An enterprise resource planning (ERP) system’s core purpose is to provide integrated management of core business processes. Previously, businesses had multiple systems in place that did not automatically communicate with one another. For example, a completed sales order would need to be communicated to a different department for billing, another department for order fulfillment, and so on. An ERP software solution ensures every department within your business can exchange necessary data, in automated and efficient ways, to encourage seamless collaboration. Surveys of ERP user communities show that one of the top reasons for buying a new ERP system is to consolidate disparate applications.
ERP Deployment Options
In the broadest terms, ERP software is deployed in one of two ways: either as a cloud-based system or as an on-premise system. Cloud ERP is hosted on the software vendor’s servers and accessed through the internet. It offers a number of advantages, especially for organizations that do not have a robust IT network in place along with the professional staff to administrate and maintain the network. Cloud-based ERP can also be less expensive up-front, but the cost of the maintenance and support the vendor will provide are generally factored into the monthly cost per user or license.
Benefits of ERP Systems
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Integration of Data
An ERP system consolidates all the data your business processes generate into a central location. This integration of data provides several benefits. Data duplication is virtually eliminated. So, for example, instead of there being some data about an order in one department’s database and other data related to the same order in other departments’ databases, all the information pertaining to that order, once entered, is in the same place. Obviously, different aspects of that data will be needed for different functions, such as billing, shipping, inventory replenishment etc. – but data is no longer siloed in disparate locations. This not only reduces the time spent manually entering information, it also reduces the occasions for errors of omissions to occur.
The time needed for data to be relayed between departments is also cut, because different parts of your business all have access to the same pool of information. In addition, data integration also makes it easier to provide good customer service, it can enhance personalization in marketing, and more.
Simplification of Inventory Management
Inventory management is one of the core functional areas of ERP software for manufacturing environments. This means that, while the breadth and depth of features will vary from one ERP solution to another, inventory management functionality is a standard part of most ERP systems. This functionality – especially because it is linked to other business areas such as purchasing, financials etc. – is greatly enhanced by the automation of transactions and shared access to data that is at the heart of any ERP solution.
ERP provides the ability to monitor and track items in inventory on a continuous basis. In turn, this can simplify shipping, purchasing, customer service, and more.
Modern ERP solutions are also beginning to integrate emerging technologies such as the Internet of Things (IoT) and augmented reality (AR). These technologies can add a further layer of efficiency and visibility to the process of monitoring inventory and, more broadly, entire supply chains.
Easily Configurable Reporting
Once your ERP system is implemented and configured, the various user groups within your organization (e.g., production management, accounting, inventory management, etc.) will be able to run the reports they require easily.
Employees will no longer lose time creating reports using spreadsheets, or legacy software pulling siloed data. Because every business process in your organization generates data each time a transaction is performed, and the integration of those processes are automated by your ERP, the system can generate the required reports, automatically.
In the case of ERP for manufacturing, production-related processes are monitored continuously, and the ERP can be set-up to produce any required reports. Also, because the vast majority of modern ERP solutions support some degree of mobility, users who are on the shop floor, or anywhere, can access data and generate reports on their mobile devices. With a high-speed, secure internet connection, they can access the information they require from anywhere.
When manufactures user ERP, the system can provide regular information on the state of production. It reports any stoppages or slow-downs, the amount of a product on hand, and more.
Whether applied to production or inventory management, an ERP provides real-time reports about what is happening so managers can respond quickly.
Some reports, such as financial statements or reports about traceable items such as foodstuffs of pharmaceuticals, are required by various governmental regulations and standards bodies. The ERP system can be configured to produce such required reports, making it easier to remain in compliance.
Improved Data Security
While ERP systems make data readily accessible to users when and where they need it, modern ERP software uses data encryption to prevent unauthorized access to database.
Some companies use two-factor authentication: by adding a second verification process, data is more secure in the event that a password is stolen. Typically, users will have access only to the part of the system that is relevant to their position. For example, a user in the HR department typically would not be able to access inventory management.
Some organizations opt to use two-factor authentication: by adding a second verification process, data is more secure in the event that a password is stolen.
Cost Savings through Improved Efficiency
Since it is intimately tied to virtually every critical process within an organization, your ERP system can help you analyze your business’ expenses. If your ERP system includes data analysis functionality, it can help you detect trends, assess gaps, and potentially even identify new opportunities. By offering support for fact-based business decision making, an ERP can help maximize your organization’s business potential.
By combining the benefits such as real-time information reporting, improved data management, and the automation and integration of business processes, most organizations that implement an ERP system (provided it is well-matched to their particular requirements) will quickly realize a significant return on investment (ROI).
Realizing ERP Benefits for Your Business
There are many benefits to implementing an ERP system. Some of the specific benefits will vary, depending on the type of business it serves and the particular feature set included in the ERP. However, the core functions included in any ERP are fundamental to delivering its major benefits: the ability to break down siloes and integrate and automate processes with results that include greater speed and efficiency, improved accuracy, and cost savings.
Business & Technology Writer at Technology Evaluation Centers
Areas of Expertise: Enterprise Resource Planning (ERP) | Customer Relationship Management (CRM) | Business Intelligence (BI)
Deeana Radley is a business and technology writer with over 5 years of industry insight. She has written extensively on technology trends, software solutions and market developments, and particularly enjoys rendering complex topics accessible to beginners.