Growing businesses eventually reach a point where spreadsheets are no longer adequate. This is where corporate resource planning software comes into play. ERP systems collect and organise critical business data, allowing organisations to run lean, efficient operations even as they grow.
Most business professionals have heard the term "ERP", but they may not fully comprehend what enterprise resource planning solutions can do for their organisations. We'll go through what ERP is, how it works, what it can do for your company, and more.
What is ERP?
An enterprise resource planning system (ERP) is a collection of integrated software used to manage, automate, and connect critical business activities.
It’s a solution that includes functions and modules for multiple company departments or a solution that focuses on a single corporate area. Accounting, manufacturing, and customer relationship management (CRM) are frequently included as features, as are supply chain management (SCM), product lifecycle management (PLM), and others.
However, there is another component to ERP systems that makes them especially valuable. An ERP may interact with other solutions to keep your data in a single place. The system also automates repetitive processes, allowing you to focus on higher-priority duties.
ERP modules
An ERP is made up of multiple modules, or sets of features tailored to specific elements of a particular business, such as back- and front-office jobs. This extends well beyond financials and other basic activities such as supply chain management and customer communication. Here's a quick rundown of the most popular ERP modules that can be found in ready-made solutions, as well as implemented by a custom ERP development company into your unique software.
Finance
The general ledger and all the financial data are managed by the finance module, which is the cornerstone of almost every ERP system. It keeps track of all transactions, including accounts payable and receivable, and conducts reconciliations and financial reporting.
Procurement
The procurement module handles purchases of raw materials and finished commodities. It can automate quote and purchase order requests and, when coupled with demand planning, reduce overbuying and underbuying.
Manufacturing
Manufacturing can be complex, and this module assists businesses in coordinating all of the procedures involved in making products. The module can verify that production keeps up with demand and track the amount of in-process and finished items.
Inventory management
The inventory management module displays the current levels of inventory down to the SKU level and continuously refreshes that data. It also monitors crucial inventory metrics. This module is required by any product-based organisation to optimise stock on-site based on current and expected demand.
Order management
This programme monitors and prioritises customer orders as they arrive from all connected channels and records their path to delivery. The order management module can improve customer satisfaction by shortening fulfilment and delivery times.
Management of the warehouse
A warehouse management unit controls warehouse operations such as receiving, picking, packing, and shipping. It can save time and money in the warehouse by automating these duties and their tracking.
CRM (Customer Relationship Management)
CRM is a popular system for companies in a variety of industries. It keeps track of all client conversations, aids in lead management, and can improve customer service and sales. As was mentioned earlier, a custom CRM module can be implemented if you’re developing an ERP system from scratch.
PSA (Professional Services Automation)
PSA modules are frequently used by service businesses to plan and track projects, especially the time and resources spent on them. It can help to streamline client billing and foster collaboration among project team members.
WFM (WorkForce Management)
The WFM module manages payrolls as well as attendance and hours worked. A programme like this can track employee absence and productivity by division, team, and individual.
HRM (Human Resource Management)
The workforce management module is similar to HRM or human capital management (HCM) units. It preserves specific personnel records, such as accessible PTO and performance reviews, and may elicit worker patterns across departments or demographics.
Marketing automation
This module oversees marketing efforts across all digital platforms — email, web, and social — and allows businesses to optimise and personalise their messaging. Marketing automation technology can increase lead generation, sales, and customer loyalty.
Why might you need an ERP?
Let's take a look at a couple of reasons why organisations of various sizes could benefit from ERP implementation.
Sharing information
The ERP system can seamlessly share critical information throughout your enterprise's numerous divisions, fostering cooperation through continuous data sharing.
Improved business performance
ERP will guarantee that departments spend their time managing their core business rather than trying to gather and organise the corporate information for doing so. For example, an ERP system could increase your company's sales forecasting effectiveness through automated order tracking, revenue tracking, and purchase order production.
Standardised reporting
If your organisation wants to interact with the market, everyone in the company must be reading from the same book. ERP will ensure that the information shared across your organisation is consistent.
How does ERP work?
An ERP system works by reducing the amount of resources required to manage a firm optimally while still maintaining profitability and growth. It differs from a single specialised application since it allows your company's other enterprise modules to share one database.
The system gathers information from various aspects of the business. It centralises the data so that employees who require it can access it anytime, anywhere. It also breaks down the silos that affect many firms and makes process data easy to understand and visualise.
Let’s assume your company's ERP system is nearly completely automated. Then the ERP enters the data in the backend and exchanges it with other units that require it completely on its own.
For example, when a delivery order for the final item in stock is initiated, the inventory management modules will record this information and notify the correct units that the inventory needs to be replenished. The sales team will also be notified the item is out of sock, so that they do not make promises they cannot keep.
Types of ERP by deployment
There are multiple ERP software implementation and deployment options:
- On-premise ERP is any ERP software that is installed directly on local equipment. These solutions are intended for enterprises of all sizes, but they may be better suited for small and medium-sized organisations.
- Open Source ERPs allow you to review, alter, and upgrade your ERP source code to tailor your program to your specific needs.
- Cloud-based ERPs operate on the software-as-a-service (SaaS) model, i.e. they are delivered via a cloud hosting service instead of an on-premise deployment. This option, which is appropriate for large organisations, allows you to view real-time data anywhere as long as you have Internet connection.
- Hybrid ERPs are systems that combine on-premise and cloud deployment.
Conclusion
Enterprise resource planning is a technology that organises and combines corporate operations. Companies can better plan and allocate resources with a greater line of sight provided by such systems. In contrast, businesses that do not use ERP tend to function in silos, with each department using its own disconnected system.
ERP systems encourage open communication and knowledge sharing throughout an organisation, system integration for increased productivity and efficiency, and improved synergies between teams and departments. However, switching to an ERP system will be unproductive if the firm's culture does not adapt to the change and the company does not examine how its organisational structure can support this kind of software.