What is enterprise resource planning? (With FAQ)
By Indeed Editorial Team
Updated 22 June 2022 | Published 3 January 2022
Updated 22 June 2022
Published 3 January 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
As an organisation grows in size, so do its administrative protocols and operational business processes. To manage and correlate all of the different data points of a business as it grows and develops, many companies introduce systems of integration, such as enterprise resource planning, also known as ERP. It can offer the crucial support and automation growing organisations require to satisfy many different functions. In this article, we describe what enterprise resource planning is, explore what types of ERP exist, highlight the benefits and discuss some common ERP system modules.
What is enterprise resource planning?
If your business is rapidly growing in size, you may wonder what enterprise resource planning is and how it can help. ERP software applications can automate and integrate the important processes necessary to run a business all within one singular system. EPR software systems can integrate many aspects of a business, including sales, planning, purchasing and inventory, marketing, human resources and finance. Here are some key aspects of an ERP system:
Integration across different business areas
The most important aspect of ERP is to provide businesses with a centralised view of important data across multiple channels or areas. An ERP allows for financial, administrative and operational data to be shared in other areas in almost real time.
With ERP software, each department operates on its own, which allows all the systems to be accessed through one application with one interface. This streamlines processes and the sharing of important information across the whole organisation and means that different areas of the business can rely on the same information to complete their specific tasks.
Automation of important business functions
ERP can help businesses automate tasks that are otherwise time consuming and repetitive, such as data entry functions. For example, ERP systems can automate tasks in payroll, reporting, human resources and order processing to minimise the time employees spend on manual data entry. This can help eliminate errors and gives employees the chance to focus on more valuable tasks.
Once fulfilling these automated tasks, an ERP system can then share this data across multiple business channels. For example, a placed order may trigger an automated shipment, invoice and stock control report. This information can automatically pass to different departments, such as finance without manual data entry, resulting in a quicker turnaround and a higher degree of accuracy.
Reporting and data analysis in real-time
Enterprise resource planning systems can also help generate automated reports and provide data analysis based on these. Usually, employees manually enter and merge data to generate reports in separate databases and spreadsheets across the business, and then share these with relevant departments. ERP can instead allow for automated reports to be pulled from one centralised system, decreasing the likelihood of mistakes and increasing the effective use of data.
ERP's ability to provide prompt and trustworthy data and reporting allows employees to gather more information and generate more sound conclusions. These sound and dependable conclusions can result in better, and faster, business insights. And this can help businesses identify weak spots and ways to optimise current operations, better serve customers, spot fraud and reduce overall costs.
Types of ERP software systems
There are three general types of ERP software systems with their own unique benefits depending on your business needs:
On-premise ERP: The more traditional means of implementing an ERP is on-premise solutions, which allow businesses to manage an ERP solution from their own company data centre. Typically, this is on a company's own computers and servers.
Cloud-based ERP: A newer way to manage an ERP, cloud-based solutions is as Software-as-a-Service (SaaS). A company's ERP typically hosts it on a vendor's servers and access them through a web browser.
Hybrid ERP: Typically implemented using a two-tier system, where a company uses an existing on-premise ERP for corporate functions and a cloud-based ERP to support some business units. Or, you may use an on-premise ERP most of the time and employ cloud-based solutions to support specific business functions like mobile accessibility.
What are ERP modules and their benefits?
Each ERP system comes with a standard set of modules depending on the vendor or system you choose to implement. Here is a list of modules and their benefits:
One of the most important modules, a finance and accounting module, can help businesses understand how their finances are doing in the present to better plan for the future. Crucial features of finance modules include tracking accounts payable and receivable, creating and storing important financial documents like balance sheets or payment receipts and managing ledgers.
Finance modules can also automate functions like billing, payments and reconciling accounts. This helps the overall accounts department avoid data entry-related mistakes and complete their monthly payroll and books. It also stores the crucial data necessary to complete key reports.
Related: 14 of the best-paid jobs in finance
Inventory and order management modules
These modules control inventory and the orders by tracking item quantities according to their location and tracking orders from purchase to delivery. Tracking and controlling inventory can help businesses develop an overall picture of current and incoming inventory levels. It also feeds and tracks orders as they're prepared, fulfilled and shipped to customers.
Employing an ERP module for inventory and ordering can help companies prevent lost orders and manage on-time deliveries by automating this process. It can also analyse internal sales trends against available products to help companies boost margins and increase stock where necessary. This, in turn, also helps prevent delays on orders and can increase customer satisfaction.
Customer relationship management (CRM) modules
A CRM module may store customer and prospect information and manage sales leads and opportunities. These ERP modules house all communication with a customer, including the date and time they contacted the company or contacted by others, and their purchase history. Since employees have access to all customer data in one spot, interaction with them is much more seamless and helpful.
Enterprise resource planning CRM modules can also help manage new opportunities and sale leads. It does so by tracking communication between the business and prospective clients or customers and suggesting which customers may benefit most from certain cross-selling opportunities. This allows for more targeted and segmented marketing and an overall more personal experience for customers.
Manufacturing modules can ensure that companies can holistically and intelligently plan production runs by tracking raw materials and machinery capacity. And during the manufacturing process, ERP manufacturing modules can update departments on the status and progress of production.
Manufacturing modules also provide a real-time picture of the factory or production line, capturing information on items in progress and finished goods. It can calculate the average time to produce an item and then compare supply with forecasted demand to plan adequate production plans for the future.
Supply chain management modules
ERP supply chain management modules can help businesses by tracking the movement of orders, supplies or goods through the supply chain. This can help businesses handle all aspects of logistics, sales and procurement more efficiently. Supply chain modules can also help businesses assess risks and potential expenditure with its reporting capabilities and data analysis tools.
And, this module can provide excellent insight when used in conjunction with other modules. When combined with modules like procurement, inventory management, manufacturing, order management or warehouse management, companies get instant data synchronisation.
Marketing automation modules
An ERP's marketing automation module can manage marketing campaigns across digital channels. These digital channels may include email, webpage, social media and SMS. It can automate sending emails based on campaign and customer segmentation to ensure that customers only receive relevant email messages.
Marketing automation modules can also provide detailed reports on the performance of campaigns. This can help companies shape future marketing plans and expenditure. These applications increase leads, customer loyalty and, over time, sales.
E-commerce modules can help businesses sell their goods and services online seamlessly. These modules enable companies to easily build and launch websites for either business-to-business markets or business to customer markets. Many E-commerce modules are user-friendly, allowing employees to easily add new elements or items, update or add products and change the overall look of the website based on marketing analytics.
Incorporating an e-commerce module with other ERP applications can also be helpful. This allows for all E-commerce payments, orders and inventory information to incorporate into the overall ERP database. This can ensure correct and on-time shipments, correct stock information and accurate ledgers.
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