There are several business management approaches to optimize processes and workflows. Enterprise Resource Planning (ERP) is at the top of this list, harnessing automation and integration. ERPs also work from specific data and run as a central database for better data management.
As a technological system, ERP is the backbone of many current businesses. This technological system is the backbone of a wide range of businesses, helping companies with finance, accounting, Business Intelligence, human resources, inventory management, supply chain management, and Product Lifecycle Management.
But what are the elements of Enterprise Resource Planning software systems, and how can you add this system to your workflow to craft thriving business models? Let's see!
What is Enterprise Resource Planning?
Enterprise Resource Planning (ERP) software allows companies to manage daily business functions on a single platform, including accounting, logistics, Customer Relationship Management (CRM) inventory, and marketing. Its primary goal is to optimize and automate business processes to increase operational efficiency and profitability.
ERP has several features that make it valuable for businesses, such as its common database that gathers all information from different departments in one place. This single-source data eases a coherent, multifunctional vision of the company.
We can find data analysis among the key features of Enterprise Resource Planning. Since data is within unified databases, sharing the gathered data with other departments is easier. Here, the focus is on all team members to have all the needed data to analyze the panorama and discuss conceptual solutions and tangible measures.
Further, ERP also has an integration feature to link the software with other programs or systems, allowing data sharing across platforms for enhanced understanding and efficiency. These systems can interact with both applications within the same environment or with other business software. With this integration, core business processes work for all departments that must interact to prevent data duplication or repeated orders.
Another great example of an ERP in action is using the same User Interface and User Experience regardless of each user role and department. These interfaces help unify the work while maintaining a familiar appearance so team members can move freely within platforms without further complications.
Lastly, Enterprise Resource Planning automates repetitive tasks such as invoices, payroll, and order processing. It also helps reduce duplicate data and manual work, saving time and reducing errors. As a result, all employees can focus on the creative and manual labor that leverages their special knowledge and skills.
Enterprise Resource Planning Stages
We can divide Enterprise Resource Planning (ERP) systems into four significant phases to better understand the history of what it has come to today.
Early Days ERP
The history of ERP began in the 70s with Material Requirements Planning (MRP), a system used by IBM's engineer Joseph Orlicky. The idea was to create a system to calculate the needed materials and components to manufacture a product. At that time, the MRP software was the backbone of many manufacturing operations.
Back-Office ERP
Also* In the 1970s, suppliers like SAP and Baan developed mainframe software to handle financial processes within a unique database. This software, called back-office, grew to integrate other business operations like HHRR and accounting.
Later, in 1990, analysts at Gartner named this software category Enterprise Resource Planning (ERP) to highlight its general-purpose function. Yet, since most ERP software packages sold to manufacturers contain an MRP module, it wasn't the end of MRP.
Contemporary ERP
In the '90s, mainframe ERP suppliers migrated from mainframe computers to client-server models, where desktop devices kept communicating with central server computing. Soon, ERPs were retrofitted with web browser-like user interfaces, gaining popularity due to being more accessible and easier to use. Further, ERPs in cloud systems at the end of the 1990s were a tech boom. Cloud Computing has made connecting with clients, suppliers, and partners easier for companies and their ERP systems.
Present of ERP
In this new era of Digital Transformation (DX), ERPs increasingly take advantage of new smart technologies, including Artificial Intelligence (AI), Blockchain, Machine Learning (ML), Robotic Process Automation (RPA), Predictive analytics, Internet of Things (IoT), Natural Language Processing (NLP), and memory database. ERPs allow businesses to consolidate processes more efficiently, leverage updated information, and remain competitive in unprecedented change.
How Does Enterprise Resource Planning Work?
ERP software comprises interconnected business applications sharing a single database, which reduces the need for resources. These applications, known as models, target specific areas yet work together to achieve different needs. Since companies vary in size and need, modules are customizable, allowing companies to select the best fit for their operations.
The value of Enterprise Resource Planning can be seen best when companies use modules for each function. With business data centralized, ERP cuts silos that often interfere with data gathering and create duplication. To sum it up, an ERP model serves as a Single-Source-of-Truth (SSoT) software solution.
Enterprise Resource Planning Types
● On-premise ERP. This solution helps you monitor all software and data infrastructure. Although it fulfills needs by integrating with your other systems, businesses need an on-site team to maintain the server.
● Cloud-based ERP. Also known as Software as a Service (SaaS), Cloud-based ERP systems include a third-party provider managing a company's upkeep, security, and needed changes. Here, businesses don't require an in-house team for cloud ERP; they usually also come with cloud solutions and business communications platforms.
● Hybrid ERP. With Hybrid ERP, businesses can enjoy the advantages of both on-premise and cloud-based models. With this setup, it's easier to get assistance from third-party vendors while maintaining secure access to sensitive data.
● Open-Source ERP. Open-Source Enterprise Resource Planning is a cost-effective —or even free— option that teams can find online. While several service providers offer free downloading, this type of ERP provides minimal support. As a result, businesses are in charge of all enhancements and maintenance.
Enterprise Resource Planning Modules
● Finances. The Finance ERP module manages the general ledger. It automates important financial tasks like Accounts Payable (AP) and Receivable (AR), closing the books effectively, creating financial reports, adhering to revenue recognition standards, and decreasing financial risk.
● HHRR. For Human Resources, ERP offers core functions like time tracking and payroll. Extra features or complete Human Capital Management (HCM) suites can connect to the ERP for more comprehensive HR capacities, from workforce analytics to managing employee experience.
● Manufacturing. Businesses can simplify complex manufacturing processes and make sure production meets demand with the Manufacturing module. This module usually has features for Planning Material Requirements (MRP), scheduling production, executing manufacturing, managing quality, and more.
● Sales. The Sales module logs interactions with potential and current customers. With data-driven insights, representatives can increase sales and target leads with appropriate promotions and upsell opportunities. Further, the Sales ERP module includes order-to-cash processes, like order management, contracts, billing, sales corporate performance management, and support for the sales force.
● Logistics and Supply Chain Management. This module monitors the flow of goods and supplies across a company's supply chain. Further, the Supply Chain Management ERP offers real-time inventory management, warehouse management, transportation, and logistics tools.
● Enterprise Asset Management. Enterprise Asset Management ERP assists businesses with heavy asset usage. As a result, it reduces downtime and ensures machines and equipment's optimal efficiency. This module includes features for predictive maintenance, scheduling, asset operations and planning, environment, and Health and Safety (EHS).
● Service. This module helps companies deliver the personalized service customers expect. Service ERP might include tools for in-house repairs, spare parts, field service management, and service-based revenue streams. Also, it encloses analytics to help reps and technicians quickly fix customer issues to improve customer loyalty.
● R&D and Engineering. The R&D (Research and Development) and Engineering module offers tools for several product-related areas, such as design, development, life cycle management, compliance, and more. This structure allows companies to develop innovative solutions quickly and cost-effectively.
How to Implement Enterprise Resource Planning?
1. ERP Identification
Before selecting an ERP system, a company should review its current processes to identify gaps and inefficiencies. They should assign an ERP implementation team to handle all needed decisions and area reviews to understand operations.
After the assessment, the next step is to choose an ERP system aligned with the practices and requirements. In this context, businesses need a clear roadmap and plan to ensure a smooth transition to new systems.
When assessing current needs, companies should consider which functions the ERP would automate and the specific data requirements of the systems. Businesses also must consider which Key Performance Indicators (KPIs) to track and the scalability of the software to meet evolving needs. At this point, timelines for implementation and deployment are key.
2. ERP Design
After selecting an Enterprise Resource Planning system, the next step is to customize it to meet specific business needs. If designing an ERP system from scratch, businesses must manage any changes that may arise in existing workflows and procedures.
Among the steps needed to set up an ERP system are establishing the organization structure, customizing the ERP software to be aligned with it, defining the access each user has to the data, and integrating the software with other systems in the organization like accounting software, inventory management, and ecommerce platforms, if applicable.
Further, there should be a dedicated team handling the development of a suitable plan for this step. This team will handle tasks like structure organization, ERP customization, access-level definition, and software integration.
3. ERP Migration
After designing, it's time to organize all existing data into a suitable format for the new ERP software. This step also includes monitoring and recording key business operation metrics.
Steps for migrating data include conducting data audits to get a clear picture of the migration, categorizing data types, and deciding the migration method. Of course, businesses must also consider creating a data backup and establishing data governance policies. Teams can perform their first ERP testing after all data is loaded and correctly formatted.
4. ERP Testing
In the testing stage, further development can be a common thing. Here, teams test individual ERP modules to include needed fixes or adjustments. Meanwhile, other modules are tested simultaneously to ensure particular functioning.
Yet, testing the entire system is key to ensuring proper functioning and data processing. This phase verifies all system applications and common processes are working correctly before the ERP software officially goes live.
5. ERP Implementation
Your organization is now ready to launch its new ERP system! If all team members have been trained on this new solution, it's time to roll out the new ERP system.
All ERP modules can be deployed at once or in stages, and organizations might prioritize certain modules and add others over time. The team that started the implementation project should be on standby to handle any confusion or issues. They should be ready for problems and have backup plans in case of malfunctions! Every organization is unique, and ERP deployment can vary greatly. Yet, ERP solutions must be accessible to all employees.
6. ERP Management
After running the chosen implementation method, it's key to establish routines for the ERP’s maintenance. Organizations should perform regular checks and update the software periodically. Having a team to maintain your ERP system's health is key to longevity!
Your ERP vendor should be available for any queries, maintenance, or updates. Best practices for this process should include a well-managed team and strong organizational communication to ensure effectiveness and efficiency.
Why is Enterprise Resource Planning Important?
Companies worldwide have adopted Enterprise Resource Planning (ERP) systems to improve operations, reduce costs, and grow business process models. ERP systems help enhance accuracy and productivity by integrating and automating processes, which leads to the removal of redundancies.
Further, departments with linked processes can coordinate their work for quicker and superior results. With ERP, businesses can also get improved real-time data reporting from a unified system. Accurate and comprehensive reports assist in planning, budgeting, forecasting, and conveying operational status.
Besides, ERP systems can boost efficiency by swiftly retrieving information for clients, vendors, and business partners. This approach leads to enhanced Customer Experience (CX), faster response times, accurate forecasts, and higher accuracy rates.
Related costs often go down as the company operates more efficiently. ERP also enhances teamwork by allowing collaboration and knowledge-sharing for a synergized workforce that boosts productivity and employee satisfaction. Team members can understand better how each group contributes to the company. Cutting manual processes allows teams to dedicate time to more significant work.
Conclusion
As a complete system, Enterprise Resource Planning helps streamline various processes according to business requirements, like sales, logistics, project management, and customer service. With these modules, companies can increase sales, manage inventory, deliver personalized service, and foster innovation. Cross-organizational ERP implementation is a critical factor for a modern enterprise to operate efficiently and effectively!
