What Is ERP Software?
Enterprise Resource Planning Software, or ERP Software, is a system that integrates multiple modules (like accounting, HR, supply chain, and manufacturing) to improve the flow of data between functions and departments.
Having critical business data in one source of truth, an ERP system aims to promote quick, accurate decision-making and streamlined operations through automated workflows.
A modern cloud-based ERP system will offer:
- Enterprise Planning
- Enterprise Budgeting
- Enterprise Accounting
- Enterprise Procurement
- Enterprise Project Management
- Enterprise Project Management
- Enterprise Compliance Management
- Enterprise Supply Chain Management
- Enterprise Workforce Management
Enterprise Planning Is Used For:
- Financial planning
- Supply chain planning
- Workforce planning
Enterprise Budgeting finds its use in:
- CAPEX (Capital Expenditure) budgeting
- OPEX (Operational Expenditure) budgeting
- Buffer budgeting for unknowns in a fiscal year
- International Financial Reporting Standards Foundation (IFRS)
- Financial Accounting Standards Board (FASB)
- Generally Accepted Accounting Principles in the United States (GAAP)
- HGB in Germany and PCG in France
- US Securities and Exchange Commission (SEC)
- European Securities and Markets Authority (ESMA)
Enterprise Procurement Is Used For:
- Human resource management
- Employee well-being monitoring
- Human resource upskilling
Enterprise Project Management is used for:
- Internal project management
- Acquisition projects
- Departmental projects
- Strategic projects
- Change management
- Short-term projects
Enterprise Risk Management is often used to:
- Document risks
- Grade risks
- Project Risks
- Navigate risks with risk mitigation actions
- Correlate risk dependencies
- Fully understand the detailed impact if the risk events happen
Enterprise Compliance Management is used for:
- Define internal and external compliance factors
- Understand planned vs actual compliance
- Understand non-compliant areas
- Procedure to adopt if compliance is not met
Enterprise Supply Chain Management is used for:
- Map the process from the production of goods to the delivery of goods
- Adjust for just-in-time (JIT) availability of raw materials
- Interlink between supply chain production processes
- Define parameters of goods/raw material acceptance
Workforce Management Is Used For:
- Managing internal and external workforces on site, plant, or other locations
- Assigning workforces to a project
- Time and labour management
- Define permit-to-work conditions
- Monitor health and safety conditions in the workplace
How Does an ERP System Work?
An ERP system acts as a data and information pipeline across all (or chosen) functions of your business. 95% of businesses that adopt an ERP system see an immediate operational improvement.
It works by collecting datasets from business processes and displaying data in real time via dashboards and workflows. An ERP then recommends automation procedures through predictive analytics to improve business processes.
ERP Systems enable you to capture information about:
- Customers
- Invoicing
- Procurement
- Production planning
- Production
- Operations
- Supply chain
- Logistics
- Warehouse
- Delivery
- Returns
- Human resources
- Financial planning
As the ERP system captures data at different stages of the business, it acts as an information repository for your business. This core component of an ERP system allows you to fully understand bottlenecks, acceleration points, and key drivers of your business.
Top 6 Reasons to Implement ERP Software
- Access one source of truth (from Sales to Manufacturing to Delivery of Goods to Returns and Service Management)
- Improve capacity and utilisation of people, assets, and processes (by eliminating data duplication, improving data visibility, and offering micro, macro, and co-relational analytics)
- Transition enterprise communication from Seeking Information to Driving Progress
- Use co-relational analytics to make data-driven decisions
- Correlate different parts of the business
- Build a growth-oriented culture
1. Build and Access One Source of Truth
The top reason for implementing ERP Software is to build one data pipeline between the most important (or chosen) business processes. Often, ERP is implemented to connect Sales, Supply Chain, Manufacturing, Warehousing, HR, Financials, Delivery of Goods, Logistics, Returns and Service Management. This allows businesses to reduce the need for multiple and individual software applications.
2. Improve Capacity and Utilisation of People, Assets, and Processes
Co-relational data and analytics is a very powerful deliverable of an ERP system. It enables enterprises to co-relate data and information across all business functions. There are amplifying capacity and utilisation benefits in knowing answers to questions like what was promised by the sales team, what is available to deliver, what can be manufactured, and when the goods will be delivered in one system.
3. Transition Enterprise Communication From Seeking Information to Driving Progress
Often, communication with siloed software is around seeking information. Simple questions like what is the order value, material location, instructions to deliver, arrival of a bill of material etc. consume an exceptional amount of time for an Enterprise.
By implementing a single source of data and truth, ERP users can find information within the ERP Software meaning information-seeking communication time is significantly reduced. This gives space for improved communication quality to drive the enterprise forward.
4. Use Co-relational Analytics to Make Data-Driven Decisions
Co-relational analytics and data between different teams open several opportunities to deliver growth, improve utilisation, and optimise costs. Volume leverage, timing leverage, managing peaks and low periods of business, hiring decisions, training, and upskilling decisions can be taken with utmost confidence by unpacking data from your ERP Software.
5. Correlate Different Parts of the Business
An ERP communicates several parts of a business by building a common data pipeline from business functions. The overall understanding of your enterprise goes up for every ERP user. The intangible benefit of deploying an ERP system depends on the quality of hires, training, and overall communication in the business. If done correctly, this results in amplified speed and efficiency of your enterprise.
6. Build a Growth-oriented Culture
ERP Software can set targets for functions such as Sales, Supply Chain, Manufacturing, Warehousing, HR, Financials, Delivery of Goods, Logistics, Returns and Service Management. This enables enterprises to set, monitor, and drive growth.
When Should Organisations Consider Implementing ERP Software?
When businesses consider implementing an ERP system, there is a mix of major drivers and minor drivers.
For instance, there are no set scenarios for implementing ERP Software; billion-dollar businesses have run their core processes on spreadsheets and micro businesses have implemented modern cloud-based ERP systems.
Yet, if there is one reason why most businesses implement ERP Software, it is for greater ‘Reporting, Analytics and Insight’.
People-Based Scenarios to Deploy An ERP System:
- Provide a single platform to work across different teams and departments
- Offer structured processes to complete tasks
- Improve speed of work
- Record intangible knowledge into systems
- Take a data-oriented approach to improve people-oriented processes
- Build a common data repository across different teams
Process and Workflow-Based Reasons to Deploy ERP Software:
- When a process has more than 5 stages
- Interdependent and interlinked process involving more than two departments/teams
- Distant process (for example, the on-site process is dependent on the off-site process)
- Looped processes where maintaining accuracy with a tolerance is important
- Collecting data is vital for compliance and efficiency improvement
Objectives, Targets, and KPI-Driven Reasons to Deploy ERP Software:
- Take data-based decisions to scale, be profitable, and be more efficient
- Improve speed and accuracy of decision-making
- Back decisions with data
- Use data to validate gut-feel-based decisions
- Improve reporting across the businesses
- Clarify priorities to drive business momentum
How ERP Software Impacts Different Industries
Businesses implementing ERP Software have multiple operations, each with a specialised area of focus that requires complex planning and reporting. With this in mind, ERP Software is best utilised in industries such as:
- Manufacturing: Manufacturing ERP systems help manufacturers plan and schedule production, improve product quality, leverage product lifecycle management, optimise supply chain planning, and gain accurate inventory control.
- Retail/E-Commerce & Distribution: Retailers utilise e-commerce integrations and ERP modules such as order management, warehouse management, customer tracking, and supply chain management to improve control of sales and the customer experience.
- Healthcare: Hospitals, care homes, blood banks, and more, use ERP systems to manage medical inventories and supplies, digitalise patient records to build centralised patient portals, and create accurate financial forecasts.
- Construction and Engineering: Construction and engineering operations use integrated ERP applications to track and assign sub-contractors, control the inventory of building materials, plan for resource allocation, and improve project management on a large scale.
- Banking and Financial Services: ERP systems are used by financial services to control risk management, plan for “what-if” scenarios, secure data management, and track custom relationships.
- Education: Institutes, schools, and colleges use ERP Software to make sharable information available to parents, students, staff, and teachers, as well as help to build digital student records and improve the availability of educational equipment through resource planning and asset management modules.
- Food & Beverage: Tailored food and beverage ERP tools use information to analyse and improve food waste management, recipe management, ingredient tracking, and allergen and dietary safety compliance. As well as using warehouse and inventory management modules for storing products with temperature, weight, and date requirements.
