What is an ERP Management System and How Do They Work?
Enterprise Resource Planning (ERP) management systems are powerful tools used by organisations to manage their various processes and resources. They can provide a comprehensive view of the entire organisation, enabling businesses to make informed decisions quickly and accurately.
If you’re not quite sure what an ERP management system is, or how one works, you’re in the right place. In this article, we’ll go over the basics of what an ERP system is, plus how they work and why it’s so important for companies to have them in place.
We’ll also discuss some of the key benefits that come with using an ERP system, as we’re sure you’re eager to understand how one could help your business.
Finally, we’ll touch on some best practices for implementing an ERP system successfully in your organisation, so that you can boost adoption and start reaping the full benefits of this system.
What is Enterprise Resource Planning (ERP)?
Enterprise resource planning (ERP) is a type of business management software, process or platform that supports organisations with a range of core business processes and integrations. At its core, ERP software makes it easy for businesses to manage their core operations within a unified system.
Often powered by high-tech ERP systems, this process can integrate functions like sales, inventory, manufacturing, procurement and more.
ERP implementations enable the sharing of data and processes across multiple departments, locations or branches, making it easier for businesses to manage their entire operations from a single platform. ERP brings a single point of “Truth” into your organisation.
With uses ranging across a number of industries and sectors, ERP can enable your organisation to perform at its best, driving business performance and, ultimately, your bottom line.
(Investopedia / Joules Garcia)
History of Enterprise Resource Planning Systems
- 1913: Ford Whitman Harris, an engineer, revolutionised the manufacturing sector with his Economic Order Quantity (EOQ) model – a paper-based system for production scheduling. This revolutionary invention allowed manufacturers to streamline their workflow operations and optimise inventory management.
- 1964: Toolmaker Black and Decker was the first business to incorporate an MRP solution that encompassed EOQ with a mainframe computer.
- 1970s-1980s: As computers advanced, concept software developed to manage business tasks outside of production such as financial activities, human resources records and customer relationship management (CRM).
- 1983: MRP II was crafted with “modules” for integrating manufacturing components and processes, connected by a shared-data system.
- 1990s-2000s: Gartner Group coined the term “ERP” to set it apart from MRP-only systems. ERP systems have advanced by integrating business intelligence, sales force automation (SFA), marketing automation and eCommerce capabilities into one system.
- 2000-2005: By developing “Internet-Enabled” products, ERP software makers have presented a new option to the traditional on-premise client-server models: Cloud-based ERP Software Solutions.
How ERP Systems Work
An enterprise resource planning system works by collecting, integrating and managing information from multiple departments and locations in a single unified system.
By automating, streamlining and centralising data into one shared platform, businesses are able to access, review and analyse their data from different angles, allowing them to make informed decisions quickly.
These tools can be accessed from an external platform or network as well as through mobile devices. This makes it easy to access data anytime, anywhere, which minimises downtime and maximises efficiency.
Types of ERP Systems
It’s important to note that there are two main types of ERP systems: cloud-based and on-premise. The choice between the two will largely depend on the size of the organisation, their budget and specific needs. Businesses can also opt for hybrid ERP systems, which use a combination of the solutions.
- Cloud-based ERP: A cloud ERP system is hosted on remote servers and accessed via the internet, offering businesses a range of features with no need to invest in costly hardware or software. ERP systems utilising cloud computing are becoming increasingly popular due to their low cost of entry, scalability, and easier maintenance.
- On-premise ERP: An on-premise ERP system is a self-hosted solution which requires installation on local IT infrastructure, such as an internal server. This model can be more expensive but gives organisations greater control over their data and allows for better customization.
- Hybrid ERP: Hybrid ERP combines both on-premise and cloud-based solutions, allowing organisations to benefit from the advantages of both. This model can be a good option for businesses that have complex needs or that want to keep certain functions within their own IT infrastructure.
Who Uses ERP Software
Industries Using ERP
Industries that use ERP software include, but are not limited to:
- Manufacturing: Manufacturing resource planning is a subset of ERP software and offers capabilities to plan, manage and execute manufacturing operations.
- Automotive and Logistics: ERP systems allow organisations to automate and optimise their supply chain operations by integrating, planning and scheduling processes.
- Healthcare and Pharmaceutical: Healthcare organisations can use ERP systems to manage patient records, track inventory and streamline billing processes.
- Farming and Agriculture: ERP software can help agriculture businesses with crop planning, scheduling, and tracking production.
- Aerospace and Defense: ERP systems are used to manage material procurement, production control and quality assurance in the aerospace industry.
- Construction and Property: ERP software solutions can be used to automate processes such as contract management and project scheduling.
- Technology and Electronics: ERP systems can be used to manage inventory and production for electronics companies.
- Accounting and Finance: Integration with accounting software and financial reporting capabilities make ERP systems a valuable tool for finance departments.
Manu Online: Bespoke ERP Solutions For the Manufacturing Sector
ERP Business Functions
There is no single set of features that come with an ERP system as the specific functions and capabilities depend on the system chosen and the needs of the organisation.
Generally, though, ERP systems will include business functions such as:
- Supply Chain Management
- Customer Service and Product Lifecycle Management
- Data Management
- Project Management
- Human Resources Management
- Finance and Accounting
- Reporting and Analytics
- Inventory Management.
Does Your Business Need ERP?
ERP software solutions should be considered if your existing business processes and systems:
- Lack adequate security requirements to mitigate risk
- No longer support business growth
- Don’t function or function inefficiently (bottlenecking/throttling)
- Are not integrated
- Are too manual and consume too much time or resources.
Ultimately, it is up to you to decide whether an ERP system should be implemented for your business. By taking the time to assess your needs, consider what features are available, and determine which type of solution best meets those needs, you can ensure that you make the right decision for your business.
Benefits of an ERP Solution
ERP systems are essential for any business that wants to remain competitive in today’s digital marketplace.
ERP solutions are becoming increasingly popular and accessible. By taking advantage of this technology, organisations can realise greater efficiency, improved security, and higher levels of customer satisfaction.
With a wide variety of options available for businesses of all sizes, ERP solutions can provide a variety of benefits such as:
- Real-time visibility into business operations
- Faster delivery times for manufactured products
- More certainty in deliver time planning
- Improved scalability and agility
- Reduced costs and time spent on manual processes
- Seamless integration of disparate systems
- Better data accuracy and quality control
- Enhanced security through improved access controls.
In addition, ERP solutions can help organisations stay compliant with regulatory standards such as GDPR and HIPAA. This allows companies to keep their data safe and secure while also preventing any violations of the law.
How To Choose an ERP Software System
To choose the right enterprise resource planning software, organisations should assess their needs and evaluate the features of potential solutions.
- It is important to look for vendors that provide software that meets all of your requirements, offer a high level of customisation, and have established partnerships with key industry players.
- It is also essential to ensure that any prospective vendor can provide support and training in order to successfully implement and maintain the system.
- Finally, it is important to look for a vendor that is willing to work with you and offers a flexible pricing structure that meets your budget.
By taking the time to research and evaluate potential ERP software solutions, organisations can ensure they make the right decision for their needs. This will help them maximise the benefits of the system and make sure they get the most out of their investment.
Tips For ERP Implementations
For a successful ERP implementation, you have to put some thought into how you can increase adoption and ensure any employees that will be part of your ERP are comfortable with the system. Here are some tips:
- Minimise disruption to existing processes by phasing in the changes over time
- Take steps to onboard new users and get them up to speed quickly
- Provide training and ongoing support for users
- Encourage user feedback on the system so that you can make improvements or fix any issues
- Focus on user experience and make the system as intuitive as possible
- Make sure the software is compatible with existing systems, so that you can integrate them seamlessly.
By taking these steps, organisations can ensure that their ERP system implementation goes smoothly for all those involved.
Still stuck? Our experts can help.
At Manu Online, we specialise in ERP solutions for the manufacturing industry.
Our experienced team would love to help you assess your needs, evaluate your options, and recommend the best system for your unique business needs.
With scalable and configurable ERP solutions and support, we can help you get the most out of your ERP system, ensure a successful implementation and a strong adoption.