Enterprise Resource Planning (ERP) is a major topic in the world of software solutions, and for IT buyers and vendors alike, it’s vital to understand what ERP is and why it’s important. However, it can be easy to be mystified by the vast amount of information available on Enterprise Resource Planning. Part of the strength of Enterprise Resource Planning is its flexibility, but as a result of this, there seem to be so many different definitions of ERP – indeed, ERP systems themselves can vary considerably. In order to understand how Enterprise Resource Planning can transform and grow your organisation and improve its processes, first you need to understand what ERP is and how it works. This is a handy guide providing an Enterprise Resource Planning overview and what you need to know.
What is Enterprise Resource Planning?
‘Enterprise Resource Planning’ is a name that’s hardly self-explanatory. It refers to the extensive set of activities in which a business participates in order to manage itself, including Customer Relationship Management (CRM), inventory and order management, accounting and human resources. ERP solutions achieve this through a system of interconnected executive dashboards, which display key business metrics. ERP software essentially provides a single integrated system to carry out these functions. In order for it to be useful, the solution needs to be able to integrate with the other systems that your company uses. As a result, implementing ERP may involve a reengineering of business processes, retraining employees and providing back-end IT support for database integration, data analytics and ad hoc reporting.
The main attribute of enterprise resource planning solutions is a shared database that can support the different functions of your various business units. This allows workers in different parts of your enterprise to have access to the same information, and use it to suit their specific requirements.
ERP systems also provide a certain amount of synchronised reporting and automation. Some ERP solutions allow users to pull reports from a single system instead of having to sustain separate databases and spreadsheets that require being manually merged in order to create reports. Enterprise resource planning also often involves a portal to help track and measure key data.
A history of Enterprise Resource Planning
The concept of ERP can be traced back to the 1960s, when it pertained to inventory management and control in the manufacturing sector. Programmes were written to monitor inventory, resolve balances and report on status. The 1970s saw this develop into Material Requirements Planning (MRP) systems, which scheduled production processes.
The 1980s saw MRP evolve to incorporate more manufacturing processes, and so acquired the name manufacturing resource planning (MRP-II). In the 1990s, MRP-II’s capabilities had expanded beyond inventory control and other operational processes to other functions such as human resources and accounting. Thus enterprise resource planning was born, and the term ERP was first used by The Gartner Group. Enterprise resource planning was now seen as representing a larger whole that reflected the evolution of application integration beyond manufacturing.
Enterprise resource planning expanded rapidly in the 1990s. Many companies were replacing their old systems with ERP not only because of its apparent benefits, but because of two major tech problems of the time: Y2K and the introduction of the Euro, which interrupted legacy systems. Now ERP encompasses business intelligence as well, as well as ‘front-office’ functions like sales force automation, marketing automation and e-commerce. The rapid evolution of enterprise resource planning and the many testimonials to ERP systems improving the operations of businesses has led to businesses of various sizes in a huge diversity of industries installing ERP. This progress in the adoption of ERP is also driven by the rise of Cloud computing. Software-as-a-Service systems provide more affordable enterprise resource planning and allow these solutions to be easier to implement and operate. Cloud also ERP offers reporting and business intelligence in real time.
What are the benefits of Enterprise Resource Planning?
ERP software is intended to help an organisation function by providing a single system for everyone to use, thereby improving understanding and communication between all users, no matter what business unit they’re a part of. This is achieved by automating and integrating core business processes such as taking customer orders, scheduling operations, and keeping inventory records and financial data.
- Integration - Integration is a major selling point of enterprise resource planning. To get the most out of ERP, make sure it can be fully integrated into every aspect of your business, from the front end, through planning and scheduling, to the production and distribution of your products and/or services.
- Automation – Having your key processes automated improves the productivity of your team by making your operations faster, more efficient, and less subject to mistakes. Your employees no longer have to be encumbered with mundane tasks such as balancing data, freeing them up to focus on more important, creative and interesting projects.
- Business Performance – The assimilation of disparate processes promotes consistency and circumvents duplication, disconnection and misunderstandings between people working in different parts of the enterprise. This can add up to performance of far better quality to what existed before the installation of ERP.
- Quality Reports and Performance Analysis – Enterprise resource planning allows for analysis that lets you produce financial and boardroom-quality reports, as well as provide information to allow you to scrutinise your business process with the intention of optimising them.
- Integration across Entire Supply Chain – A good best-of-breed ERP solution should be able to integrate with your supplier and customer systems for full visibility and efficiency across the supply chain.
If you’re interested in finding the ERP solution that will benefit your company the most, then consult our team of experts at Software Advisory Service, and we can provide non-chargeable, impartial advice. Contact us and we can send you a shortlist of providers who can offer you the best ERP system for you, whatever your company’s size, goals or requirements.