What is ERP - Working, benefits and features

If your company is looking for a way to efficiently run business in the market and spreadsheets just aren’t enough, you may want to give the enterprise resource planning system a shot.


This system can prove to be immensely helpful when it comes to minimizing overhead costs and maxing the business’s efficiency.


The ultimate goal of every business owner is to run their business in such a way that it leads to maximum profits.


ERP resource planning software collects and assembles all the business information and helps the company to operate seamlessly, even with constant expansions.

What is ERP?

ERP is the short form for enterprise resource planning. ERP software is designed with and incorporates powerful and efficient strategic business processes management tools, which are used to organize and properly handle all the business information in a structured manner.


We do acknowledge the fact that every company doing business in the market today, is different, however, they all have to face the same challenges to prove competence in the modern cut-throat business environment.


In order to be on top of the game, every organization needs a trustable and streamlined way to access information and store all of it.


This is where enterprise resource planning tools come into the picture. ERP systems can consolidate all the aspects of the enterprise and prepare a comprehensive information system that can be easily accessible by all the people of the organization. 


With an efficacious enterprise resource planning software in place, businesses can easily automate and streamline burdensome office tasks, improve the overall productivity of all the roles and get real-time visibility into all the business operations.

How does enterprise resource planning work?

An ERP system is designed to reduce the number of resources required for running a business ideally and still ensure positive cash flow or profitability and constant improvement in the business-standard. 


An enterprise resource planning system is different from a single application. This is because it enables the organization modules of your business to all run from one database.


The system basically gathers data from all different parts and functions of the business and amalgamates that data in one main location from where everyone in the company can access it.


This eliminates all the company’s inefficiencies and is a way to make sure that everyone in the company has access to an adequate amount of data to perform their tasks. 


Imagine a situation where your business’s ERP system is fully automated. The ERP will now enter all your data in the back-end for you and also share the information with other parts of the business which require it.


For example, when the sales order is out in for the last few units of the output, the inventory management side has to record all the information associated with this sale and has to pass on relevant information to other departments so that the inventory can have stock again.


Other departments like sales, shipping, accounting everyone will have the means to see the information and work accordingly.

Why enterprise resource planning is important?

ERP applications perform an important role in keeping the business at a profitable stage. Investing in advanced technologies is not just a feature of only MNCs.


Even small-scale businesses and startups have started acquiring modern technological tools and automation applications to untangle the whole complex business operations process.


This, in turn, has made the ERP system a hot-shot amongst all sizes of businesses. Enterprise resource planning implementation facilitates an organization with solid collusion of all the departments in one place. 


A business tends to benefit from an ERP system in terms of increased productivity in a short turnover period.


The amount of time invested in consulting different departments and teams for one single resolution on a project can be insanely high and will of course require more attention because so many people mean so many ideas and ways of working towards it.


The formula is simply more time involved in communication leads to greater delay in reaching a resolution.


On the other hand, when all the departments work together on a single platform, the time invested will significantly decrease and this is where enterprise resource planning software is an expert.


All the data is updated in real-time and numerous departments can access that data anytime through one single personalized dashboard.


This highly decreases the communication needed between two entities and obviously colossally increases output.

How does enterprise resource planning improve efficiency of business?

Invested time, money, and resources that do not benefit the business in any way, are obviously hurting the business.


Using ERP applications can help your company reap benefits like more efficient business processes and a reduced amount of time consumption.


ERP system results in a short conversion period, diminished costs, enhanced quality, higher profit, boosted productivity, and praise-worthy customer service. 


Here’s how ERP solutions can help you:

1. Reducing waste

Enterprise resource planning software documents your workflow to help you precautions analyze the operations which are slowing down the growth and what processes or solutions can be implemented to boost efficiency in the business.


Things like, minimizing set-up, increasing warehouse space, managing delivery time and so much more can be done through ERP data evaluation and these can make a huge difference in the overall output and positive cash flow of the company. 

2. Consistent improvement

ERP Systems are constantly updating data in real-time. As and when the changes the implemented, the data is ready to be scrutinized.


You can always do some or the other thing to reduce costs and increase profits.


The analysis to find these loopholes is not entirely up to you, ERP systems sort out data in such a way that almost half of the analysis is already done, with synchronized and systematic organizing.

3. Improved customer service

One of the indications that your business is doing good, is customer satisfaction.


Enterprise resource planning systems facilitate you with features to integrate Customer Relationship Management (CRM) functionality into the software.


This tool can majorly put every management process in order by coordinating the workflow of all departments from inventory to sales to production to accounting, shipping, and many more. Plus, the customers will also get the feature to track the status of their order. 

4. Demand order

ERP systems can notify every department about the needs and orders of other departments, your team will know what production, inventory, supply requires in order to produce according to the market demand.


This terminates any need for individual communication between departments and maintains supplies while uninterrupted workflow.

Features of ERP software system

There are certain fundamental features in an ERP system that differentiate it from other automation applications or other software types. These features are: 

#1 - Common database

Numerous advantages a business gets from using an enterprise resource planning software come out of the common database feature.


This gives businesses the facility to organize all their data at one central location and this information comes from different departments.


This central source with real-time data updates terminates the manual process of merging and separating information, each being controlled by the type of business functions they perform. 

#2 - Consistent UX/UI

Everyone across the company uses the same interface (UI) and has the same user experience (UX) with an ERP system. Inventory, HR, finance all have the same modules and have a similar look and feel.


This makes the software more likely to be adopted and makes it easier for anyone to browse between departments for information.


A consistent UI and UX has consequences like efficient business gains as all the members can search and understand information from anywhere in the company.

#3 - Business process integration

A typical must-have feature in ERP applications is that it must successfully support and integrate the processes of a business from any department, accounting, production, marketing, supply, everything.


The right Enterprise resource planning system will possess the feature to unify all the distinct and diverse processes and connect them into one efficient workflow, which helps the business in management and boost productivity and visibility.

#4 - Automation

Another essential feature in any ERP system is the ability to automate businesses’ repetitive tasks and processes like purchase order processing, payroll, invoicing, reporting, etc.


This feature successfully eliminates manual work, data entry burdens, saves time, and minimizes errors.


Automation takes a lot of workload off the employees’ shoulders because of which they have the space to invest their time, energy, and knowledge in more valuable tasks which cannot be automated.

Benefits of ERP software for various business departments

Reduces cost

The most popular and marketable benefit of an ERP system is that it can help an organization save a lot of money from numerous different channels.


Automation of many simple and repetitive tasks ensures minimal errors and diminished need to hire more employees as the business keeps growing.


Transparency and company-wide visibility of all business-related data make the process of error detection easier.


All the inefficiencies that contribute to the increase in the cost of business can be quickly spotted which in turn leads to a better and more efficient distribution of resources.

Analytics

All business data collected is of no value until it is properly organized and analyzed. An ERP for enterprise can help you in that area.


An advanced solution like this consists of amazing reporting and analytics tools, which give the user to not only track KPI but also present metric and contrast of the whole system.


An ERP is an all-inclusive system, it can prove to be a major part of understanding how the business is changing, at what rate, what are the problems it is facing, and from where can the problem be solved. 

Risk management

Enterprise resource management can colossally reduce the risks of a business.


Access control to the ground level and strictly defined workflow approvals strong-arm the financial controls of a company ad reduce fraud.


Along with this, it also gives a clear, more accurate, and quick data error detection which saves a lot of sales, which would have otherwise led to a great loss.


Ultimately, the facility to see and track the status of the whole project enables the team members to swiftly resolve risks arising from any business damage.

Data security

Enterprise resource planning software is designed by keeping in mind that all business information is critical and this sensitive data needs to be protected by using various security measures.


These measures are extremely important because of the increasing volume of cyberattacks.


Cloud enterprise resource planning, specifically, uses state-of-the-art security protocols to protect your company by keeping it away from the damaging attacks of hackers.

Customer management

ERP applications can significantly make a company’s customer and partner relationships stronger than ever. 


The system can display insights and analytics on suppliers, shipping facilities, other service providers with the cloud feature providing more convenience and smoother information exchange.


Talking about customers, ERP solutions can give you a track of survey responses, returns, support tickets, and to the extent where business can actually ensure maximum customer satisfaction.

How to determine whether or not your company requires ERP?

Every business is different and has its unique features and different challenges.


So the decision of whether or not your company needs enterprise resource management can be a difficult one.


Here are some things you need to start evaluating to make the decision, if you check off most of the items that mean your company needs an ERP system ASAP. 


 

• You don’t have easy access to the information needed for making informed essential decisions. 


• Your team members are investing a lot of time in completing tasks that you know can be digitally automized and streamlined.


• You work with numerous vendors and third-party applications around the world.


• You don’t know the daily status of your inventory.


• You are personally investing more than the required time in looking for information to improve productivity and profits and new technologies required to scale the business. Your business’s departments aren’t exactly able to smoothly cooperate and share information amongst each other. Your teams can’t easily collaborate or share information with each other.


• You can’t get anything business-related when you are not in the office.


• You are facing addressing problems, meaning you aren’t able to proactively detect the problems that need to be resolved to keep the business operations going. 


• You and your whole team are seriously challenged with adjusting to the changes in functioning regulatory compliance.

How to choose the right ERP software?

When you choose ERP software, always remember that it should have the ability to revolutionalize your business.


However no denying that there are some risks involved. Before any ERP deployment into a business occurs, several factors have to be examined for a profitable enterprise resource planning implementation. Here are some key considerations: 

Technical status

An ERP gets integrated with your business’s ongoing systems, so the ERP software you choose to implement must have the flexibility and compatibility to blend with your current technological infrastructure.


If you are not able to make the decision, it is suggested to take advice from experts on risk management, security details, cost of maintenance if you get a new ERP system.

Keep options open

The market is filled with various ERP software options, differing in functionality, interface, cloud storage, security means, etc.


The humongous amount of vendors can obviously be confusing and can make the decision of choosing one very hard.


It is advised not to make a blind purchase looking at the brand name, do thorough research, look around different solutions, keep in my your business’s needs and then choose the right one.

Acquisition cost

It happens often that ERP applications vendors start charging a little extra here and there for service which is given over the basic package price.


While doing research, you must get enough knowledge on the additional pricing variables such as:


• Software maintenance.

• Hardware upgrade charges.

• Implementation cost.


However, this doesn’t mean that you should simply choose the cheapest enterprise resource planning software because those may turn your company vulnerable to security breaches and hacks.

Logical implementation plan

Enterprise resource planning implementation is a big step for any company and it may take some time to get used to it.


Hence, the implementation time frame is an essential factor to consider along with others like cost and profitability.


Your implementation plan must have a grace period for shifting data.

Process review

Track and compile all your drawbacks, strengths, and other functions that you think your ERP solution should be able to manage.


Determine which processes and workflows your company needs to optimize and what is expected business look after the implementation.

Potential benefits

After an ERP implementation, your company is highly likely to increase its profits by reducing various costs from every corner of the business.


So, it becomes crucial to have metrics to measure the benefits of the system before you actually purchase it. 

Factors to consider before implementing enterprise resource planning program

To get the perfect ERP system for your company, apart from considering the factors mentioned above, you can answer these questions to get a clear picture of your needs and then make an informed decision. 


• What are some of the inefficiencies in your existing business processes that you'd like to eliminate?


• Have you communicated the phases of ERP implementation internally?


• Have you allowed for contingencies?


• Do you have the right project team?


• What are your ERP integration budget and timeline?


• Is there any way to integrate the software with other internal and external systems?

Challenges of implementing an enterprise resource planning solution

ERP systems bring in a lot of benefits to the company, however, there are certain challenges your business may have faced.


Still, many of these problems can be smoothly avoided by beforehand, efficient planning, and choosing the right supplier.

System cost

The cost of purchase of early ERP software is pretty expensive, implementation and maintenance add up to the cost because of which they were accessible only to a unicorn or large companies.


However, the scenario has drastically changed over the past two decades.


Although, ERP applications still require a lot of time and financial investment to be installed the technology has comparatively become affordable now.


This price differentiation is because of Saas systems which levy a recurring charge and more solutions available in the market for small and midsize businesses. 

Training requirements

Similar to when you introduce any new technology, ERP also has a learning period.


Anyone who would use the system, most probably all your employees; would need a certain level of training.


There may be some acceptance issues at first, however, when people start understanding the benefits the ERP technology gives them, the acceptance will come naturally.


Recent systems which keep upgrading themselves are more user-friendly and more instinctive and this diminishes the requirement for training sessions and increases comfort.

Data migration costs

When a new ERP system is adopted, a lot of data has to convert into a format that can be accepted by the new software.


This may draw up unexpected costs and time lags, so it is essential to review your database and work with an IT experts team to identify and solve all data compatibility-related problems.

Complexity

Enterprise resource planning software is filled with features, and this can be intimidating for everyone.


But the type of ERP solutions available today are easier to use because the vendors have put in efforts to enhance the user experience.


Along with this, employees need to have access to only those modules and dashboards which are related to their job type, which makes the information more approachable. Thorough training can, however, solve this problem.

Maintenance

Earlier the maintenance of software meant large expenses which small businesses could of course not afford.


Along with the cost paid to IT professionals to handle security, management, and system updates, often the vendors or suppliers also had to be paid for their service and expertise.


This is now not a big concern, because a SaaS system takes care of all maintenance and regularity moves for all customers and all this comes into a subscription price.

Steps to enterprise resource planning implementation process

Implementing an ERP system is an important and huge step that requires proper planning, without which ERP would just drain all your time and money.


How much will the whole implementation cost, how much time will be required to successfully complete the whole process will depend on various factors like implementation strategy, migration time, system complexity, etc?


Proper and detailed planning can help a company avoid many major challenges. Here are seven essential steps to the enterprise resource planning implementation process:

#1 - Detection and planning

The first step is to gather a team of various individuals from different parts and departments of the company and determine what exactly does the company needs from an ERP system.


They should be able to identify areas of inefficiency and other drawbacks in the functioning and process of business growth.

#2 - Assessment and selection

Once the team has a clear idea of the requirements of the business, the next step is to assess the features and marketable points different enterprise resource planning software existing in the market have to offer.


Also evaluate which platform can best resolve your company’s problems, meet all departments’ requirements and also stimulate the development of the business.

#3 - Design

This is the step where the implementation team determines if the system can adjust and be compatible with the existing workflow and which are the processes that need to be refurbished.


This is also the step where the team has to identify if the system needs any customization.

#4 - Growth

Technical professionals whether internal and/or external can help your company by molding the software in such a way that it meets all your demands.


After this customization, these professionals start migrating the company data from the existing system to the new ERP solution.


This is also the time where you decide how and when to train your employees for getting used to the interface and also start scheduling sessions and collecting training materials.

#5 - Testing

Testing cannot be compromised at any cost. It is the most important step after the enterprise resource planning implementation.


This is done to make sure that every aspect and feature of the ERP is working as expected and if there are any problems they can be fixed immediately.


While doing this, it is crucial to include employees from across the company for testing every aspect from the perspective of every department.

#6 - Deployment

There may be some setbacks initially but businesses should always prioritize training sessions for the employees to avoid any problems in the process of adjusting to the change.

#7 - Support

Make sure that everyone has everything they need to make the best use of the new system.


This is a continuous process and can include extra add-on configurations with the help of suppliers or professional consultants.

ERP implementation best practices

ERP applications are typically built around institutional best practices.


The software vendors design workflows and processes based on the working experience of hundreds or thousands of consumers and encourage compliance, though there is enough flexibility in the adjustment process.  


Maintaining and abiding by industry-standard best practices poses some significant advantages for businesses.


Organizations have often observed and realized that as they keep improving and upgrading their functioning, it keeps their profits maximizable, operational efficiency is achieved and they are no longer behind their competitors.


Conformity with the best industry practices also helps businesses comply with the prevailing financial standards.

What is the ROI for ERP implementation?

When you sit down to calculate the return on investment (ROI) for ERP implementation, the comparison is between the cost of implementing the software against the saving cost and profit increase facilitated by the solution.


Normally paced implementations bring in an expected ROI or sooner and a relaxed adoption does not achieve the expected ROI in the expected timeframe. 


Though these statistics should be considered, however companies should also remember that a hasty implementation raises risks of the ERP not exactly aligning and adjusting with your business processes.


Especially, when you chase ROI with an aggressive implementation it may turn out to be high risk with normal profit. 


Enterprise resource planning system selection and implementation can be a colossally huge task.


Choosing the right ERP system is a complicated decision with a lot to bet. Always remember to keep in mind the needs and type of your business and make the best possible choice. Consider and think about everything explained above and then take the decision.

Simplify and streamline your business process