ERP is a popular software solution that helps optimize business processes in companies of various sizes and industries. In this article, we will highlight the main principles of ERP and its benefits, as well as the question of choosing an infrastructural platform for the system.
ERP stands for «enterprise resource planning», which is the company’s strategy in terms of organizing business processes. These processes include optimizing production, managing assets, finances, risks and employees etc. An ERP system is a set of software tools that help solve these tasks effectively.
The ERP complex covers all aspects of business management and unites them into a centralized system. This helps companies form a clear understanding of how it operates, what its financial status is, how to allocate funds, what needs to be reported to the fiscal authorities, how to manage employees, what direction to develop in and how to adapt to the current satiation to achieve strategic goals.
The ERP solution market is diverse and largely depends on the locality. Popular examples of ERP systems include Oracle, SAP and Microsoft Dynamics.
These are the main principles of ERP that will be useful for businesses:
- works in real time;
- has a shared data base which supports all apps and modules;
- unites all modules into one system;
- works on various servers and operating systems;
- can be accessed through the client interface wherever and whenever needed;
- includes both vertical and horizontal access rights based on the org structure and the departments;
- can be deployed in a server or in the cloud.
The main purpose of an ERP system is to optimize the company’s business processes. This is achieved through, automation, systematization and analytics. For example, the system creates reports automatically based on the information in the data base. This helps lower expenses and minimize the risk of errors.
ERP uses work with a single data base. Confidential data is not stored on employee workstations; this increases security and simplifies access to information. Access rights depend on the hierarchy of the org chart, the department and other factors. The system can be accessed from anywhere in the world, no matter the hardware platform. Remote employees can enter the system using mobile gadgets based on Android or MacOS while staffers that work in the office connect to the data base using Windows.
Data centralization facilitates business analytics. The ERP system contains data regarding the company’s inventory, supply chains, clients, revenue etc. The analytics of the ERP can be used to plan sales based on demand analysis, to monitor the company’s warehouse and identify inefficient spending. The system also helps analyze and optimize the work of each department thanks to unified reports.
ERPs use a modular architecture. This allows users to compile the system in stages, based on the company’s priorities. For example, you can add the accounting and the warehouse management modules first, then later add a CRM and an employee management module. If you don’t need the full stack of ERP modules, the architecture of the system allows you to only install the ones you need.
ERP systems support multiple languages and currencies, as well as adaptability in terms of local legislation. This will be useful for transnational companies and corporations that serve customers worldwide. However, this will also be an advantage for small businesses. It’s likely that your preferred ERP supports your language and currency by default while taking the specifics of your country’s laws into account. This way, it won’t take long for you to find a suitable solutions and you won’t have to adjust the system yourself.
The system can be scaled based on the company’s org structure. This means that various organizational levels are included in a single system, such as parent companies and divisions, branches, affiliated structures etc. It also supports various forms of ownership, tax systems, charts of accounts, accounting policies etc. The same principle is used when forming ERP systems for companies with territorial branches.
The benefits of enterprise resource systems are largely a consequence of their main principles and structures. The ERP system:
- accumulates, processes and presents reports on data necessary for decision making;
- automates the document flow and business management processes;
- increases the efficiency of employees due to the use of IT algorithms and tools;
- provides full control over each department’s activities;
- optimizes and synchronized business processes;
- lowers spending for businesses with branching org charts;
- facilitates analytics, planning and decision making;
- provides employee management tools for hiring, professional growth, motivation, training, loyalty management etc.;
- improves data safety using security policies and access rights.
Each company that uses ERP solutions can add its own benefits to the list above. However, the main consequence of these advantages is an increase in revenue due to optimal resource management and transparent data.