Enterprise resource planning (ERP) refers to a software system that integrates various business processes into a single platform.
It’s used to manage day-to-day business activities such as accounting, procurement, project management, risk and compliance, supply chain operations, and more.
The goal? To streamline business processes and provide an easy way to collaborate and access information.
In this article, we’ll dive into how Enterprise resource planning works and how you can integrate it into your own business. Let’s get started!
How does an ERP system work
Let’s first talk about how ERP works. ERP is made up of various integrated modules or apps that all talk to each other and share a common database.
Common ERP modules include finance, human resources (HR), sourcing and procurement, sales, manufacturing, logistics, customer service, research and development, and asset management.
Of course, most companies don’t adopt an ERP system for all of these at once. Instead, they start with one area of business or need. For example, a business might realize they need help in their logistics department. By adopting an ERP system, they can address their logistics issue while paving the way to integrate other business processes.
Most ERPs can be bought on a software subscription or license model. These can be deployed on the cloud, on-premise, or some mix of the two (hybrid).
Your business likely already uses various software systems. The beauty of ERP software is that it can integrate with your existing systems. These include customer relationship management (CRM), human capital management (HCM), ecommerce, accounts payable (AP) automation, and other industry-specific software.
How does an ERP system do this? Through application programming interfaces (APIs). These are tools that allow two different kinds of software to communicate and share data with each other. Think of them as a contract of service between two applications that defines how the two interact.
The benefits of ERP
So what are the business benefits of ERP? There are many, but here are just a few:
- Improved business oversight. When you can coordinate all your business processes from one software, you gain a better vantage point of your overall operations.
- Enhanced collaboration. An integrated ERP solution allows staff to coordinate across departments more easily.
- Lower operational costs. Because business processes are easier to coordinate and streamline across departments, you can cut down on your operational costs.
- Improved efficiency. The entire company can work at a more streamlined pace.
- Reduced risk. When business processes are funneled through a central system, the chance that something gets overlooked is reduced. There’s also less risk of fraud and human errors.
Things to look for in an ERP solution
Ready to adopt an ERP for your business? Here are some features you should look for:
- A common database. You want to make sure the ERP software operates with a single database that all can access.
- Embedded analytics. Analytics and reporting tools can help you monitor your business’s progress on common key performance indicators (KPIs).
- Data visualization. This helps you present complex data in a way that’s easy to understand (think: graphs, charts, etc.). Data visualization comes in handy when presenting to key stakeholders.
- Automation. Your ERP should allow you to automate repetitive tasks through AI and machine learning.
- Integration. The integration of other software into your ERP system should be easy and seamless.
- 24/7 customer support. Every ERP system will have a learning curve, and you may have unexpected issues arise. So your ERP provider should offer robust customer support to help fix issues and minimize downtime.
There are a lot of ERP solutions out there. Do careful research to narrow down one with the features listed above, which meets your unique business needs.