History - Evolution of the ERP System
Through the years, ERP was gradually developed from MRP which stands for Material Requirements Planning or Manufacturing Resource Planning. ERP integrates all the key processes needed in running a business.
Historically, managing business processes has been a tough and challenging job for any company. Later, they started using software applications to manage parts of the business operations such as billing, inventory, etc. But most often, these systems worked separately and never had any connection correlation with one another.
This made it complicated and laborious to get consolidated information combining data from various departments. This delayed business decisions or resulted in wrong decisions, causing irreparable damages to the business. .
What is ERP?
ERP software is a software application with which all business processes such as Finance, HR, Manufacturing, Supply Chain Management, Procurement, etc. are being integrated into and managed by a single system. Its main purpose is to reorganize the various functions of all departments and streamline the processes and information transversely within the entire organization. Managing business processes without flaws has been challenging work for any company or organization. Even though they used software systems, most often, these systems worked separately and never had any connection with one another that made it complicated and laborious for each function to work together and get consolidated data. ERP software is considered to be a type of enterprise application that is designed to be used by larger businesses and often requires dedicated teams to customize and analyze the data and to handle upgrades and deployment. In contrast, ERP applications are lightweight business management software solutions, often customized for a specific business industry or vertical. Read more
ERP takes the full responsibility of incorporating all core business processes and various departmental functions into one system to combine and streamline business operations. It takes care of handling costs more effectively and enhances the performance and growth of the overall business. It promotes good communication and coordination between different departments to make sure that the operations are functioning accurately all times. Regardless of the size, common requirement for most companies is a system that helps them enhance operation’s efficiency, reduce costs, increase in sales and most importantly, support the organization to make accurate, informed and strategic decisions driven by insights based on data. ERP system does exactly the same for them. Read more
Benefits of ERP
Above all, there is one factor that most of the companies are looking for when they decide to install ERP.
Guess what it is?
Simplicity.
Systems may have lots and lots of features but, if they are not simple to use, companies will hate it. considering the fact that most of the business organizations have staff with basic computer literacy. So, ERP has to be simple and it has to simplify. Simplifying your business operation is the first and foremost benefit that you might enjoy after the installation of the ERP system of your choice. Here are a few benefits that make ERP such a popular choice among the business community.
Streamline and Accelerate Your Business
ERP helps every company to streamline and accelerate the advancement of their business. It is a progressively flexible solution that is capable of supporting the growth of the business. It dynamically changes the business operating procedures of companies who need to keep up the competitive advantage.
Advance Business Development
ERP transforms and helps businesses adjust quickly to varying market trends and demands and motivates rapid business development. Being a synchronized and automated system, it helps the company to be more scalable and streamlined.
Improved Data Analysis and Decision-Making
With real-time metrics and role-based dashboards, it helps to improve the decision making in each segment of the business. Reports can be seen automatically in the dashboard upon log-in which helps the business analyze the functions of each department at a glance.
Provides Excellent ROI
With inter-department connectivity, each department will be able to access all the essential tools and data and collaborate with each other. They are able to utilize their time more efficiently since they don’t need to check multiple systems separately for a piece of information. Furthermore, ERP helps saves money by eliminating several software providers, and suppose expenses saved can be turned into better ROI.
Efficiency and Better Customer Service
ERP eliminates tedious and unnecessary tasks and reduces human errors. It automates every process to increase a company’s productivity, efficiency, and profitability. It helps provide better customer service and satisfaction to customers.
Reduce Operational Costs and Maximize Profits
One of the most essential roles of ERP software is to reduce the company’s operational costs. It centralized various business processes that control inventory cost, marketing cost, and production cost, etc. The ability to acquire accurate data at any stage of the process means efficiency and problem solving become standard practices of the company. Higher efficiency means maximum profit achieved.
How ERP Systems Work
It is capable of providing real-time process monitoring and it can also oversee each department’s progress simultaneously, which helps in enhancing development execution and increasing the percentage of output efficiently.
It administers better planning and managing growth while enhancing the performance of the business. With updated reports and finances, plans and decisions on how to increase profitability can be done better and fast.
ERP also provides exceptional user experience plus identifying and refining application interfaces, in the long run, is one of its accomplishments. Nowadays, companies are implementing ERP software to become smart in planning and managing the rapid growth of their business.
Types of ERP Applications
ERP systems are classified mainly as Cloud ERP, On-premise ERP and Hybrid ERP with deployment is the main difference between each type..
Cloud ERP (SaaS)
Also called “Software as a Service (SaaS)”, Cloud ERP allows different users to access the ERP software over the internet. Licenses, hardware, and data servers are not necessary to access and use the system. Additionally, the business has nothing to worry about the safety or loss of data as it is stored on cloud storage equipped with utmost security.
On-premise ERP
This type of ERP system is more conventional that works on in-house servers located on a company’s premises. It is a solution that provides security and more control of implementation using their own IT infrastructure to associate processes and systems. It is known to be more customizable and capable to grow and adjust to any changes needed in the company.
Hybrid ERP
It is basically a combination of the fundamentals of on-premises ERP and Cloud-based ERP. Companies using Hybrid ERP solutions can get the best of both on-premise and cloud-based versions of the ERP system. It is an ERP system that is multi-sourced with a modular application environment for the modern, digital, networked enterprise..
Modules of ERP
Supply Chain Management System
Supply Chain Management System is one of the essential modules of ERP. Its purpose is to manage and optimize the complicated movement of a large number of items. It provides updated information about the production and distribution process that helps in forecasting demands. It is an effective tool in reducing wastage and excess inventory.
Inventory Management System
Accurate tracking and ensuring the availability of resources is the main purpose of the Inventory Management System. This module is one of the most important modules of ERP because it is connected to the purchasing process for order fulfillment and also lets the user know if there is space still available to accommodate the incoming inventory..
Customer Relationship Management System(CRM)
Customer Relationship Management System serves as a central point of customer relationships for the entire company and basically supports two key functions: Salespeople and Sales management services. By using this module, all transactions like servicing, marketing, and selling products to the customers will be carried out in an organized and systematic way. It is beneficial to the company to have easy access to information that can manage sales and customer relationships more effectively.
Human Resources Management System (HRMS)
HRMS not only handles employee data and payroll but it also synchronizes all the systems to each other across the whole human resource department. It simplifies employee management functions such as salaries, employment, and other duties. It is also capable of tracking each employee’s performance and achievements. It provides valuable insights to identify HR issues and avoids it to happen.
Accounting Management System
The purpose of the accounting system is to provide control and integrate the financial information necessary for the strategic decision-making of the company. It provides real-time information and also limits the errors possibly caused by automating the tedious manual tasks.
ERP – Functional Areas
The following are the main functional areas of an ERP system.
Financial Accounting: Controls financial operations that include financial functions such as general ledger, fixed asset, payables including preparing vouchers, payment processing, cash receivables, collection and its management and financial consolidation.
Project Management: Helps in project planning, resource planning, project costing, work breakdown structure, billing, time and expense, performance units and activity management.
Human Resource: Improve the management of staff starting from recruitment, training, fostering, compensation/payroll, benefits until its separation and retirement.
CRM-Sales: Gain better data insights and manages sales and marketing, commissions, service, customer contact, and call center support.
Order Processing: Better management of order entry, order to cash, credit checking, pricing, inventory, shipping, sales analysis, and reporting and sales commissioning.
Manufacturing: Manage product development and production. Covers functions such as engineering, bill of materials (BOM), work orders, scheduling, capacity, workflow management, quality control, manufacturing process, projects, and its flow and product life cycle management.
Supply Chain Management: Refines functions such as supply chain planning, supplier scheduling, product configuration, order to cash, purchasing, inventory, claim processing and warehouse receiving.
Management Accounting: Manage financials such as budgeting, costing, cost management, activity-based costing with ERP’s integrated interface
Who Should Use ERP?
ERP can be used by any business that wants to manage its business functions in a centralized and integrated system. Organizations in any industry can use it, regardless of its size, be it a large enterprise, a midsize company or small business.
Scope of ERP Customization
ERP customization depends upon the priorities of the user. It is determined by how unique the business is, how established its processes are and how the business is open to changes. ERP basically meets the majority of the business needs. Later on, as the business or company expands, it requires customization to fill some of the gaps and make sure that the system is in a proper working mode based on the desired business process.
Latest Trends and Future of ERP
and be competitive in this age of the digital economy. Cloud ERP has been introduced and increasingly gaining the attention of business owners. It replaced the on-premise ERP solutions rapidly because it is offered to businesses via a subscription model by cloud solution providers. It is hosted on cloud servers and became compatible with companies looking for a much affordable solution. It eliminates hardware set up which saves businesses from large investments. `Hosted on the provider’s server, access through a browser, and billed on a monthly subscription basis are the characteristics that make it cheaper than on-premise systems. Mobility is fundamental to all cloud ERP applications. Majority of cloud ERP application is flexible and can be accessed via mobile phones that have an internet connection, anytime and anywhere. Users who used to work outside the company premises can now take care of their tasks and manage business operations without sitting at their desks all day. Due to the accessibility and mobility of cloud ERP, it also predicted that more users are going to switch to the cloud. Being fast, cheap and easy to use are the most common reasons for switching in the cloud. As for others such as small businesses, they use cloud ERP as their road to new technologies. Artificial Intelligence (AI-based ERP) is also slowly revolutionizing the ERP arena to achieve higher levels of automation. The personalization of ERP solutions is being predicted as well to help the user stay up to date with the industry trends.