Enterprise Resource Planning (ERP)
What is ERP?
Enterprise Resource Planning or ERP is integrated business software that is used by organizations to manage and execute their core business processes. An ERP system integrates all aspects of a business from accounting and finance to human capital management, project management and supply chain management, bringing in synergy, visibility and efficiency to the organization.
The important thing to remember is that ERP is not just a software, it is an integrated system that helps companies simplify the growing complexity of business by strengthening its process and storing data at each step.
What does ERP do?
The most basic of ERP systems help define and maintain business processes and encourage flow and exchange of data between different functions. As they evolve, the new age ERP systems utilize the power of Machine Learning and Artificial Intelligence (AI) for decision making and predictive analytics.
The simplest benefit of an ERP system is an alignment between different functions and verticals of business through data-sharing and transparency. It also improves decision making by providing better insights. It also helps to decrease operational costs by improving efficiency across business processes. For instance, accurate sales projects and real-time sales data can help not only in better production and manufacturing planning but also streamline raw material procurement.
For business managers and owners, an ERP system will also improve their control over the business, help them comply with regulations as well as provide them with accurate insights that will empower them to take the right strategic decisions.
Functional areas of ERP
Each ERP system has a variety of modules and functions that are designed to help a specific area of business.
- Accounting and Financial Management: The heart of all business processes, this module covers elements from budgeting to cash flow management and general ledger functions along with tax collection and reporting.
- Human Capital Management (HCM): Integrated closely into the ERP system are functions of payroll and performance management and benefits administration along with more evolved functions such as intelligent recruitment, skill development and training.
- Supply Chain Management: Efficient inventory management that exchanges data with manufacturing and sales is the backbone of a good ERP system. For a Manufacturing company, Inventory Management, Purchasing Management and Quality Management would be the quintessential modules to streamline its processes. On the other hand, a Distribution company would need modules such as Distribution Process Management and Order and Logistics Management to manage its business efficiently.
- Customer Relationship Management: Sales and marketing are driving forces of business and this module also integrates customer support and engagement.
- Project Management: An essential for most companies, the project management module provides tools that help organizations design, plan and execute complex engineering and services projects, while ensuring profitability and timeliness of deliverables.
- Product Lifecycle Management (PLM) From inception to design and manufacture, the PLM function helps in identifying challenges and streamlining processes through the product lifecycle.
- Business Intelligence (BI) and Data Management: One of the most important functional areas of ERP, BI drives data assimilation and analysis in order to help business managers make accurate and informed decisions.
- Security and Compliance: With data stored increasingly on the cloud, this module is pertinent to safeguarding the integrity and controlling access to confidential business data.
Trends and Industry Needs
- Integration of business intelligence (BI): The biggest trend transforming the industry is the advent of artificial intelligence and data visualization that provides end user improved data insights as well as a user-friendly interface for consumption and decision making.
- From On-Premises to the Cloud: Traditionally run in the company’s own data center and on its own servers, you have now the option of a hybrid ERP or a cloud-based ERP designed as a Software-As-A-Service product that provides scalability and mobility.
- Amalgamation with Internet of Things (IoT): From sensors on the factory floor to those integrated with delivery vans and trucks, IoT devices are increasingly being used to improve supply chain and its management.
Top ERP software vendors
- Netsuite ERP, acquired by Oracle is one of the market leaders in ERP. A highly scalable ERP with an intelligent BI module, Netsuite is the ERP of choice of mid-sized and large businesses.
- SAP Business One, developed by SAP is a business management software which automates core business functions and one of the popular ERP systems for large enterprises.
- SAGE Intacct is another specialized ERP solution for financial management that supports over 6 industries along with their supply chain and procurement functions.