning refers to a type of software that organizations use to manage their business activities like project management, risk management, accounting, procurement, supply chain operation, and compliance.
When it comes to complete ERP suites, covers enterprise performance management, and software that helps plan, budget, predicts, and report an organization's financial results.
ERP systems tie together a lot of business processes and allow the flow of data between them. It eliminates data duplication and provides data integrity with a single source of trust by collecting the shared transactional data of an organization from multiple sources.
In this modern age, the ERP system is vital to manage thousands of businesses of all sizes and in all industries.
The concept of ERP was coined in the year 1990 by Gartner, but its roots date to the 1960s.Back then, the concept was applied to inventory management and control in the manufacturing sector.
It was created by software engineers to monitor investors and reconcile balances, and status reports. By the 1970s, it had evolved into a MaterialRequirements Planning system that was used to schedule production processes.
In the year 1980, MRP developed to encompass more manufacturing processes, prompting many to call it MRP- II or Manufacturing Resource Planning.
By 1990, these systems expanded beyond inventory control and other operational processes to other back-office functions such as accounting and human resources, setting the stage for ERP that we know.
In the late1990s, cloud ERP arrived which was the next fundamental shift in how ERP was delivered and consumed. Cloud computing made it feasible for companies to connect their ERP system to customers, suppliers as well as partners. It also created web browsers the standard UI for most new ERP systems.
Here are the four ERO concepts that differentiate it from most other types of business applications:
Comprehensive integrated business processes
Modularity
Central database
Consistent look and feel in the application
Most ERP software solutions handle some important and core business processes either in dedicated modules or in the sub-function of other modules, which are common to all types of business.
The ERP finance module is the single one, which is in every ERP product, as every company requires the ability to process financial transactions and account for them.
HumanCapital Management
OrderManagement
SalesManagement or CRM
Purchasing Procurement
Companies involved in manufacturing or distributing products require additional modules with specialized capabilities. Some common modules include:
MRP
inventory management
ManufacturingManagement or Production Management
Supply Chain Management: Complex process for demand planning and logistics covering transportation management systems and warehouse management systems.
Some companies still add another layer of muddles that are even more specialized or offer advanced capabilities that go beyond what is possible within a standard module.
Increased Productivity: ERP helps you in streaming and automate your core business processes to support everyone in your company to do more with fewer resources.
Better Insights: It eliminates informationsilos and presents a single source of the face. You also get fast answers to mission-critical business questions easily.
Accelerated Reporting: ERP keeps track of business and financial reporting and shares output. It acts on insights and enhances performance in real time.
Enhanced Agility: When you get an ERP for your business, you can quickly identify and react to newer opportunities with effective operations and ready access to real-time data.
Lower Risk: ERP maximizes business visibility and control, at the same time, it ensures compliance with regulatory needs and predicts and prevents risk.
Better Financial Consolidation: ERP solutions eliminate the data silos that arise from disparate systems. It works for you and virtually eliminates the task.
Simplified IT: If you wish to simplify your IT to give everyone an easier way to work, get an integrated ERP application that shares a database.
When you decide to take support from an ERP system, consider providing your future objectives. Before starting with ERP, outline these objectives so that your system can be able to support these goals and projected progress.
Employees from major departments should be involved in finding the important needs for their areas. Working as a project team will find the needs of the business and how it needs to be resolved. You can allocate responsibility individually for software maintenance post-implementation.
It is important to review the daily process in your business to map it out during the early stage of the project. It will provide you with a better picture of how the software will perform for your business and what kind of impact it will bring. You need to make sure that you have included an external process like spreadsheets in it.
Try that the software you are going to bring into your business would be utilized by all members. It needs to be covered in the scope of the software needs once the functional needs have been agreed upon.
When it comes to investment, we always check longevity and future scalability. Advanced technology is a vital attribute of your selected solution. This solution will be needed that can adapt to changes and growth of the business without becoming obsolete.
Cost is a major game player. The price of the software is going to be determined by the functionality and resource needs, hence careful consideration should be given to these factors when setting your budget.
The larger the project, the more likely it will bring the extra ERP modules needed, coming quite possibly with an additional expense to buy or extra development work.
Now, you have a proper idea about this solution and you have decided to purchase the one. But wait, careful consideration is compulsory before your select software.
Price- Buy the software that comes under your budget.
Return-Before buying make sure that the solution provides a return on investment.
MinimalDisruption- bringing anything new is great, but your new software implementation should not disrupt your day-to-day business
Functionality-Your ERP software should be supportive and always buy it to improve your current business process.
Reputation-Do sufficient research to find the best ERP software provider who can deliver what he claims
Expansion-The software should be such that can expand and grow with your business
Support- Buy your software from a company that provides support all-time support and post-implementation
The sheer size, interconnectedness, and complexity of ERP are a blessing as well as a curse.
When an ERP system performs well, it makes things run smoothly and opens up new possibilities. But when its deployment is delayed or the system goes down, it can bring business to a standstill and force users to scramble, looking for manual alternatives. Here is the list of major advantages and disadvantages of the ERP system;
It can save businesses money over the long run by streamlining the process.
ERP brings a unified system that lowers IT, Labour, and training costs.
Through improved data and analytics, it facilitates reporting and planning
Bringing better compliance and security
ERP software is expensive to deploy and maintain
Many people find it tough to implement
ERP needs significant change management
ERP modules are less sophisticated than specialized software