A Quick Guide to ERP

November, 2021

An enterprise resource planning system, sometimes known as ERP, is a networked software system that manages the transactions and record-keeping for the fundamental activities of a company's operations, such as sales, purchasing, accounting, and human resources. Installing an enterprise resource planning system (ERP) is one of the most audacious measures a company can take to computerize its business operations.

ERP software comprises several interconnected but distinct components or modules, each enabling employees to carry out the responsibilities of a specific business process or departments, such as sales, customer relationship management (CRM), inventory management, and financial management.

Unlike other forms of business software — such as simple accounting, scheduling, or task management — that are utilized by a single person or a small group and do not directly relate to other software, ERP is designed to work in a collaborative environment.

What's the big deal with ERP?

Tapping onto the internet to expose these ERP channels to the outside world helps to align supply and demand by attaching the needs of consumers more closely to the activities taken by a firm, its suppliers, and partners to produce and deliver products and services to the market place.

This continuous "digital transformation" of practically every corner of the corporate sector, made possible mainly by enterprise resource planning (ERP), has permitted the introduction of new conveniences such as mobile e-commerce. It has also contributed to the integration of the international economy by enabling — or, at the very least, facilitating — global manufacturing, supply chain analytics, and industrial Internet of Things (IoT).

At the same time, digital transformation necessitates the development of a new set of ERP skills that place a strong emphasis on comprehensive business knowledge and cooperation to write the next chapter in the long-standing partnership between ERP and the business community.

What can you find in an ERP?

Most enterprise resource planning systems (ERP) manage the critical business procedures common to all types of businesses — either in dedicated modules or as subfunctions of other modules. On the other hand, the ERP finance module is included in every ERP package since every organisation needs the capacity to handle financial transactions and account for their results. Basic accounting, invoicing, financial analytics, forecasting, and reporting are all automated using this software.

Additional modules with particular capabilities are required by businesses that manufacture or distribute items. The following are the most often encountered:

  • Material requirements planning (MRP);
  • Inventory management;
  • Manufacturing management, or production management;
  • And supply chain management (SCM): complex processes for demand planning and logistics, including transportation and warehouse management systems.

Some firms go one step further and install still another layer of modules that are even more specialized or provide more sophisticated features. For example, in addition to the core HR services of an HCM system — such as payroll, benefits, and personnel records — a firm may choose to add talent management software, which includes modules dedicated to recruiting, training, assessing, and rewarding people on top of these basic HR activities.

It is possible for a consultancy, construction firm, or other organization whose work is usually structured into projects to add a project management module to their existing software system. 

A firm with its own distribution centres may choose to purchase an SCM suite from another vendor that includes sophisticated transportation and warehouse management software with pre-configured integration to the ERP rather than developing its own.

Pros and cons of ERP

Oftentimes, the advantages of ERP often exceed the downsides in most cases.

Pros of ERP

  • By optimizing operations, enterprise resource planning (ERP) can save money in the long term.
  • This solution delivers an integrated system that helps reduce IT, labour, and training expenses.
  • ERP provides a more complete picture of essential aspects of a company's operations, such as sales, working capital, and inventory.
  • Improved data and analytics make reporting and planning more accessible, and it helps to save costs.
  • It enhances compliance and security by implementing standardized procedures and allowing for fine-grained control over user permissions.

Cons of ERP

  • Deploying and maintaining ERP software may be a costly endeavour.
  • It is frequently difficult to put into practice.
  • It necessitates extensive change management efforts.
  • ERP modules are frequently less advanced than specialist software, and as a result, they are either left unused or must be updated.

Tips on selecting an ERP system

  1. Assigning a team to work with. The ERP purchasing process begins with forming a project team managed by a project manager and often consists of department heads, senior executives, and information technology.
  2. Specifying the prerequisites. To understand the organisation's present and future ERP use cases, the project team compiles the requirements and wish lists of various stakeholder groups.
  3. Vendors are being investigated. A framework for examining ERP software providers and inviting the most promising ones to reply to an RFP explaining how they will deliver the requirements is established during the requirements planning stage of the process. Some suppliers may be invited to make sales presentations to potential customers.
  4. Creating a shortlist of candidates. The project team selects a limited number of suppliers that it feels will most likely match the specifications.
  5. Demos should be scheduled. The nominated vendors must demonstrate how their software operates in real-world situations, which may include participating in a competitive "bake-off."
  6. Finding and selecting a dealer. After negotiating the price and terms with the vendor of choice, the buyer signs a contract with that seller.

To learn more about ERP, feel free to schedule a call with us.