8.7% of businesses using ERP systems are wholesalers or distributors.
Enterprise Resource Planning (ERP) is a framework for managing and organising the core operations of an organisation. Many ERP software programs are essential to businesses because they help implement resource planning by integrating all the functions needed to manage their enterprises within a single system.
ERP systems streamline processes and improve overall efficiency by integrating various functions such as finance, human resources, and supply chain management. This centralised approach allows for better decision-making and resource allocation across different departments within the organisation.
Key Takeaways:
- ERP software can incorporate all the business operations needed to manage an organisation.
- As ERP solutions have evolved, many are now typically web-based applications that users can access remotely.
- Some advantages of ERP include seamless communication across business divisions, a single source of information, and accurate, real-time data reporting.
- A company can choose from hundreds of different ERP applications, most of which are customisable.
- If a business does not implement an ERP system carefully, it may be ineffective.
Enterprise Resource Planning (ERP): Meaning
Enterprise Resource Planning (ERP) functions as the core nervous system of an enterprise, connecting all its computer systems. With ERP software, each department retains its own system, but all systems are accessible via a single application with a unified interface. Without ERP software, each department’s system would need to be optimised for specific tasks.
Furthermore, ERP programmes facilitate communication and information sharing across departments within the organisation. They also enable enterprises to achieve greater self-awareness by simultaneously linking information on production, finance, distribution, and human resources. As a result, ERP systems can eliminate costly duplication and resolve issues with incompatible systems. The process often integrates accounts payable, stock control systems, order-monitoring systems, and customer databases into a single platform.
How do Enterprise Resource Planning Platforms Work?
ERP, also known as an ERP suite, consists of integrated business applications or modules that communicate with one another through a shared database. Over time, it has evolved from traditional software models that relied on manual entry systems and physical client servers to cloud-based software accessible remotely via the Internet. The platform is typically maintained by the company that created it, with clients paying for its services.
Furthermore, businesses choose the applications they wish to use. The hosting company then loads the applications onto the client’s rented server, after which both parties begin integrating the client’s processes and data into the platform. Thus, when it comes to data migration, 58.8% of businesses employ some kind of phased approach.
Once all departments are connected to the system, all data is collected on the server and becomes instantly available to authorised users. Reports can be generated with metrics, graphs, or other visual aids that clients may need to assess the business performance and its departments. A company could face cost overruns if its ERP system is not implemented carefully.
Business cost savings rank among the top three most important ERP goals, according to 46% of businesses.
Types of ERP Systems
Numerous ERP solutions are available to meet a wide range of business requirements. While not exhaustive, this comprehensive list encompasses various types of ERP systems. When a company wants to use an ERP system, it should be able to see the value of different types of systems. Some situations may require multiple systems.
Take a look at the below-mentioned types:
On-Premise ERP System
On-premises ERP systems are characterised by purchasing software licenses and installing the ERP system directly onto a company’s servers. As the system is located within the company’s premises, the company retains complete control over it and its data. Customisation and integration with current systems may be more thorough, and this kind of ERP typically necessitates dedicated IT resources for maintenance, updates, and security.
Cloud ERP System
Cloud ERP systems operate on distant servers and are accessed via the Internet. SaaS-based cloud ERPs provide enhanced scalability, enabling businesses to effortlessly modify resources and features as required without substantial initial investment in hardware. Typically, cloud ERP systems adopt a pricing model based on subscriptions, with the ERP provider managing updates and maintenance instead of the company itself.
Industry ERP System
ERP solutions tailored to a particular industry’s needs and specifications are called industry-specific ERP systems. Industry-specific functionalities, modules, and best practices are often included in these systems to handle the sector’s complexity. Take, for instance, a manufacturing company that depends significantly on supply chain management, inventory control, and product distribution. Compared to client-based ERP, like the ERP of a financial institution, that kind of ERP will be very different.
Open-Source ERP System
Users have access to the source code when using an open-source ERP system or any other open-source software. This implies that a business can alter, adjust, or reorganise the ERP as per its requirements. Compared to commercial ERP solutions, open-source ERP implementation and maintenance may require greater technical know-how and resources.
Business-ERP System
Small business ERP systems, on the other hand, are centred around the needs of small and medium-sized businesses (SMB). These ERP systems aim to strike a balance between being slightly niche and providing essential functionalities at a lower price point. When it comes to implementation and customisation, small business ERP solutions are typically less complex than enterprise-level ERP systems because they are less powerful.
Tiered-ERP System
Tier-based ERP systems offer varying degrees of functionality and scalability to meet the needs of businesses of various sizes and complexity levels. With the option to upgrade or customise as needs change, businesses can select the tier that best fits their needs and budget at the moment. This would mean adding modules as needed. For example, a business expanding internationally might put off implementing foreign current modules until later.
Benefits of ERP
The market for ERP software is predicted to grow at a compound annual growth rate (CAGR) of 10.2% between 2019 and 2026, reaching £78.40 billion globally.
Enterprise resource planning, or ERP, is used by businesses to expand, cut expenses, and enhance operations, among other goals. It combines multiple business functions and delivers real-time data, enabling businesses to make informed decisions and streamline processes more efficiently. ERP software can also help standardise operations across multiple departments and regions, promoting uniformity and collaboration within the organisation. If you plan to implement ERP for your business, it is essential to understand how it will benefit you. Let’s comprehensively explore the benefits of an ERP system:
Accuracy and Productivity: Integrating and automating business processes reduces redundancies while increasing accuracy and productivity. Additionally, departments with interconnected processes can coordinate efforts to achieve faster and better results.
Reporting: Some companies benefit from improved real-time data reporting from a single source system. Accurate and comprehensive reporting enables businesses to plan, budget, forecast, and communicate the status of operations more effectively to the organisation and stakeholders, such as shareholders.
Increased Efficiency: ERPs allow businesses to quickly access information for clients, vendors, and business partners. This leads to higher customer and employee satisfaction, faster response times, and improved accuracy. Furthermore, as the company enhances its efficiency, associated costs often decrease.
Enhanced Collaboration: Departments can work together more effectively and share knowledge; a newly synergised workforce can boost productivity and improve employee satisfaction, as workers can more clearly see how each functional group aligns with the company’s overall goals and objectives.
ERP Drawbacks
It’s important to note that implementing an ERP system doesn’t always guarantee efficiency improvements within a business. The company may need to reconsider its organisational structure to avoid encountering incompatible technology. In many cases, ERP systems fail to meet their objectives due to companies being hesitant to leave behind old processes and software that previously worked well. To prevent cost overruns, it’s crucial to avoid breaking ERP projects into smaller segments. Additionally, incorporating change management principles throughout the ERP life cycle can help prevent or minimise failures during implementation.
ERP vs. CRM
Some believe that ERP systems and CRMs are one and the same thing. However, both are different from each other and their purpose is also different.
The table below presents the difference between ERP and CRM (Customer Relationship Management)
| ERP | CRM |
|---|---|
| Enterprise Resource Planning | Customer Relationship Management |
| ERP focuses on internal business processes and operations. | CRM is centered around managing interactions with customers and prospects. |
| ERP systems are designed to integrate and automate core business functions. | CRM systems are dedicated to managing customer relationships and interactions. |
| The goal of ERPs is to streamline processes. | The goal of CRMs is to enhance customer engagement, satisfaction, and loyalty. |
ERP and CRM systems often share certain areas of overlap, despite having different central areas. CRM functions are present in many contemporary ERP systems. This interface allows firms to synchronise client data, such as contact information, purchase history, and conversation logs, between ERP and CRM systems.
A CRM would often keep track of a customer’s past purchases, for instance. A business can predict when a customer will repurchase, make sure it has enough on hand at a given time, and make sure it has enough personnel on hand to finish the potential order by integrating it into a larger ERP system.
Tips for Choosing an ERP System
There are various aspects to consider while selecting an ERP system. Here are some crucial factors to consider before making your decision:
- Check that the ERP system can scale with your company as it develops and evolves.
- Look for an ERP solution that enables customisation to meet your specific business procedures and needs.
- Consider how well the ERP system integrates with other software products you may be using.
- If you intend to use your ERP frequently, consider one with an intuitive and user-friendly interface that is simple to use.
- Choose an ERP solution that provides mobile accessibility.
- Prioritise data security and compliance elements to safeguard critical corporate information.
- Evaluate the ERP system’s analytical capabilities. This includes examining its built-in reporting tools, dashboards, and advanced analytics capabilities.
- Look into the total cost of ownership for the ERP system during its lifecycle. This is more than simply the initial implementation expense. Consider ongoing maintenance costs, training costs, and any hidden costs, such as “charge per transaction” instances.
ERP Examples
Here are some examples of ERP systems:
Oracle Fusion Cloud
Oracle ERP Cloud is a cloud-based ERP solution designed for medium-sized and big organisations. Cloud applications use artificial intelligence (AI) and machine learning to automate daily tasks. Financial services, healthcare, higher education, manufacturing, and retail are some of the core verticals.
Visibility ERP
Visibility ERP is a virtual ERP solution that is ideal for to-order, mixed-mode, and project-based manufacturing businesses. It provides control over inventory, money, customer relations, and shop floor operations.
SyteLine
Infor’s SyteLine ERP platform is offered in both cloud and on-premise deployment options. This vendor is best suited for enterprises with complicated manufacturing processes, broad product lines, and stringent client needs.
Conclusion
Ultimately, Enterprise Resource Planning (ERP) systems play an important role in modern enterprises by combining activities such as finance, human resources, and supply chain management on a single platform. ERP boosts productivity and decision-making by centralising these functions and enabling real-time data visibility. ERP systems provide numerous advantages, including increased accuracy, productivity, and collaboration, but they also present challenges. Poor implementation, opposition to change, and expensive expenses can all jeopardise its effectiveness. It is crucial for organizations to carefully plan and execute the implementation process to ensure successful adoption.
Looking for an ERP development company in the UK that can assist you with your ERP doubts, connect with the MeisterIT Systems team today!
