What is ERP (Enterprise Resource Planning)?


As companies grow, they reach an age where spreadsheets just can’t longer suffice. This is where enterprise resource planning software can help: ERP systems collect and arrange important business information to assist businesses in running slim efficient and effective operations regardless of the size they are expanding.

Many professionals in the field have heard the word “ERP,” but they might not be aware of what ERP tools can do for their teams. We’ll provide the specifics of what ERP is what it is, how it operates and what it can accomplish for your company as well as how to pick the best solution, and much more.

Check out this article for the answers to all the questions you may have about Enterprise Resource Planning.

What is Enterprise Resource Planning (ERP)?

In essence, ERP is an application which automates business processes. It also gives insight and internal control by drawing from an integrated database that gathers information from various departments, including manufacturing, accounting and supply chain management marketing, sales as well as human resource (HR).

Every business has to complete work that involves a variety of individuals with a variety of responsibility. It’s not easy when the data required to carry out processes and make important decisions is scattered across disparate systems. The data may be stored in the basic spreadsheets or in business management software employees may have a difficult finding the information they need and might not have access to the entire database.

An ERP solution solves this issue by combining information into one central database that gives employees and managers the ability to see across departments. It also solves the issues caused by different sources of data, and empowers them to analyse diverse scenarios, find ways to improve processes and make huge efficiency improvements.

What is the reason why ERP important for businesses?

ERP systems have turned into tables stakes for companies looking to make the most of their resources. They allow leaders to better allocate their financial and human capital or develop more efficient business processes that can save the company money, but not sacrifice performance or quality.

An ERP is also a valuable asset in managing and planning. Employees can view the current inventory as well as orders from customers in depth, and examine purchase orders of suppliers and forecasted demand for the future. If needed, they are able to make adjustments to prevent issues. ERP software helps improve collaboration and communication as employees can track the state of departments in order to make their individual choices.

How does an ERP System Function?

ERP System

ERP systems operate by using the same normal data structure. The information entered by a department is instantly available to all authorized users throughout the organization. This unifying structure keeps everybody on the same on the same page. For example, suppose an local food distribution chain has multiple locations, which often share personnel and stock. Since sales, quality, and employee information from these sites are transferred into ERP systems it’s formatted so that it can indicate the location from which it came.

Real-time data is then integrated into workflows and business processes across departments. Leaders can discover if a site is performing significantly better in getting rid of spoilage than a location a few towns away and then work out the reason, while operations will make sure that staffing levels are aligned with the traffic patterns. Finance can evaluate sales and rents to assist executives in deciding whether or not to consolidate.

ERP Modules

An ERP is comprised of a range of modules – packs of functions that are tailored to diverse aspects of the business, such as the front and back office roles. It goes beyond finance and includes other essential functions such as supply chain management as well as customer communications. Here’s a quick overview of the most commonly used ERP modules:

Finance: Finance, which is the base of nearly all ERP system, is responsible for the general ledger, as well as all financial information. It records every transaction including account payable (AP) and accounts receivable (AR) and also handles reconciliations as well as financial reporting.

Procurement: The procurement module handles purchases, whether they are raw materials or final goods. It is able to automate requests for quotations and purchase orders. It can, if coupled with demand planning, reduce buying too much and not enough.

Manufacturing: Manufacturing can be complex This module can help businesses to coordinate the various stages involved in the production of products. The module helps ensure that the production process is consistent with the demand and also check the amount of work in progress as well as finished items.

Management of inventory: A module for managing inventory displays the inventory levels at the SKU level. It also changes these numbers in real-time. It also monitors important inventory-related metrics. Every company that relies on products requires this program to maximize the amount of stock in-hand, based on future and current demand.

Management of orders: This software tracks and prioritizes orders from customers through all channels when they are received and tracks the progress of their delivery. A module for managing orders will speed up delivery and fulfillment times, and enhance the customer experience.

Warehouse management: A warehouse management system controls warehouse tasks like receiving, picking packing, and shipping. It could result in time and cost savings within the warehouse by finding more efficient methods to complete these tasks.

CRM stands for Customer Relationship Management (CRM): CRM is a very popular program used by businesses across a wide spectrum of industries. It monitors all communication with clients, helps with lead management, and helps improve the customer experience and increase sales.

Professional services automation (PSA): Businesses that provide services often use the Professional Services Automation (PSA) tool to manage and plan projects, which includes the duration and money they spend on them. It is a great way to simplify billing for clients and facilitate collaboration between the staff who are working on a particular project.

Workforce management (WFM): Workforce management (WFM) module tracks of the hours worked and attendance as well as manage payroll. The tool is able to track absence and productivity for the department, team or each employees.

Human resource management (HRM): Human resource management (HRM) or human capital management (HCM) module is comparable to a module for managing workforce. It records employee data with details, including the available PTO, as well as review of performance, and it can discern trends in the workforce of diverse departments and demographic data.

Ecommerce: Ecommerce is a module that lets retailers and brands manage the back as well as front-ends for their websites. They can modify the site’s appearance and layout, and also make changes to pages for products using this software.

Marketing automation. This program manages marketing activities across all channels of digital media -including email, web and social. It allows organizations to customize and optimize their communications. A tool for marketing automation can increase leads, sales and loyalty to customers.

How can ERP help or improve the business?

ERP helps companies identify areas in their operations that may have potential for improvement or to expand. It is essential that users are involved as the more people with access to the system, the more likely they are to identify issues, whether it’s an increase in the demand for a particular product, a delay in shipments from a supplier, or an imminent cash flow crunch. Employees can then take proactive steps to address the problem to the greatest extent feasible.

Executives generally focus on outcomes and utilizing information to accomplish goals such as improving efficiency, cutting costs, or responding to evolving customer needs or market conditions.

Data access anywhere: Employees no longer need to move through stacks of papers or files scattered over a desktop. With ERP that is cloud-based warehouse managers is able to log into their mobile device while working on the floor of the shop and a salesperson is able to look up inventory while on an office site for customers.

Information is always up-to date: Because the ERP system constantly receives information from various departments, the information is continuously updated as inventory is taken, payment is made and emails sent out to customers. This is a huge benefit since decision makers base their decisions on the most current information.

Business decisions are based on the same data: With the common database, all decision makers have the same information. There aren’t any duplicates or conflicting sources and businesses are able to to schedule and automatically distribute dynamic reports. Need more depth? Data that is under the hood can be accessed by clicking on the report.