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.

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.

• 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.

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 enterprise resource planning systems 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, enterprise resource planning systems make business organizations more aware of their progressing functions and operations by synchronizing databases.

The use of computer applications started in the 1960, when mainframe computers were in use. But these applications were quite costly for any commercial usage due to the fact that they could deliver work much faster and more accurately compared to human beings. But still, their speed was not enough to get much work done. Another problem was the limitation in terms of functions. However, slowly but steadly, various standalone applications were invented, that could handle a particular part of any work, like manufacturing process tracking or managing sales orders, etc.

But during the 1980s, integrated processes came into existence, which were application solutions that could handle an integrated system like sales, marketing, finance, manufacturing, inventory, human resources and so on, using one particular software. Slowly enterprise resource planning programs came into existence in late 1990s. This brought about a huge transformation in the sector, where it could cater to a wide range of services including project planning, accounting and management, or reporting to end-users.

As time passed by, the speed of the internet increased rapidly, paving way to the entry of newer and upgraded development tools that could be used in many industries comfortably. This created a huge revolution in the ERP space and helped introduce cloud ERP software, which proved to be a huge breakthrough in the application process and could be used in many ways.

The modern forms of enterprise resource planning software systems are increasingly upgraded to adjust and adapt to changing technologies like the AI, which is a latest trend in the technology market, robotic processes, etc, which helps companies run even more smoothly, by handling unstructured data and help businesses remain in competition though increase in adaptability.

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

In enterprise resource planning programs, 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.

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.

A common enterprise resource planning software system will have many types of modules in it. Each of those modules have the role of helping certain particular business processes like finance, human resources, accounting, sales, operations, manufacturing, etc. The employees of the concerned departments can use these modules to plan and strategize their work in such a way so that maximum work can be done within limited time. Learning the functionality of these modules are not very difficult of time consuming. Rather they give the much-needed insight to te employees to do their job properly. Let us learn them in detail.

1. Human resource

Human resource has a huge role to play in terms of selection of proper contributor to the working of the business to time and attendance management and payroll tracking. The entire human resource modules of every EPR software comes with varied and robust functions which also helps in management of both employee and customer experiences.

2. Manufacturing

This is a very important planning and execution module that helps the business to carry out the complex manufacturing process in a very simple and easy to handle manner, so that production and demand match with each other. It helps in reducing wastage of time and resource by maintaining quality and ensuring the production schedule is followed properly.

3. Procurement

This deals with the procurement or purchase process of raw materials or goods that are to be sold to clients. Thus, they include products and services that are both raw materials or for resale purpose. Through this module, the system is automated and there is a central point from where the requests for quotes, purchase, contract creation and their approvals are passed. This not only helps the process to work in a systemmatic manner, but also connects the buyer with the seller and promotes exchange of ideas and opinions in a transparent manner.  

4. Sales

This module is very effective in maintaining communication of the vendor with the client and use insights to achieve sales, complete targets, help in product promotion. Thus, this module includes the order-to-cash process, managing billing, invoice, contracts, collection, follow-ups, complaints and even payments.

5. Finance

This is considered to be the backbone of any company and also the software system. It helps in managing all main financial and accounting tasks like payment for purchase, collection for sales, creation of journals, tracking accounts payables and receivables, tracking any financial discrepancy and loopholes, helping in creation of financial statements, assisting in audits, etc, by compliance with rules and regulation.

6. Logistics

This module keeps track of the movement of products or services across places within a city, state or country. This, this module is essential in order to ensure goods reach customers on time in proper condition and as per the order. Similarly purchases can also be tracked like this.  This leads to management of various functions of the company like purchase, inventory, transportation and warehousing. This makes the supply chain management more efficient, effective and accurate.

7. Research

Not all, but still many enterprise resource planning platforms have the facility of research and development. They come with special tools that acts as a guide to developing and designing new features, adding utility services to the product, product or service upgradation, and eliminating problem areas. This makes the products, cost efficient, innovative and increase their demand.

Thus, the above are some important modules of functionalities that frequently come in packages in any ERP softwares and are widely used by corporates to manage their daily workflow.

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.

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.

Some disadvantages of the enterprise resource planning platforms as follows:

1.Training

Employees require different levels of training and guidance regarding handling and usage of such systems. However, everyone may not be so efficient to catch up with the new processes so quickly. Thus, it requires time to pick up. This leads to delay and errors in work process.

2. Upgradation

The systems require upgradation and management from time to time so as to remain in line with the rest of the industry.

3. Cost

The cost may become a big issue for small startups who may try to implement it for faster work process and better streamlining of the systems. But cost may be related to purchase, implementation, maintenance, training, setting up relevant management and tracking teams and so on.  

4. Data Conversion

This can lead to difficulty related to conversion strategy development because it involves analysis of sources of data, examination and conversion, which often leads to rise in cost and cause delays.

Thus, the above are some noteworthy disadvantages of the concept.

This has been a guide to what is Enterprise Resource Planning. We explain it with examples, modules, advantages, types, features, disadvantages & evolution. You may also find some useful articles here:

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