ERP - Enterprise Resource Planning
Enterprise resource planning (ERP) is the integrated management of main business processes, often in real-time and mediated by software and technology.
Enterprise resource planning system is usually referred to as a category of business management software — typically a suite of integrated applications—that an organization can use to collect, store, manage, and interpret data from these many business activities.
ERP provides an integrated and continuously updated view of core business processes using common databases maintained by a database management system.
Enterprise resource planning solutions track business resources— cash, raw materials, production capacity—and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data.
ERP facilitates information flow between all business functions and manages connections to outside stakeholders.
You can think of an enterprise resource planning system as the glue that binds together the different computer systems for a large organization. Without an ERP application, each department would have its own system optimized for that division's particular tasks. With ERP software, each department still has its own system, but all of the systems can be accessed through one application with one interface.
ERP applications also allows the different departments to communicate and share information more easily with the rest of the company. It collects information about the activity and state of different divisions, making this information available to other parts, where it can be used productively.
ERP systems typically include the following characteristics:
- An integrated system
- Operates in (or near) real time
- A common database that supports all the applications
- A consistent look and feel across modules
- Installation of the system with elaborate application/data integration by the Information Technology (IT) department, provided the implementation is not done in small steps
- Deployment options include: on-premises, cloud hosted, or SaaS
Enterprise resource planning programs have traditionally been used by the big players in the market that have thousands of employees spread out over the world. However, software developers are now marketing business ERP solutions to small- and medium-sized companies.
There are different types of ERP software ranging from industry-specific ERP solutions to web-based, or cloud ERP software; to small business ERP.
The type of ERP system that will work best for your business depends on the size of your organization and the functions of the ERP solution that can best support your business requirements.
Industry Specific ERP. ERP systems for large corporations are often built from the ground up to suit the organization's specific and unique needs. For a small business like yours, an off-the-shelf model will work fine. Most are grouped into three categories to service manufacturing, finance or logistics based companies.
Web-Based ERP system. ERP software services tend to be complex, requiring high-end computers to run them. However, instead of purchasing the software to run on your computer in your office, many suppliers offer Software as a Service, or SaaS. In this case, you pay a subscription to access the software and your data over the internet. Because the program is running on a remote server, you are free to access it from anywhere you have an Internet connection.
ERP software for small business. Although ERP systems can cover everything from supply chain management to accounting solutions as well as customer relations management, your business may not need to automate all these functions. Therefore, software developers offer scaled-down models at a lower, more cost-effective price. For instance, your operation may work fine with a system that offers sales and order management, but leaves out the module for warehouse management.
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F.A.Q. about ERP - Enterprise Resource Planning
What does an ERP do?
The purpose of an ERP management system is to improve efficiency (and thereby profitability) through improving how company resources are spent, whether those resources be time, money, staff or something else.
If you can reduce how many resources are being used, without sacrificing quality/performance, then you can grow your business more efficiently and appropriately.
ERP software combines a number of different reports and metrics across various departments into the same environment. This makes it easier to get a full view of what’s going on and how resources are being spent.
From this vantage point of the business, you can discover key insights into how processes might be improved or resources better spent to generate higher growth.
Without an ERP system and proper planning of how resources should be spent to maximize growth and the bottom line, it is much easier to invest resources in tactics that underperform.
Conversely, a great ERP software platform allows a business to allocate resources away from underperforming tactics and into those that are generating good returns.
An ERP system also makes it faster to find the information or report you’re after because everything is in the same place. You don’t have to search through spreadsheets or look through different business applications to find that kernel of data you need; it’s all available and accessible right from the ERP interface.
ERP software can differ depending on the package you purchase and the provider. That being said, there are some key features that you should look for when researching ERP software providers. Your software should, at the bare minimum, offer the following modules:
- Accounting: Manage all of your financial reports in the same interface, such as purchase orders, expenses, sales reports, payroll, etc. This makes it easier to monitor your cash flow and revenue and determines how money might be better spent or how you can reduce your burn rate.
- Inventory and warehousing: If your business has inventory or warehouse processes, your ERP business software needs to be able to integrate those operations to better track and manage goods. This makes it easier to see how much inventory is available, what inventory is going out for delivery, what inventory is coming in from which vendors and more. Carefully monitoring and tracking these processes helps protect a business from running out of stock, mismanaging a delivery and other potential issues.
- eCommerce and web: It’s essential for a business to be able to see the eCommerce side of their business separate from physical, retail sales. After all, the tactics you leverage to encourage online sales are different than the ones you use for your physical stores. An excellent ERP system will enhance your existing web offerings to include better purchase options for customers to choose from.
- Human resources: As much as a business strives to keep customers happy and retained, it is equally important that your employees remain happy as well. The HR module of your ERP system contains all of the employee management processes, including payroll expenses, recruitment, performance evaluations, attendance, scheduling and more. It’s a one-stop module for all employee management and communication efforts.
- CRM and marketing: Your brand-customer relationships are ultimately going to drive repeat business. It’s important to know how effectively your marketing tactics are working at engaging and re-engaging customers, whether those tactics are email marketing campaigns, social media offers, surveys, follow-up phone calls and others. The CRM module will better express what’s working and what isn’t and how marketing is translating into added revenue.
- Project management: The last should-have feature of your ERP software product is a project management tool, which allows you to communicate productively across your organization to plan and execute projects internally. This helps ensure company cohesion by getting every involved stakeholder or employee on the same page and in-the-know as to the most current business objectives and goals.
Benefits of ERP software and why to build it
In today’s business environments, it’s hard to move on without an ERP system. Among the main benefits of ERP implementation is automatization of manual tasks staff spends hours on and thus improves the overall business performance. So the staff can focus on more important initiatives. At the same time, you can collect real-time data for improving performance management and making data-driven decisions.
ERP planning software comes handy in lots of areas due to its in-built modules and flexibility. Here are a few advantages of ERP software tools:
1. Reduce operating cost. The company starts gaining profit as soon as the ERP system is implemented. Prepare to face the reduction of marketing expenses, inventory maintenance, production cost and so on. Also, if you’re aimed at combining all business processes within a unified system, ERP is the right choice. By using the software, it’s easy to improve cross-department cooperation and increase staff’s efficiency.
2. Instant data access. With ERP systems, employees soon forget about hours spent on collecting necessary details. Instead, they can be accessed in just a few minutes. Works great for busy executives and department managers that need to access data quickly.
3. Defined planning process. It’s easy to understand the business objectives, targets and aims when you have a full list of business needs, outcomes, and assets all in one place.
Sure, ERP systems also have some disadvantages. The most common issue is the price. It’s almost impossible for small companies to develop an ERP suite for their own needs, only middle and large-sized corporations can afford it.