ERP, which is an abbreviation for Enterprise Resource Planning, is a modular software system used by many businesses today. It offers a suite of different tools that make it easier to manage information within a specific company. The truth is that while all companies are different, each of them needs an efficient way to store and access information to be successful. That is exactly what ERP systems are created to do. An ERP system takes all the information related to a company and puts it into a single system that individuals from anywhere in the organization can access.
When a company has ERP software in place effectively, streamlining and automating tasks can occur. This frees up time for employees to be successful in doing other things. It also offers real-time visibility of what is happening in a company.
The History and Present of ERP
The term Enterprise Resource Planning was first used in the 1990s by an analyst at the Garten Group. The term is an adaptation of MRP (Material Requirements Planning) and MRPII (Manufacturing Resource Planning), both of which were well-known at the time. MRP and MRPII gained popularity in the 1960s as manufacturing companies searched for ways to offer better decision making and efficiency for managers.
The Garten Group and other companies wanted to use MRP systems with businesses beyond manufacturing, which is what led to the move toward ERP. When it was first in place, it had a focus on streamlining and organizing data and back-office processes such as human resources, inventory management, accounting, fulfillment, IT, purchasing, planning and scheduling, manufacturing, and other areas.
As the Internet became more widespread, ERP began to be used for other business areas like supplier relationship management, customer relationship management, human capital management, supply chain management, eCommerce, and business intelligence.
Today an ERP system can be used in all areas of business but has the purpose of allowing managers and leaders to understand all the parts of the company, helping them make more informed decisions, and identify opportunities that will lead to success.
While the word enterprise is part of the ERP name, it can be used by businesses of all shapes and sizes. There are two main types of ERP systems used today, including cloud-based and on-premises, which we will look at more below. The one that works for you is going to vary based on what your business is and what its specific needs happen to be.
What an ERP System Is
Within an ERP system are tools and applications that help different areas with communicating more fully. The system takes all parts of a business and moves it into a single information system. As an example, your employees would have access to the same information as your finance department as it relates to their specific needs.
Since the data is available in real-time, this creates a workplace where employees can make better informed and quicker decisions.
Every important business function within ERP is available at a central place with regularly updated data. An ERP allows integration of data from multiple locations so all employees can see what is happening from areas like:
- Business intelligence
- Customer relationship management
- Finance & accounting
- Human resources
- Inventory management
- Point of sale
- Production management
- Supply chain management
- Warehouse management
Why Modern Businesses Should Use an ERP API
While even ERP software can’t keep up with every business process you have, it is the closest option when you want to help your business make the best data-based decisions, when you are looking to improve collaboration, and when you are looking to advance the productivity of a business. Below are some examples of what ERP can do to help your business:
When using a modern ERP API, most of them offer you a dashboard that shows you an overview of your finances. Anyone can tap into this information, which is provided on a real-time basis, from anywhere. In addition to looking at the latest data, many ERP software solutions also remove tedious daily work by automating the most common daily tasks. The finance tools also include tracking options which can help with being compliant with regulations, even when they change.
Another area where ERP can help a lot with the modern company is human resources. The streamlining and managing of data make it even easier to handle hiring, payroll, and similar duties. One of the ways that Enterprise Resource Planning can help here is by tracking things like employee performance so you can determine problems are going to happen before they do.
Since ERP was adapted from software and planning options for manufacturing companies, it may be no surprise that ERP also has many options for helping with that sector. The manufacturing options through modern ERP provide a way to automate typical daily processes, improve communication through the business, and fulfill customer needs and manage resources. This section of the ERP software helps with production planning as well as optimizing cost and project management.
If you are involved in a business that uses a method that requires entering information by hand or running around the warehouse to look for inventory, ERP is something that can help you save both money and time through automation. Business intelligence and dashboards are two of the options that ERP offers, which will help you better handle inventory management at your business.
Different Types of ERP Solutions
When you look back in time, the older ERP systems were often complicated, large, and homogenous, which means that cloud integration was and still can be a problem. If you choose to use one of these Enterprise Resource Planning systems, especially if it comes from a large and older vendor, it may need to be operated on-premises.
Deploying a new system at your place of business can involve employee retraining, re-engineering of business processes, and retaining support for the backend with ad hoc reporting, database integration, and data analytics.
However, many companies are now moving toward cloud ERP or hybrid ERP. The former is entirely cloud-based while the latter involves having part of the ERP software solution run on-premises while the rest is running on the cloud. Cloud systems can be less complicated and costly to implement due to being loosely coupled. Since cloud ERP does not require on-site infrastructure and hardware, it saves on cost for both technology and staff who manage it. It can also be more efficient through simple scaling and automatic upgrades.
One of the things that makes cloud Enterprise Resource Planning stand out is the fact that several vendors have created cloud products with an emphasis on things like advanced analytics, powerful data processing capabilities, blockchain, IoT, machine learning, 3D printing, and other upcoming technologies. It gives companies a leg up when it comes to competing in a global market.
However, it’s also worth realizing that some organizations will not be interested in using applications and systems in the cloud; this might be because of the risk of data control or the feeling that there is a higher security risk with doing so. In addition, some government agencies or businesses that are highly regulated may have specific requirements about what systems can be used and where data has to be stored on a geographic level. In these cases, on-premise ERP is the best option and offers the best customization options.
Benefits of Using an Enterprise Resource Planning System
Many organizations will find an ERP system an asset once in use. It can make a business easier to run by protecting and unifying your data, producing useful trends, and automating some processes. There are numerous benefits to choosing an ERP system, but the largest of them will be explained below.
Reliable IT Costs
While it can be an investment to start using Enterprise Resource Planning, it’s integration can create better efficiency and more reliable IT costs. Rather than spending money on numerous systems along with the infrastructure, staff, and support teams needed for each, you can put all the costs into the ERP. This can lead to savings on IT costs as a whole. When there is one system in place, that also means lower training costs since each worker needs to be trained only on that system.
One of the biggest reasons that companies choose ERP is due to the extreme visibility that it offers. Data from each department is readily available for management and senior employees. As an example, you can see what is happening across various processes in multiple departments in seconds. This lets you make fast decisions confidently because you know that you have all the information you need to do so.
Better Level of Planning and Reporting
In addition to having better visibility, you also get better insight with ERP. When you implement the system across all the departments in a business, that means you have a single reporting system for all your processes. That means you can generate and analyze report and data any time you like. Financial reports are one of the most popular options to use from ERP as you can see items like cash flow and income or create custom reports based on your specific needs.
High Level of Customization
We mentioned earlier that ERP is modular, and that is another perk that it offers. Many of the vendors offering ERP have multiple applications that can all be used together based on the needs of your business. Most of them can be stand-alone or with the suites itself. That means you are the one who decides which components matter to you and which aren’t that important for your business success.
ERP can reduce your training and IT costs, but it can also reduce the effort and time needed by employees to get their work done. If you have a properly implemented ERP system, it can eliminate or highly reduce the number of repetitive manual processes that need to be done each day. That means members of your team can focus on tasks that bring in revenue. Beyond that, it can help you enforce and adopt the industry best practice processes across the entire company.
Benefits Clients and Customers
While your customers and clients may not realize this, they will also experience benefits from using this type of system. When your customer information is streamlined, that means the people in sales can spend more time building relationships with clients instead of worrying about spreadsheets and notes. Any business should be focused on customer acquisition and retention, something that ERP offers and makes easier to keep an eye on from the start of a relationship until further on into the relationship.
Superior Data Quality and Security
Another of the large benefits of Enterprise Resource planning is the security of your data. ERP focuses on data above anything else and having the option to share it from sales to marketing, business development, and customer services ensure the best level of collaboration through a company. However, you also need to consider controlling who can see or edit this data. ERP comes with controls so you can keep track of the security of all your information. Through using a single input system, you get better security, accuracy, and consistency.
When it is time to decide on the right platform for your business, being aware of what ERP offers is crucial. Assessing your needs and problem areas can help you make the best decision. There is likely an ERP system that can improve the future of your business. For most companies, the investment is well worth the benefits. Having boosted productivity and streamlined business processes are something every business can appreciate.