Enterprise Resource Planning

What Is Enterprise Resource Planning?

Enterprise resource planning or ERP refers to the process of integrating resources, information, and communication across various internal departments of a company. These subdivisions include human resources, finance, marketing, sales, inventory management, etc. Businesses mostly use ERP software to integrate and streamline processes that enhance their work efficiency and decision-making.

What is Enterprise Resource Planning?

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Enterprise resource planning software allows companies to automate certain processes and simultaneously accommodate new ones to achieve better coherency and professionalism. The software complements the requirements and goals of a company that can help a business achieve quicker access to information from different departments, communicate across departments swiftly, and practice cost-effectiveness.

Key Takeaways

Enterprise resource planning systems organize data and process it into a database easily accessible to employees across departments such as sales, marketing, accounting, etc.
These applications enable greater efficiency in an organization by improving work productivity, saving overhead costs and time, and enabling faster decision-making by automating data and providing flexible access.
These systems are of three types, on-premises, cloud-based, and hybrid. It depends on the organization adopting ERP software to choose a suitable type for its business needs and operations to improve its productivity.

How Does An Enterprise Resource Planning System Work?

Enterprise resource planning systems aim to create a culture to manage business processes in real-time by using software and IT applications, on-premise or hybrid systems. Thus, ERP systems focus on improving savings in terms of finance, time, and manual labor.

Enterprise resource management applications collect, process, store in the cloud, and manage all of the data from different departments of the business, eliminating the hassle of collating data. However, compared to ERP systems, manual work takes longer to collect, process, and streamline data, which delays decision-making.

In the case of ERP applications, everyone from managers to employees can access information in real-time, cohesively, and across departments. The flow of communication is streamlined to eliminate the time-taking process of gathering disparate information from multiple sources.

Collecting data from various departments like manufacturing, inventory and order management, customer services, sales and marketing, finance, etc., brings greater efficiency and accuracy in decision-making. In addition, ERP applications eliminate the possibility of human error. At the same time, an ERP system can better explain the data by employing graphs, pie charts, percentages, and tabular formats per the company’s needs.

For instance, information processed through enterprise resource planning software is available to the accounting and sales departments to calculate the statistics they require for gaining insightful business knowledge. Such as, the accounting department can access data from various spreadsheets. At the same time, a salesperson can conduct a tally of finalized deals from the data on the same portal or ERP system.

At the same time, the personnel in the inventory will make arrangements for delivery with the same information available through ERP software. As a result, ERP systems make business organizations more aware of their progressing functions and operations by synchronizing databases.

Characteristics of ERP

Enterprise resource planning applications are a suite of applications built to help a business in the process of its growth and expansion. These include certain characteristics that advance business operations, such as,

1. Availability of Data in Real Time

Vivid data is processed that provides insightful information on developing business trends in real-time that indeed helps grasp opportunities.

2. Centralized Data Processing

Upgrades information gathering throughout the organization that helps in quicker decision making and requires less time to collate this data with the help of technology.

3. Flexibility and Transparency of Data

Better data representation through ERP systems improves the understanding of the information across departments by collecting, storing, and processing data. It reduces the possibility of human errors and makes data accessible even remotely.

4. Automatic Information

With enterprise resource planning software, a database is generated automatically for the entire organization with insightful information and intelligence from various functionaries and departments. Consequently, it also eliminates various time-consuming processes.

5. Customized Look and Features

ERP systems are curated with special features by software manufacturing companies that work to understand an organization’s special needs, vision, and mission. Thus, to benefit from the services of ERP systems, an organization should be aware of the basic reasons for installing one.

ERP Types

Enterprise resource planning systems can be specific from company to company, while a company can adopt more than one type of ERP system, such as,

1. On-premises Software

Companies or businesses using this software maintain it within office premises, either physically or internally, on in-office computers and servers. However, these are not accessible remotely, but complete ownership and control are with the business.

2. Cloud Software

Such cloud-based or web-based ERP systems are remotely accessible on any device with an internet connection and are known as – Software as a Service or SaaS. It is a subscription-based service for which the service provider ensures training, support, and customization.

3. Hybrid Software

This software combines the above two software services. It depends on how the user organization and service provider host and deploy these, respectively. This type has greater flexibility and allows for newer addition and implementations in the existing systems.

Example

Let us understand the critical uses and functions of ERP applications utilized by Amazon for managing its marketplace.

An enterprise resource planning example is the Systems Analysis and Program Development or SAP. SAP is an ERP solutions company that has been present in the business since 1972, originated in Germany.

Through the years, it’s become a global doyen by providing well-founded and superior ERP application services in financial accounting, invoice verification, inventory management, logistical requirements, HR, order management, and sales assistance.

SAP’s S/4Hana Cloud is the most modern and intelligent ERP solution that provides AI, machine learning, and advanced data analytics for ever-expanding global businesses.

Amazon, a global marketplace, uses SAP’s ERP solutions services to manage its product line, customer relations, and orders and generate essential customized reports. The system helps prevent the company from losing sales and assists Amazon in building a more profitable supply chain. In addition, the company has millions and millions of products listed on its marketplace that are country-specific. Thus such ERP solutions assist in collating this product information into one database.

The process of collating the products and offers from separate domains in the age of big data while ensuring data security becomes both a challenge and an opportunity for e-commerce businesses. The credible and safe use of ERP systems ensures the efficiency and profitability of Amazon, from accounting to shipping. In addition, using ERP solutions has helped it achieve a more customer-engaging business profile and gain an edge over competitors.

Benefits

In the final analysis, let us now understand some benefits of ERP systems. These will help in understanding how ERP assists an organization’s long-term vision of growth and expansion,

1. Automation and Integration of Information

An ERP system enables a cohesive database that provides a one-stop solution to various business functions, reports, invoices, and analytics.

2. Increases Productivity

ERP solutions and cloud services provide access to insightful data through detailed reports without the help or assistance of an IT expert. An ERP system enables employees to identify problems on the go (even remotely), get information from across departments in lesser time, and arrive at a solution quickly.

3. Reduces Operations Cost

These solutions streamline disparate workflow and information from different departments into one database, eliminating excessive human interface and possibilities of human error and thus saving time and costs, etc.

4. Gives Edge Over Competitors

ERP solutions can take a business from 0 to 10 in terms of ranking when businesses adopt customized solutions that are qualified, intelligent, and customized. With real-time data availability, honed information, and quicker access to tap opportunities in case of addressing customers’ concerns and engagement.

5. Strengthens Data Security

Businesses thrive on data intrinsic to their business functions, operations, and technology. Thus, a repository of data on-premise or on the cloud helps eliminate the threats and misinformation related to disparate data, like generating reports, invoices, etc., and also eliminates data manipulation.

Frequently Asked Questions (FAQs)

1. Why enterprise resource planning is important?

It enables an organization to synchronize disparate data into a manageable database that is essential in running its operations. It reinforces greater flexibility and transparency, reduces cost, and saves time.

2. What does enterprise resource planning involve?

ERP involves managing data to access crucial information and communication across organizational departments easily. These systems are of three types,
1. On-premises are hosted internally within an organization and are not accessible remotely.
2. Cloud-based can be accessed remotely and includes smart features such as AI, machine learning, or automatic algorithms for faster decision-making.
3. Hybrid software provides greater flexibility to businesses in adopting ERP systems.

3. What are the tangible benefits of enterprise resource planning?

Tangible benefits include:
1. Data security.
2. Savings of high operational costs and time.
3. Higher work productivity of employees with real-time data availability.
4. Automatic generation of vast data and reports across departments.
5. Improves customer redressal mechanism (CRM).