Apr 13, 2023 11:53:57 PM | ERP What is Enterprise Resource Planning (ERP)?

Have you ever heard of Enterprise Resource Planning (ERP)? If not, don't worry, you're not alone. While ERP has been around for decades, it's not a term that's commonly known outside of the business world.

But if you're interested in improving the efficiency and profitability of your company, it's worth taking the time to learn about this powerful tool.

In today's fast-paced business environment, companies need to be able to adapt quickly to changing market conditions, customer demands, and regulatory requirements. This requires a high degree of coordination and collaboration across all departments and functions.

ERP software is designed to help businesses achieve this by integrating all their core operations into a single, unified system.

In this article, we'll take a closer look at what ERP is, how it works, and why it's so important for modern businesses. We'll explore the key features and benefits of ERP, as well as some of the challenges and risks involved in implementing it. 

What is enterprise resource planning (ERP)?

Enterprise resource planning (ERP) is a powerful tool used by companies to manage their core business functions and processes. These functions may include accounting, manufacturing, marketing, and sales.

By integrating multiple business processes into a single operating system, an ERP system allows for the free flow of information within the organization, between departments, and with employees.

One of the most attractive features of an ERP system is its scalability. Companies of any size, whether small, midsize, or large, can benefit from its use. In the past, ERP systems were quite basic in their capabilities. However, with new technology, these systems have become more comprehensive and versatile than ever before.

Modern ERP systems offer features such as system automation, artificial intelligence, and cloud-based storage. By leveraging these tools, businesses can optimize their productivity and streamline their operations.

The benefits of using an ERP system are many. By automating repetitive and time-consuming tasks, employees can focus on higher-level work. By providing real-time access to data, businesses can make better-informed decisions. Also, by allowing for seamless communication and collaboration across departments, businesses can stay agile and responsive in a rapidly changing marketplace.

In short, ERP systems provide businesses with a powerful suite of tools to optimize their processes, maximize their productivity, and stay ahead of their competition. Whether you're a small business just starting or a large corporation with a global presence, an ERP system can help take your operations to the next level.

How does ERP work?

Enterprise resource planning (ERP) is a system that helps companies manage their core business functions and processes by integrating multiple business processes into one operating system. But how does it work, and why is it necessary?

To understand the concept of ERP, let's use an example of planning a party. When planning a party, you would typically contact different vendors for the venue, music, catering, and decor. You would also need to stay within your budget.

However, managing these vendors can be challenging, as it involves multiple conversations, troubleshooting issues, and readjusting your budget. This is where an ERP system comes into play.

An ERP system allows you to simplify your communication by centralizing and integrating all the essential parts of your business into one system.

For example, instead of using Gusto for human resources and payment, Shopify for managing sales, and QuickBooks for accounting, you would manage all that data in one place with an ERP system. This integration allows you to access accurate, real-time data and streamline your business processes, making them more productive, efficient, and transparent.

The ERP system works by creating a database that stores all the information regarding your business operations. This includes data from various departments such as accounting, marketing, sales, manufacturing, and human resources.

The system automates the flow of data between departments, allowing employees to access the information they need quickly and easily. It also eliminates the need for manual data entry and reduces the chances of errors.

The Benefits of ERP Systems

Enterprise Resource Planning (ERP) systems offer a range of benefits to businesses. These systems help companies bridge gaps in their processes, systems, and data. While ERP systems are beneficial for businesses of all sizes, it's important to note that they won't solve every problem within a company.

Before investing in an ERP system, it's crucial to evaluate how it will fit into the day-to-day execution and management of business activities. This evaluation will enable you to maximize the benefits of an ERP system.

Some of the key benefits of an ERP system include increased productivity, improved business insights, reduced operational costs, increased collaboration, and reduced risk.

The key benefits of ERP systems include:

Higher Productivity

An ERP system can help businesses achieve higher productivity levels by enabling employees to work smarter, not harder. By automating and streamlining repetitive tasks, an ERP system frees up time and energy for more high-value activities.

For example, instead of manually entering data into multiple systems, an ERP system allows for real-time updates across departments. This ensures that everyone has access to the most up-to-date information, which can reduce errors and delays.

An ERP system can automate routine tasks like generating reports, sending reminders, and processing orders. This not only saves time but also reduces the risk of human error.

Higher productivity levels can lead to increased profitability, as more work can be completed in less time, and employees can focus on activities that drive revenue growth.

Improved Business Insights

Another significant benefit of an ERP system is improved business insights. By integrating data across departments and providing real-time visibility into operations, an ERP system allows for better decision-making.

For example, an ERP system can provide insights into customer behaviour, such as which products are selling well, and which ones are not. It can also help identify trends in supplier performance and inventory levels, which can inform procurement decisions.

An ERP system can generate reports and dashboards that provide executives with a holistic view of the business, making it easier to identify areas of improvement and measure progress against goals.

Improved business insights can help businesses make better decisions, optimize operations, and stay competitive in an ever-changing marketplace.

Reduced Operational Costs

An ERP system can also help reduce operational costs by improving efficiency, reducing waste, and minimizing errors. By automating routine tasks, an ERP system reduces the need for manual labour, which can lower labour costs.

An ERP system can optimize inventory levels, reducing the need for excess stock and minimizing the risk of stockouts. This can lead to cost savings in storage, handling, and transportation.

An ERP system can improve supply chain management by providing visibility into supplier performance and enabling proactive management of supplier relationships. This can help reduce the risk of supply chain disruptions, such as delays or quality issues, which can be costly to resolve.

Reducing operational costs can help businesses improve profitability and reinvest in growth opportunities.

Increased Collaboration

An ERP system can also promote increased collaboration across departments, enabling employees to work together more effectively. By integrating data and processes, an ERP system provides a shared view of the business, making it easier to collaborate on projects and resolve issues.

For example, an ERP system can facilitate communication between sales and production teams, ensuring that production schedules align with sales forecasts.

An ERP system can enable cross-functional teams to collaborate on product development, ensuring that products meet customer needs and are launched on time.

Increased collaboration can help businesses improve efficiency, reduce errors, and enhance customer satisfaction.

Reduced Risk

Finally, an ERP system can help reduce risk by improving compliance, data security, and disaster recovery. By providing a centralized database and automated processes, an ERP system reduces the risk of data loss or theft. Additionally, an ERP system can help businesses comply with regulations by providing real-time data and automated reporting. This can reduce the risk of fines and legal penalties.

Furthermore, an ERP system can provide disaster recovery capabilities, ensuring that critical data is backed up and can be recovered in the event of a system failure or natural disaster. This can reduce the risk of downtime and data loss.

Overall, reduced risk can help businesses improve resilience and protect their assets.

The ERP Effect on Business Functions

Many businesses share similar core functions within their organizations, even if it may not be initially noticeable. In the previous section, we discussed the overall benefits of ERP. However, the benefits are magnified when you analyze them against common business functions.

ERP systems can improve universal business functions, such as:

Accounting and Financial Management

ERP systems provide a holistic view of your company's financial data. By integrating your accounting and financial systems, you can automate manual processes and reduce the risk of human error. With real-time data, you can make informed financial decisions that help your business stay on budget and optimize profitability.

Human Resource Management

Managing human resources can be a time-consuming and complex task. ERP systems can help automate HR processes such as payroll, benefits administration, and time and attendance tracking. By streamlining these processes, HR teams can focus on other important tasks like employee engagement and retention.

Supply Chain Management

ERP systems can help companies manage their supply chain from start to finish. From procurement and inventory management to logistics and distribution, an ERP system can help improve communication and collaboration between suppliers, distributors, and customers.

By streamlining the supply chain, companies can reduce operational costs, optimize inventory levels, and improve customer satisfaction.

Improved Customer Relationship Management

ERP systems provide a 360-degree view of your customers, allowing your sales and marketing teams to identify and respond to customer needs more efficiently. By tracking customer interactions, sales teams can personalize their approach, leading to improved customer satisfaction and increased sales revenue.

In summary, ERP systems can help businesses streamline their core functions, leading to improved productivity, efficiency, and profitability. By centralizing and integrating business processes, companies can gain a competitive advantage in their respective industries.

Retail

Retail businesses have undergone significant changes over the years, with modern technology now playing a vital role in their operations. With the integration of brick-and-mortar operations and e-commerce, companies can benefit from the comprehensive features of ERP systems.

Even companies that do not identify themselves as being in retail have retail functions because they focus on the sale of goods or services to a consumer for use or consumption.

One of the most significant benefits of ERP for retail businesses is its ability to create a seamless, personalized experience for customers. The system streamlines retail functions such as inventory management, pricing, and promotions.

As a result, customers can access real-time information about products, services, and pricing. They can also receive personalized product recommendations and experience an omnichannel approach to their shopping.

Signs to Implement ERP

Implementing an ERP system can improve any business's overall processes and functions, but how do you know when it's time to adopt one? Here are some signs:

• Heavy reliance on manual processes: If your staff spends too much time on daily, repetitive tasks, an ERP system can automate processes, free up schedules, and increase employee satisfaction.
• Lack of real-time data: Your company needs access to data as it changes to keep up with business demands. ERP allows you to view and share data with your employees, enabling them to make sound decisions as they fulfil their duties.
• System can't keep up with growth: If your business is scaling up and your system can't accommodate frequent or fast changes, it's time to consider implementing an ERP. Many software options offer immediate upgrades and updates to ensure your business never falls behind technological advances.
• Need to improve customer service: Most ERP software includes customer relationship management (CRM) functions, centralizing data and enabling your team to handle questions and issues more quickly. This can improve customer satisfaction and retention.

The Types of ERP Systems

When considering implementing an ERP system, it's crucial to choose the one that best fits your business needs. An ERP system must have automation, integrations, built-in analytics, and data visualization to be effective.

ERP systems come in three types: on-premise, cloud-based, and hybrid. On-premise systems are installed on your company's servers, providing complete control over data security, customization, and integrations. Cloud-based systems are hosted off-site, offering flexibility, scalability, and automatic upgrades. Hybrid systems combine the advantages of on-premise and cloud-based systems, allowing companies to store sensitive data on-premise while enjoying the flexibility and scalability of the cloud.

The type of ERP system you choose will depend on your business's unique needs, including data security, customization, flexibility, scalability, and cost.

Evaluate each option carefully before deciding to ensure that the system you select can enhance your business functions and help you achieve your goals.

On-Premise ERP

On-Premise ERP systems are installed on your company's computers and systems, making it a hands-on, industry-specific model. You have complete control over the ERP software, which means you will also be responsible for its installation and maintenance.

To gain full control, you usually need to purchase the software license, which can be an added cost.

While this model might be challenging for companies without a well-trained IT department, a skilled tech team can design the ERP system to your specifications. They will also manage its implementation and security.

However, keep in mind that industry-specific ERP systems can become outdated quickly as technology advances with new releases and features.

Cloud-Based ERP

Cloud-based ERP is a model where the ERP software is hosted on a cloud server by a vendor, and businesses access the service over the internet. Compared to on-premise ERP, cloud-based ERP has many benefits and few challenges, making it the most popular choice for businesses.

One of the advantages of cloud-based ERP is its lower upfront cost. The cost of cloud-based ERP is at least 30% less than on-premise ERP. Additionally, cloud-based ERP provides real-time access to your data from anywhere and at any time, as long as you have internet access.

Cloud-based ERP software is also easily customizable to fit your business as it grows. The system can be modified and tailored to fit your processes, and most cloud ERP vendors automatically update your system with upgrades.

Hybrid ERP

Hybrid ERP is a combination of on-premise and cloud-based ERP systems. This model allows you to store your data and applications on both a cloud server and at your business.

If your company already uses an on-premise system, a hybrid ERP model might be the best choice for you. This approach can help you manage your core business functions in-house while moving your CRM processes to a cloud server.

Compared to on-premise ERP systems, hybrid ERPs cost less but more than cloud-based ERPs. With some software vendors now offering cloud capabilities, implementing the hybrid method can help you keep control of your business that on-premise ERP allows while accessing new upgrades and features associated with cloud ERP.

One of the benefits of the hybrid ERP model is that it offers a lot of flexibility. For instance, you can decide which functions to manage in-house and which to manage on the cloud server. This way, you can prioritize which aspects of your business are most important to keep in-house and which are best left to the cloud.

ERP Software

ERP software is essential for businesses that want to streamline processes and improve efficiency. There are several ERP software options to choose from, each with its unique benefits. Here are four popular ERP software systems:

1. Oracle Cloud ERP

When it comes to ERP software systems, Oracle Cloud ERP is a popular choice. Its popularity is reflected in the number of well-known corporate brands that use it, such as FedEx, Dropbox, Honda, Lyft, Wendy's, and Square. One of the benefits of this software is that it is updated on a quarterly basis, ensuring that users have access to the latest technology.

Oracle Cloud ERP also offers several features to its users. For example, users can gain a clearer picture of their financials, streamline procurement processes to empower employees, and use artificial intelligence to predict and analyze analytics. These features can help businesses increase productivity and reduce operational costs.

2. SAP ERP

SAP is a provider of enterprise resource planning (ERP) software, which is used by businesses of all sizes. The company offers cloud-based ERP software, allowing for access to the system on a public or private cloud. This customization provides easy access from anywhere, at any time.

SAP's ERP software comes with a range of key capabilities, including asset management, manufacturing, resource and development engineering, and sourcing and procurement.

With two solutions available, small and midsize businesses can choose from SAP Business One or SAP Business ByDesign, respectively. These solutions are tailored to meet the needs of different-sized companies.

SAP's ERP software is designed to streamline business processes and enhance productivity. With its cloud-based platform, businesses can benefit from real-time data and analytics, which can help with decision-making. SAP's software is also customizable, allowing businesses to tailor it to their specific needs.

3. Microsoft Dynamics 365

Microsoft Dynamics 365 is an ERP software that can help businesses connect their data, processes, and teams. It offers a range of applications and integrations to create a hyper-connected business environment. This software is suitable for various industries, including finance, retail, and manufacturing, making it a popular choice for many businesses.

While Microsoft Dynamics 365 provides numerous benefits, including predictive analytics and third-party integrations, it does have a downside. The software does not offer 24/7 support. Despite this, it remains an excellent choice for businesses looking to improve their operational efficiency, optimize their supply chain management, and enhance their customer experience.

The software's suite of applications includes financial management, sales and marketing, operations, human resources, and customer service, all designed to streamline your business operations.

4. Sage 300

Choosing the right ERP system can be a daunting task, but Sage 300 aims to make the selection process as smooth as possible. The ERP software company provides an evaluation guide that helps users identify how to choose the right system.

Sage 300's focus is on four key areas: finance, sales management, inventory, and payment processing. The software is capable of setting up and maintaining general ledger accounts, automating purchase order procedures, producing inventory reports to manage stock, and integrating with payment apps like PayPal and Stripe.

One of the benefits of Sage 300 is that it's highly customizable. The software can be tailored to fit a business's specific needs and requirements. Sage 300 also has a strong user community that provides support and resources to users. The downside of the software is that it may not have as many features as some of the other ERP systems mentioned. However, for businesses that only need the basic functionalities, Sage 300 could be an excellent option.

The Future of ERP

In conclusion, implementing an ERP system is crucial for companies that want to streamline their processes, increase efficiency, and gain control over their operations. The choice of ERP system depends on the specific needs and goals of the company.

With the wide range of options available in the market, choosing the right ERP system can be overwhelming. However, with proper research and evaluation, companies can identify the system that aligns with their business goals.

At Fine Media, we specialize in inbound marketing and can help your company find the right ERP system that meets your business goals. Our team of experts can work with you to create a customized marketing strategy that can help increase visibility and attract new customers.

Contact us today to learn more about our services and how we can help you take your business to the next level with the right ERP system.