"WHAT IS ERP"

Enterprise Resource Planning (ERP) is an application that automates business processes, and
provides insights and internal controls, drawing on a central database that collects inputs
from departments including accounting, manufacturing, supply chain, sales, marketing and
human resources (HR).

Once information is compiled in that central database, leaders gain cross-departmental

visibility that empowers them to analyze various scenarios, discover process improvements
and generate major efficiency gains. That translates to cost savings and better productivity
as people spend less time digging for needed data.

ERP software that’s tailored to meet the needs of an individual business pays major
dividends, making these systems a critical tool for companies across industries and of all
sizes. Many of the world’s best-known and most successful firms have leaned on ERP for the
last quarter century. Now, this software can be configured and priced to meet the needs of
all-size businesses.

Put simply, an ERP system helps unify people, processes and technology across an
organization.

History of ERP
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Computerized business applications were born in the accounting and finance world in the
1960’s using mainframe computers. These pioneering applications were faster and more
accurate than manual processes – but were expensive, limited in functionality, and still slow.
Before long, these applications spawned the development of dedicated, standalone
solutions such as sales order processing and manufacturing requirements planning (MRP).

In the mid 1980’s, competition in the manufacturing sector was exploding and new tools
were required. New MRP II software integrated accounting and finance, sales, purchasing,
inventory, and manufacturing planning and scheduling – providing the manufacturer with
an integrated system.

Near the end of the 1990’s, ERP was introduced. ERP transformed the technology sector by
serving a broader range of industries and by combining MRP II, human resources, project
accounting, and end-user reporting.

In the short span of the 21st century, faster internet speeds and new development tools
have again revolutionized ERP suites. The introduction of browser-based software paved the
way for cloud ERP software, a breakthrough that has expanded both the reach and the
functionality of ERP solutions.

Today – in the era of digital transformation – businesses are increasingly relying on artificial
intelligence and other innovations to automate their business processes and stay
competitive.

Why Is ERP Important for Businesses?

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ERP systems have become table stakes for businesses looking to use resources wisely. They
can help leaders reallocate human and financial capital or build more efficient processes
that save money without sacrificing on quality or performance.

An ERP is also an asset when it comes to planning and coordination. Employees can see
current available inventory and customer orders in detail, then compare supplier purchase
orders and forecasted future demand. If necessary, they can make adjustments to head off
problems. ERP software improves communication and collaboration as well because workers
can check on the status of other departments to guide their own decisions.

As a comprehensive source of data, an ERP system also provides a host of reports and
analytics that can be difference-makers for the business. Turning a vast trove of information
into charts and graphs that clearly illustrate trends and help model possible results is an ERP
capability executives find invaluable.

What are the core features of an ERP system?

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Any modern ERP system will have a long list of software features based on
the industry they serve
and the modules they offer. However, all enterprise resource management
systems should have these top 10 characteristics:
1. “Single version of the truth” where data is consistent and tailored for approved users

2.  Up-to-date information and alerts, with self-service reporting across all operations

3. Visual presentation of the information with dashboards, KPIs, and analytics to assist in
quick and informed decision-making

4. Choice of deployment such as cloud, on-premise, or hybrid

5. Standard and advanced business processes, like, automation with AI and machine

learning

6. Configuration tools for processes and users (including customers and suppliers), as well as
for business units, locations, and product lines for example

7. Open and easy integration with other software solutions, including third-party systems

8. Technology platform that is fast, proven, and stable for this long-term investment

9· Technology support for the Internet of Things (IoT), security and privacy, mobile, e-

commerce, and other business priorities

10. Multinational support including languages and business practices, as well as cloud,
training, help desk, and implementation services

6 Disadvantages of ERP Systems

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Despite all the value ERP brings, there are challenges businesses may

encounter. Many of these can be avoided by preparation and choosing the
right supplier partner.
1. System cost: Because they were expensive to purchase, implement and maintain, early
ERP systems were accessible only to large companies. However, that hasn’t been the case
for two-plus decades. While ERPs still require a time and financial investment, the
technology has become much more affordable thanks to both SaaS systems that charge a
recurring fee and more solutions designed for small and midsize businesses entering the
market. Organizations can use tools to calculate estimated savings after one and three
years, for instance, to find out when returns will surpass costs.

2. Need for training: Like any new tech, ERP has a learning curve. Anyone who will use the
software—that is, ideally, most or all of your employees—requires some level of training.
Although there may be resistance at first, that should fade away as people realize how much
the technology will help them. Newer systems that receive frequent updates are more
intuitive and user-friendly, reducing training requirements and increasing adoption.

3. Data conversion costs: When moving to a new ERP, you may need to convert some data
into a format that’s compatible with the new platform. This can lead to unexpected costs
and delays, so review your databases, and work with your IT team or an integration partner
to identify potential data compatibility issues early on. Then, you can factor conversion
efforts into the ERP implementation plan.

4. Complexity: An ERP system is loaded with features, and that can be daunting to your
workforce. But the software available today is far easier to use than legacy systems because
vendors have focused on improving the user experience. Additionally, employees need
access to only the modules and dashboards required for their jobs, which can make it more
approachable. Thorough training should temper concerns about complexity.

5. Maintenance: In the past, maintenance was a large expense that deterred lower-revenue
businesses from adopting ERP. Not only did a company need an IT staff to handle patches,
security and required system upgrades, it often had to pay the vendor or a third-party
service provider for its expertise. This is less of a concern with a SaaS system because the
provider takes care of all maintenance and regularly moves all customers to the latest
version—and it’s all built into the subscription price. Companies concerned about
maintenance should thoroughly vet a potential supplier to ensure it offers a true vendor-
managed SaaS system.

6. Doesn’t solve process and policy issues: If you have error-prone or inefficient processes,
an ERP won’t necessarily fix them, even though it may increase accuracy. It can, however,
uncover problems in your operations and help you brainstorm better ways to do business.
The same goes for policies that hold the organization back—it’s up to you to adjust those
and then configure the system to support better ways of doing business.

12 Benefits of ERP Systems

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Today’s ERP solutions have rich feature sets that bring countless benefits to businesses. While what an
individual firm sees as the greatest value of this technology will vary, here are key universal advantages
ERP delivers:
1. Cost savings: Perhaps the biggest value proposition of ERP systems is they can save your organization
money in a number of ways. By automating many simple, repetitive tasks, you minimize errors and the
need to add employees at the same rate as business growth. Cross-company visibility makes it easier to
spot inefficiencies that drive up costs and leads to better deployment of all resources, from labor to
inventory to equipment. And with cloud ERP, companies may quickly see incremental value from the
software, over and above what they’re spending.

2. Workflow visibility: With all workflows and information in one place, employees with access to the
system can see the status of projects and the performance of different business functions relevant to their
jobs. This visibility may be particularly valuable to managers and leaders, and it’s far faster and easier than
searching for the right documents and constantly asking colleagues for updates.

3. Reporting/analytics: Data is useful only if companies can analyze and understand it, and an ERP helps
with that. Leading solutions have impressive reporting and analytics tools that allow users to not only
track KPIs, but display any metrics or comparisons they can dream up. Since an ERP is all-encompassing, it
can help a business understand how a change or problem with a process in one department affects the
rest of the company.

4. Business insights/intelligence: Because ERPs can access data from across the company, these systems
can uncover impactful trends and provide extensive business insights. This leads to better decision-
making by organizational leaders who now have easy access to all relevant data.

5. Regulatory compliance & data security: Financial reporting standards and governmental and
industry-specific data security regulations change frequently, and an ERP can help your company stay safe
and compliant. An ERP provides an audit trail by tracking the lifecycle of each transaction, including
adherence to required approval workflows. Businesses may also reduce the chance of errors and related
compliance snafus with automation. ERP software provides financial reports that comply with standards
and regulations, and SaaS applications are well-equipped to help companies with PCI-DSS compliance.

6. Risk management: ERP technology reduces risk in a few ways. Granular access control and defined
approval workflows can strengthen financial controls and reduce fraud. Additionally, more-accurate data
heads off mistakes that could lead to lost sales or fines. And finally, the ability to see the status of the
entire operation enables employees to quickly handle risks posed by business disruptions.

7. Data security: ERP providers understand that your system houses critical, sensitive data and take
necessary steps to ensure it is secure. This diligence is more important than ever as the volume and scale
of cyberattacks increase. Cloud ERP software, in particular, uses cutting-edge security protocols to ensure
your company doesn’t fall victim to a damaging attack.
8. Collaboration: Employees are most effective when they work together. ERP solutions make it easy to
share information—like purchase orders, contracts and customer-support records—among teams. It
knocks down walls between departments by giving employees appropriate access to data on related
business functions.

9. Scalability: The right ERP system will be scalable and flexible enough to meet your company’s needs
today and for the foreseeable future. Cloud systems in particular adapt to minor and major operational
changes even as the amount of data the organization captures and demand for access increase.

10. Flexibility: While ERP software helps businesses follow best practices, it also offers the flexibility to
support unique processes and objectives. The system gives administrators the ability to build out
company-specific workflows and create automatic reports important to different departments and
executives. An ERP enhances your organization’s innovation and creativity.

11. Customization: While most companies find that modern ERPs support their businesses “out of the
box,” some firms need to add to the extensive built-in functionality. If you have a lot of specialized
processes, look for an extensible system that allows your integrator or IT staff to write code that adds
needed features, or that can integrate with homegrown or legacy solutions. However, before going the
custom route, take a close look at your processes—the prebuilt functionality and configurations modern
ERP solutions support are based on best practices gathered from thousands of companies. Aim to
minimize customizations.

12. Customer & partner management: An ERP can strengthen a company’s partner and customer
relationships. It can provide insights on suppliers, shipping carriers and service providers, with the cloud
enabling even better, more convenient information exchange. When it comes to customers, the solution
can track survey responses, support tickets, returns and more so the organization can keep its finger on
the pulse of customer satisfaction.
 

Roles and Users

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Within those organizations, a number of job functions benefit from ERP, including
but not limited to:
· Finance/accounting: The accounting team is often the first adopter. This group will track
and report on all transactions and other financial information in the system, including
accounts payable (AP), accounts receivable (AR) and payroll. With ERP, financial planning
and analysis (FP&A) experts—whether a separate role or part of the accounting department
—can turn comprehensive financial data into forecasts and reports on revenue, expenses
and cash flow.
· Supply chain: Employees focused on operations, a group that includes purchasing agents,
inventory planners, warehouse managers and senior supply chain leaders, rely on the ERP
system to ensure a smooth and continuous flow of goods from supplier to customer. They
count on accurate, detailed information provided by the system to optimize inventory levels,
prioritize orders, maximize on-time shipments, avoid supply chain disruptions and identify
inefficient processes.

· Sales and marketing: An ERP solution can increase the productivity of and drive better
results for your sales team by automating lead management and monitoring the
interactions prospects have with your company. Reps can document discussions and change
the status of prospects as they move through the sales funnel. Using those same records,
marketing can automate and manage outreach across all channels, from email to display
ads to social media, and measure the effectiveness of those messages and channels to
better allocate its budget.

Human resources: The HR department tracks all employee information and broader

workforce trends in the ERP. It can quickly find contact information, compensation and
benefits details and other documents for each employee. HR can also monitor metrics like
retention by department, average pay by title, promotion rate and other metrics to better
allocate its own staff and assist line-of-business managers.

How Can ERP Improve or Help a Business?

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ERP enables companies to identify areas of the business with room for improvement or
opportunities for expansion. User uptake is key: The more employees with access, the more
likely teams will spot problems, whether a spike in demand for a certain product, late
shipments from a supplier or an impending cash flow crunch. Employees can then
proactively mitigate the issue to the extent possible.

Executives are generally focused on outcomes—using information to achieve objectives, like

increasing efficiency, reducing costs and responding to changing consumer needs or market
conditions.

For business units, ERP software can automate many error-prone tasks, like account
reconciliations, customer billing and order processing, and provide the information teams
need to operate more efficiently.
But the real beauty of ERP is that it can give both a 10,000-foot view of the company’s
health and detailed insights into a specific process or KPI by not only storing and organizing
data, but identifying patterns and flagging anomalies that require investigation. Try that
with a spreadsheet.

Other business upsides:

Access to data from anywhere: Employees no longer need to shuffle through piles of papers
or files scattered across a desktop. With cloud-based ERP, a warehouse manager can log in
from a mobile device while on the shop floor, or a salesperson can check inventory while at
a customer site.

Information is always up-to-date: Because the ERP system is continually receiving

information from various departments, it’s updated immediately as inventory is pulled, a
payment is posted or emails are sent to customers. This provides a major advantage
because decision-makers are basing their choices on up-to-the-minute data.

Business decisions based on the same data: With a common database, all decision-makers
are on the same page. There are no duplicate or conflicting sources of information, and
companies have the ability schedule and distribute dynamic reports automatically. Need
more depth? Underlying data can be accessed simply by clicking the report.