There is a lot of information online about ERP and more often than not a lot of it seems to contradict each other, with everyone defining it in their own way. This is largely because of how the system has been implemented and in many ways this highlights the strengths and flexibility of the software itself.
In order to understand the many ways in which ERP solutions can benefit your business it helps to get a grounding in what ERP is and the fundamentals of how it works. Below is a brief overview of ERP and why it can play an important role in the success of your organisation.
What is ERP?
ERP stands for Enterprise Resource Planning, although even that term sounds a little vague. Gartner were responsible for creating the phrase back in 1990, but the actual concept goes back even further to the 1960s manufacturing sector. This is when programs created by software engineers monitored inventory, helped to reconcile balances and provide status reports. Material Requirement Planning (MRP) was the next stage of the evolution in the 70s, which allowed for the scheduling of key production processes.
MRP expanded further in the 80s to cover even more manufacturing areas, its name changing to MRP-II or Manufacturing Resource Planning. The 90s saw these systems move beyond inventory and operational functions to encompass admin areas such as accounting and HR, which created the platform for ERP as we understand it now.
Today, ERP has the ability to integrate many of the essential processes that go into running a successful organisation. This includes everything from accounting, human resources, inventory and order management, customer relationship management (CRM), sales force automation (SFA), ecommerce and marketing automation.
Thought about at its most basic, ERP software is able to bring all of these together into one system, streamlining work processes, access and use of information across the business as a whole.
All ERP systems contain a central database that can be shared across multiple departments and units within the organisation. The idea being that everyone is able to work on the same page at the same time, regardless of the division they are based in.
Synchronising automation and reporting
ERP software also has the capability to synchronising reporting and automation. This provides more flexibility for staff who instead of having to create and maintain separate spreadsheets of information which are then manually merged together to generate a report, they can extract the required reports from a single system.
A good example would be related to sales orders that are automatically tied into the finance system, removing the need to manually enter in the data. This will enable the order management team to process the orders far more efficiently, with the finance division able to close the order a lot quicker. Another common ERP feature is the inclusion of a dashboard that allows staff to have immediate sight on the performance levels of key business metrics at any time.
ERP software and the cloud
Although ERP systems were primarily designed for enterprises, mid-to-large size businesses have begun to heavily rely on the software. Software-as-a-Service (SaaS) solutions – otherwise known as cloud computing today – have proved to be the driving force behind this. This is because cloud-based solutions have made ERP systems more cost effective as well as making them easier to install and manage over the medium-to-long-term.
Cloud ERP provides the opportunity for reporting in real-time and business intelligence, making it an extremely valuable tool for management executives to gain a precise insight into where the company stands in the moment.
Various sized businesses from a vast range of industries are now becoming more interested in what ERP software can offer to them. In fact, it is estimated that the global SaaS market will be worth around $164.3 billion by 2022. When you start to take into consideration the many benefits that ERP can provide to your business, it is easy to see why it will continue to grow exponentially.