What is ERP?
Enterprise Resource Planning (ERP) streamlines the business processes within all of the departments at your company, connecting not only your workers but also their ideas. Investopedia defines it as a process-oriented methodology that integrates systems used across different departments of a company. As a result, the information flows simply and uniformly under defined controls, assisted by the use of software applications and defined best practices.
ERP’s Main Components
To function sufficiently, Investopedia notes that any ERP system needs to fulfill the following requirements:
· The system must be unified with simple applications and interfaces
· Different applications allow access to either a common database or multiple, shared databases
· Based on various parameters, search and reporting utilities generate reports
· Scalability, customization and simple integration of ad hoc modules
To function wholly, an ERP system mandatorily integrates several tools and applications:
· Database Management/Data Warehouse/Information Management Tools: The backbone of any ERP system is data storage and project management with established workflow across different departments and functions. There are many data storage tools and systems available from companies like Oracle, Sybase, and IBM’s DB2 and open source free offerings like Apache Derby. Repository applications and Content Management Systems (CMS) make up other information management tools. Further, some businesses might utilize materials requirement planning (MRP) or manufacturing resource planning (MRP II), which centralizes, integrates, and processes information for effective decision making in scheduling, design engineering, inventory management and cost control in manufacturing. The type of database companies choose to work with should depend on the industry. The database or repository can be multiple with automatic data flow from one database to the other or a single centralized one. Databases can be hosted in the cloud, locally or remotely.
· Applications and interfaces with suitable permission control: To process the data, data storage and management requires read-only or editing access. There is a routine that typically follows the manufacturing and buying process. Investopedia writes that once items are manufactured, they need to be marked as ready inventory. These items are then updated as ready for sale by the stock management department. Once they are purchased, they are marked as “sold.” To simplify this process, easy-to-use applications and interfaces are an integral part of any ERP system that also has designated controls and permissions. To allow for permission-based controls, any ERP solution that may be browser-based, desktop installations or tablet/mobile apps. It depends on the team – a manufacturing team that doesn’t typically move locations will prefer to work from a desktop-based interface, while a traveling sales team will appreciate a browser-based interface or mobile app.
· Workflow Management Tool: Multiple modules and data repositories made up an ERP system, where data updates and actions follow a logically defined sequence based on the business needs. Investopedia defines this process as the workflow, which is a necessary part of any ERP solution. If an ERP system includes order entry and customer service capabilities, that system would bridge office functions by connecting the back office and front office.
· Reporting Tool/Dashboard: Another important requirement for an ERP system are management level, department level, team level or individual level report generation. Investopedia notes that it is typically available in either a dashboard form or customizable reports generated in common word- or data-editing applications like spreadsheets. Most reporting tools and dashboards function in real-time. These applications are also available as browser-based or desktop installations; they also include end-of-day reporting features offering emailing of reports with charts/graphs/tables as Microsoft Excel or Word attachments.
· Communication Tools: Communication is necessary for any system working across multiple departments. ERP systems enable this to happen by offering tools for action-based automated mail generation, instant messaging, chat or general broadcast features at individual and group levels. These tools can also integrate analytical tools, which can be used for business intelligence, predictive analysis, data mining and related analysis, and resource allocation and task scheduling tools.
Key Benefits of ERP
If you want your organization to stay agile, ERP is a necessary addition to your organization. According to SAP, ERP allows businesses to stay competitive as it is available in 25 industries, 37 languages, and 45 localizations. Key benefits of ERP solutions include:
· Eliminate information silos – communicate insights quickly and turn insight into action in real time by giving everyone across the business the single source of truth
· Automate core processes – increase operational efficiencies and reduce errors by building sustainable growth via systematizing the fundamental aspects of your business
· Make better decisions – make data-driven business decisions and improve operational performance by expediting the flow of real-time information across departments
· Enact improvements – enable companies to address concerns proactively and drive improvements by giving a global, real-time view of data
· Keep finances in check – reduce risk and improve financial compliance with regulatory standards
· Automate business operations – including lead-to-cash, order-to-fulfillment, and procure-to-pay processes.
· Enhance customer service – now, one source for billing and relationship tracking will be utilized.
Different Types of ERP
SAP notes that there are three different types of ERP implementations – cloud, on premise, and hybrid. Cloud ERP is a type of ERP that is hosted on a cloud computing platform instead of the premises within an enterprise’s own data center. An on-premise ERP allows companies to run their ERP software in their own data centers for flexibility and control. Finally, the hybrid ERP allows companies to run some of their applications in the cloud and some on premise with hybrid ERP. This is also called the two-tier ERP.
Deciding to Utilize ERP
There are several signs that your business might be ready for an ERP system. Here are five noted by SAP:
1. Daily activities are taking up too much of your time – if managing daily activities is starting to take up too much of your day, it is time to look into an ERP system. ERP software compresses solutions and data into one system with a common interface, which makes it easier for business units to communicate and do their jobs effectively.
2. Your business questions often go unanswered – If you cannot easily answer important questions about your business activities, it might be time to consider ERP. According to SAP, specifically, it might be segregated systems and a lack of access to metrics and KPIs that may be slowing your progress. ERP was created to address challenges such as these.
3. Your businesses processes are getting away from you – SAP notes that if it’s getting harder for you to manage inventory, satisfy customers, or keep costs in check, it might mean you have runaway business processes. To accommodate growth or changing priorities, your business processes may need to be restructured through the use of ERP software.
4. Your manual processes rely on multiple data sets – if most of your departments are using their own applications and processes to accomplish day-to-day tasks, it might be time to consider ERP software as chances are you’re spending too much time on duplicate data entry. Decision making is hampered when information cannot flow between systems because reporting takes longer and errors happen frequently.
5. Fast-moving opportunities are passing you by – exciting opportunities are out of reach when you are spending too much of your time running your business. Machine learning and predictive analytics are intelligent capabilities of newer ERP systems, which make it easier to identify and capitalize on profitable new ventures.
There are plenty of tools to choose from when considering ERP. According to Gartner, SAP is a Leader based on its ability to execute and its completeness of vision. SAP solutions for EIM support capabilities to understand, integrate, cleanse, manage, associate and archive data to optimize business processes and analytical insights. Other ERP vendors include ERP tools like 24SevenOffice, AlloyERP, Microsoft Dynamics, Oracle ERP Cloud, and Sage. These tools allow companies to properly manage all aspects of business, including human resources, supply chain management, and manufacturing, among others.
ERP Delivery Methods
According to Oracle, the primary delivery model for ERP is software-as-a-service (SaaS). This allows the software to be kept up-to-date with the latest features, functions, and best practices. So, emerging technologies such as AI, digital assistants, machine learning, blockchain, augmented reality and IoT become available to subscribers regularly.
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