What is an ERP System?
If you’ve ever worked at a large company, you’ve probably had some level of experience with an ERP system. Even if you’re at a small to mid-sized company, you’ve likely heard the term floating around the office. Although ERP stands for Enterprise Resource Planning, many small and mid-sized businesses have been integrating it into their organization.
ERP Integrates Processes Across Business Functions
When you step back and look at all the different systems, processes, and data a business relies on, the sheer amount of information can be overwhelming, let alone the organization of it all. ERP helps address this problem.
ERP is a software that enables a business to integrate all processes across business functions and create a streamlined system that allows users to access critical business data at any time. ERP systems combine human resources, accounting, customer service, marketing, order management, and even inventory, into one cohesive system.
History of ERP
ERP was originally coined in the 1990s as an evolution of Material Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII), which were both created as a way for manufacturing companies to improved efficiency and decision-making capabilities.
In its early days, ERP focused on organizing data in back office areas, such as inventory management, fulfillment, accounting, IT, HR, and other related areas.
As the software developed, so did its capabilities, which would soon include customer relationship management (CRM), supplier relationship management (SRM), supply chain management (SCM), human capital management (HCM), business intelligence, and more.
ERP Integrates Reporting and Automation
Instead of asking employees to maintain separate databases and spreadsheets to generate reports, some ERP systems can automatically generate the same reports using its shared database.
The Business Value of ERP
At its most basic level, ERP was designed to break down barriers between internal business silos to create a more efficient organization. More specifically, an ERP system can:
- Provide business leaders with real-time data
- Enable leaders to quickly identify challenges, opportunities, and make decisions that impact different areas of a business
- Provide a single point of truth for organizations
- Allow for easy collaboration between teams and departments
On-Premise or Cloud-Based ERP
There are two main types of ERP systems available: on-premise or cloud-based.
An on-premise ERP system is a physical system located at your organization. Your IT staff would likely be responsible for keeping your hardware and servers operational. This option tends to be more expensive due to housing and maintenance costs, but it enables you to have more autonomy over the system.
A cloud-based ERP system is a newer version that doesn’t require everything to be stored at your place of business. Instead, the system lives in the cloud. You simply log in to a website or app to access your information. You can also use this system via a mobile device so you don’t have to be in the office to take a look at your data.
Both systems have the power to transform the way your business works. The decision ultimately comes down to how you need it to fit your goals.
ERP Selection Process
Whenever you implement a new system or process, it’s important to ask the right questions. How can this system help? Is it worth the investment? Does it take a long time to begin working? How will it improve the workflow?
Answering these questions is key to deciding if the new system is right for you, but it’s also important to understand the benefits. Your organization can take advantage of these benefits when you implement an ERP system:
- Easy access to information
- Increased work efficiency
- Automated business operations
- Stress-free collaboration
- Improved data security
- Off-site access
- Proactively identify and fix problems
Having all your business divisions able to access your data and information is key to running an efficient business. An ERP system enables you to do that and more, so you can create a simplified system for better operations.