What is an ERP?

Enterprise resource planning (ERP) software is a solution that helps companies manage all aspects of their business with a single interface. Those aspects include accounting and finance, sales, marketing and customer service, human resources, inventory management and distribution, to name a few. The solution includes different modules that integrate with one another.  

ERP software is intended for large and enterprise companies in the manufacturing and distribution industries, however, small-to-medium-sized businesses in most industries benefit as ERP automates business processes. 

What Modules are Included in ERP Software?

Here are the common ERP modules: 

Accounting: The accounting module tracks all the company’s finances. Some features included in this module are budget and expense planning, core accounting features (general ledger, accounts payable and accounts receivable), revenue management and tax management. 

Human resources: In the human resources module, organizations manage their hiring cycles from recruitment to succession. Some features are applicant tracking, payroll, time and attendance, performance management and learning management. 

Manufacturing: This module helps manufacturing and other production-oriented facilities manage their processes. It consists of the following features: work orders, bill of materials, quality control, engineering, manufacturing process and planning, and product lifecycle management. 

Inventory management: The inventory management module lets businesses accurately track their materials and supplies to eliminate wasteful spending. Inventory management features may differ based on the type of business, but the common features are inventory control, purchase orders, automatic ordering and inventory scanning. 

Customer relationship management (CRM): With the CRM module, businesses manage their client-facing operations, such as sales, marketing and customer service. The sales staff keep track of their prospects, such as the status of the sales pipeline. Users can also manage marketing tasks, including advertising and lead generation campaigns. And finally, the CRM module stores customer information and tracks the relationship between the business and the customer. 

Supply chain management: The supply chain management module tracks the product from manufacturing to warehouse and distribution to retailers to customers. Some features include supplier scheduling, purchasing, inventory, claim processing, shipping, tracking and product returns. 

Business intelligence: Business intelligence modules are becoming more common in ERP solutions. It refers to collecting and analyzing data from multiple sources and presenting data into dashboards and reports. Business intelligence helps users make better business decisions with real-time data access. Some features of the BI module include customizable dashboards and other visualization tools, ad-hoc and scheduled reporting, and drill-down capability. 

Some ERP solutions contain additional modules or features, such as e-commerce, project management or document management. 

Who Uses ERP Software?

ERP software has traditionally been intended for large and enterprise businesses, as those companies have multiple business divisions with different data and different needs. However, ERP software vendors also target small-to-medium-sized businesses to help automate their business processes. For example, the SAP Business One solution is intended specifically for small businesses and includes core modules like finance, customer management, purchasing, production planning and business analytics. 

There are also vendors that provide industry-specific ERP solutions. The typical industries that these types of solutions target are manufacturing and distribution. However, there are other industry-specific solutions, such as healthcare, e-commerce or professional services. 

What are the Primary Benefits of ERP Software?

There are several benefits to ERP software, including:

Business processes become more automated: With a single ERP system, there’s no need to work with multiple data in multiple systems. Users don’t need to manually enter data or build separate reports, and they won’t have to worry about errors with automated systems. Automated processes lead to improved productivity and efficiency in other areas as ERP frees up users’ time to focus on key parts of their job. 

Reduced expense of purchasing and maintaining separate software: Having to purchase and maintain more than one software tends to be costly. Having an ERP reduces that expense, which can be allocated to something else. 

Improved compliance with legal and other regulatory mandates: There are many types of regulatory compliance in different areas that a company needs to adhere to, such as finance and HR. Having an ERP helps companies keep track of all compliance by monitoring data. The ERP can also automatically make updates to any compliance changes. 

Total visibility into business data and processes: With an ERP, top managers, executives and decision-makers have access to all information. They can have a full picture of all processes within each department and how the process affects the entire company. 

What is Cloud ERP? 

Cloud ERP is the ERP solution that’s deployed in the cloud, also known as Software-as-a-Service (SaaS). Unlike traditional on-premise deployment where the data is stored on the company’s servers and hosting and maintenance is the company’s responsibility, cloud-based ERP solution hosting and maintenance is done by the vendor.  

The cost of purchasing cloud ERP is simply a monthly or yearly subscription cost. Subscription costs can include the number of modules the company needs, as well as any support and maintenance.        

There are some vendors that offer a hybrid on-premise/cloud deployment, allowing companies that have legacy on-premise systems to implement cloud-based ERP modules into the current interface. Those vendors include SAP, Oracle and Epicor.    

Takeaways

An ERP solution can benefit any company in most industries, as it automates office functions and allows companies to work with just one software. Companies can either deploy an ERP software on-premise, in the cloud, or both. 

If you’re interested in evaluating different ERP systems for your needs, head over to our ERP Reviews page where we’ve reviewed over 35 systems. 

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