What is Enterprise Resource Planning?
Enterprise Resource Planning (or ERP) mainly refers to the software which is used for the purpose of standardizing, streamlining, and even integrating different business processes across several verticals of business. The software can be applied to varying segments of a business enterprise, ranging from human resources to the procurement of raw materials, their subsequent distribution, and so on.
So, you could say that Enterprise Resource Planning is mainly a category of business management software. It offers an integrated approach to carrying out core business processes, and it simplifies a lot of sub-modules. Therefore, it assists in better business functioning and smoother managerial decisions too.
The History Of ERP
Let us take a look at the history of ERP to give you some background upon which you will be able to further substantiate your understanding of the matter.
It was back in the year 1990 when Gartner created the term ERP. He used it so he could chart the evolution of MRP and MRP II at the same time, as well as take into account other important aspects of the business enterprise too. Both MRP and MRP II failed to take into account the finances, and even the HR part meticulously. This is what ERP aspired to achieve.
More about Material Requirements Planning (MRP).
Сlose to the 1990s Enterprise Resource Planning systems started developing very rapidly. ERP was the standard solution that could replace the old systems, and it turned out to be cost-effective as well. Thus started the era of ERP systems!
The trend of recent years is cloud-based ERP systems. Cloud-based platforms for ERP software come in two forms - private cloud and public cloud. In the case of a private cloud, the possibilities of customization are greater, since each client uses its own copy of ERP software, and its own infrastructure (servers). However, such a platform significantly increases the cost of the ERP system.
In the case of a public cloud, all clients use the same infrastructure, and one instance of the ERP software. This greatly reduces the cost of operation of the ERP system. This type of platform uses MRPeasy - a leading cloud-based self-service ERP software for small manufacturers (10-200 employees).
The Use of an ERP
Those of you who are wondering as to what are the key uses which an ERP system has to offer need to know the following:
When you have an ERP system, it will take into account the different aspects of an order. It would coordinate the placement of an order to the whole manufacturing process, keeping in mind the order quantity, along with the related details of inventory stock, the distribution channel, and also accounting matters.
Previously, before the advent of ERP, there were separate systems to handle each of the sub-processes. However, ERP offers one single system to streamline all of these order-related aspects, and therefore it cuts down the possibility of errors as well.
For any business to thrive and prosper, it is very important to ensure that the finances are handled diligently. Using Enterprise Resource Planning helps in integrating the different sub-aspects like the sales segments, finances, and so on. As each of these subsystems handles the details individually and manually, it can lead to a waste of effort and time.
With the ERP accounting module, the finances can all be tapped at one point and handled accordingly.
- Standardizing the HR particulars
The human enterprise segment is one of the most critical parts of any firm. For any firm to prosper and thrive, the employees of a firm need to be dedicated and committed to their company.
Having a well functional ERP means that there is a self-service centralized portal which will help the employees maintain not just the personal data, but also the ability to track several other factors like their expenses, time tracking, and more. As the data is all stored in a central repository, it becomes easier for management to match the right workforce to specific projects, and thereby the correct form of optimization can be obtained.
- Customer information handling
The customer is the king of any business. No business can thrive for long until we are ready to pay full attention to customers. This is why ERPs make use of the best customer relationship management tools so that they can track the interaction with customers, and also carry out the right follow-through as well. It provides tremendous insight into the needs of the customers.
- Standardizing manufacturing
The best ERP systems are able to manage different manufacturing types, supporting processes by providing planning, scheduling, and reporting. This helps in saving time and it would also push the productivity several notches up too. The manufacturing unit deals with several sub-processes too, and as the data is streamlined in a central repository, it turns out to be more beneficial in the long run.
Procuring the raw materials for creating the products could be a lengthy process. Possessing ERP software could help in analyzing and tracking the purchases in a coordinated and streamlined manner. With a centralized system, you could feed all data to one place, and then handle it methodically to avoid losses and errors.
The Main Components of an ERP System
Now that we understand some of the advantages that an ERP system has to offer. Now we are going to take a closer look at the component of Enterprise Resource Planning:
Customer relationship management
Most businesses have now realized that customers are the key driving components. With the right customer relationship management module, you can keep track of the details and needs of the customers in mind.
Some of the key details of counter relationship management include tracking the buying history of your customers. These details come in handy as it can help you track additional purchases, as well as to suggest customers in relation to the repeat orders as well. Furthermore, it will also help you to track the conversation history and to check out the leads and further capitalize on them.
The right CRM tool can help you improve your sales funnel, and thereby gain the right kind of business profits.
Supply chain management
You must have seen that having the right supply chain is critical to the success of your business. Supply Chain Management (or SCM) would refer to the procurement of raw materials, the purchasing of the components, and even their subsequent distribution as well. With this component as a sub-part of the ERP, you will be able to collect real-time data with regards to purchasing and procurement.
It also helps in performing the right kind of predictive analysis. One of the best advantages of having the finest supply chain management system is that you can thoroughly carry out apt demand planning. Therefore, you would have an adequate supply to match the needs and demands of your customers, even when there is seasonal fluctuation.
You have to make sure that you maintain the right kind of stock. Both over and understocking is harmful to a business. When there are too many orders simultaneously, you have to ensure that the inventory is well managed, because you need to be thoroughly updated with the actual stock details.
The warehouse management component also helps with tracking the different details as a part of the order, and thereby it eliminates several manual steps and errors. This aspect would include things like number tracking, revision level tracking, SKU handling, and so on.
Production planning and reporting
For manufacturing companies, it is important to handle the production process. The production units have to be thoroughly planned because the final sales channel is directly dependent on production capacity. Along with it, the thorough reporting which needs to be completed for the production output is massive as well. There is a lot of manual work involved in this process. By having the right ERP system, the production process can be automated, and therefore, manual errors can be curtailed.
The accounting module in an ERP system is completely integrated with other parts of the system. Usually, it includes A/R, A/P, & G/L, alongside financial and tax reporting. This allows users to quickly and easily view (and manage) the company’s balance sheets and profits. Our software solution offers all the tools you need, in one easy-to-use ERP system.
So, these are the different components of ERP. Of course, there are several other sub-modules which are a part of it. These would include payroll, project management, asset management, and more. This might give you an idea of how wide the Enterprise Resource Planning system truly is.
Perhaps this is the reason why most business enterprises spend a significant amount of time and money just to have the perfect ERP system in place. As ERP is a large software system, it is mostly seen in larger business enterprises that have a lot of sub-functions to carry out, and who possess a larger production capacity to maintain, and therefore, they are perhaps the types of companies that benefit the most from an Enterprise Resource Planning system.
Using this software could be a little expensive, but if you compare the kind of benefits you can get, it outweighs the cost trade-off. One of the most far-reaching benefits of having the best Enterprise Resource Planning system must be the fact that it cuts down the manual errors, and ends up saving time and effort significantly.
Cloud-based systems could dramatically reduce both your initial expenses and your Total Cost of Ownership. They also have an important advantage - a cloud-based system is with you everywhere (so long as you have an Internet connection).
When you have automated software to handle these processes, you will be able to focus on your core tasks and business, and therefore you can continue to prosper ahead and make further inroads to success. So, if you too are looking to develop your business and earn a substantial amount of profits, finding the right Enterprise Resource Planning system and integrating it into your system seems like the smartest decision to take.
Getting familiar with ERP is no rocket science, and a simple bit of understanding and a little familiarity will help you make the most of the system. So, what are you waiting for? Begin your free trial and start using this right away!