Enterprise Resource Planning Definition | What Is ERP?

In this article, you’ll learn what enterprise resource planning is, main ERP components, benefits, software, and how does ERP work.

What is ERP?

ERP (Enterprise Resource Planning) is the procedure that companies use to organize and coordinate the most important aspects of their operations. An ERP software program can integrate purchasing inventory, planning sales, marketing and finance, human resources, and many other areas.

What Is ERP Implementation? 

ERP implementation is a highly coordinated effort that can span several weeks or months, depending on your company’s needs.  During an ERP implementation, you will work with multiple teams across your organization—including IT and finance—to ensure all systems are integrated properly and working as they should be. You will also need to train employees in using their new systems, which can take time as well.  

How Does ERP Work?

ERP software is designed to manage a wide range of business processes, including sales and procurement; manufacturing; human resources; and accounting. These systems automate many business functions, streamlining them into one integrated system. 

Here is how it works:

  • The ERP software is installed on a server and integrated with existing systems, such as an accounting system or CRM. If necessary, new software is also purchased to integrate into your ERP system.
  • The data from your existing systems are entered into your ERP system and stored in its database; then, it’s synced with all other connected systems. 
  • Once all of your data is successfully transferred into your new ERP system, you can begin using it for daily operations.
  • The final step in implementing an ERP system is training employees on how to use it; you may also need to train them on any new software that was purchased as part of your implementation.

Once your company has successfully ERP integration, you can rest assured knowing that all of your business processes are being managed by one integrated solution. From sales to accounting—and everything in between—your business operations will be streamlined into one easy-to-use interface.

What are the main ERP Components?

An ERP system can be broken down into various ERP modules or primary components: 

1. Finance

It tracks every financial detail, including Accounts payable, receivables general ledger, expenses and budgets, as well as forecasts. It aids in keeping an accurate record of your cash flows, reduces costs, improves profits, and ensures that all charges are paid in time.

2. Human Resource

It is a program that handles every personal task for employees and managers. This part is responsible for the automated payment to employees, the payment of taxes, creating reports on performance, tracking attendance promotions, and deciding the working hours and holidays of staff.

3. Manufacturing and logistics

It offers a clear view of the desired and achieved levels that are crucial to see if you’re meeting your goals or not. It also provides the complete details of the production plan and stock summary useful for your business.

4. Supply Chain Management (SCM)

The supply chain is a system of facilities that perform the acquisition of raw materials and the transformation of those products into intermediate or final products and the distribution of the products to customers. Planning Marketing, Manufacturing Distribution, and purchasing companies that makeup supply chains operate in a separate manner.

5. Customer Relations Management (CRM)

This component interacts with customers by using data analysis to analyze a large quantity of information. It keeps detailed data on general purchase history, details about personal information, as well as buying patterns. The advantage it offers is that it keeps an eye on the purchaser’s past and suggests purchases.

While each of these categories is important for any enterprise—large or small—the specific setup will vary depending on your company’s business model.  

Benefits of ERP 

1. Enhance efficiency

Implementing ERP software can help businesses reduce inefficiencies and streamline operations by providing a single source of information for departments such as Sales, Accounts Payable, Purchasing, and Manufacturing. 

2. Work allotment

With an integrated system, businesses are able to share data and work together more effectively—for example, accounts payable personnel can access customer data from salespeople so they know what payments have been received and when invoices need to be sent out. 

3. Effective data-sharing

In addition to sharing data with other departments within your company, it’s also possible to share data with suppliers or vendors so that you can manage inventory levels more effectively or cut down on shipping costs. 

4. Greater customer satisfaction

ERP implementations often lead to an increase in customer satisfaction because they help companies better meet their customers’ needs and improve their overall customer experience

5. Automation

ERP systems can help businesses become more efficient by automating manual tasks and eliminating redundant processes—for example, an ERP system can track inventory levels and automatically reorder when necessary, saving time for accounting personnel who would otherwise have to manually create purchase orders. 

Which Software Is Used For ERP?

There are many software platforms that can be used for ERP. Some of these include Microsoft Dynamics NAV, QPR ProcessAnalyzer, Oracle and NetSuite. All of these systems have a built-in database and are able to run off their own dedicated server or on a cloud system like Amazon Web Services (AWS). 

If you want your ERP solution hosted in AWS, there is an additional fee. AWS makes it easy for you to manage your own database server without having to pay any fees or deal with data storage limitations.

Let’s understand these fantastic ERP tools in brief:

1. QPR Process Analyzer

Minimize risk and maximize performance with QPR ProcessAnalyzer, the leading platform for process mining. QPR ProcessAnalyzer is a comprehensive platform for process mining analyses and applications. It combines data exploration, process mining, and automation in one easy-to-use environment.

2. Celonis

Finally, get rid of inefficient workflows. Celonis provides companies with a modern way to run their business processes entirely on data and intelligence. With execution management, run a company from anywhere—from any computer, tablet, or mobile device!

3. Microsoft Dynamics

Modernize your organization with intelligent ERP software. With Microsoft Dynamics full-suit, you can do things like provide time-saving mobile solutions, automate tedious tasks, and make it easy to engage with customers.

4. Netsuite

Connect with your team on mobile or desktop devices without a VPN connection. Navigate every aspect of your business from anywhere across Mac, Linux, and Windows devices. With Netsuite’s IT solutions, your team can focus on what they do best while our experts handle any IT issues.

5. Oracle

Get complete visibility over all your finances. Oracle JD Edwards Enterprise One offers a complete suite of enterprise software which includes accounting, supply chain management, human capital management, customer relationship management, and enterprise content management.

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