Defining an ERP System

Diane Harvey
Updated on

ERP is a comprehensive business management system that allows businesses to manage and automate many of their back-office functions related to technology, services, and human resources (People, Processes and Technology)

The acronym “ERP” originally referred to the phrase “enterprise resource planning,” but it’s become less specific over time. It encompasses a broad range of activities for integrating the business processes of an entire organization, including planning, purchasing, inventory control, sales, marketing and finance.

ERP systems help organizations integrate data across departments and gain better visibility into their operations. They also let companies increase their productivity and improve customer service.

Large corporations have used ERP systems since the 1990s to streamline their operations. Today they’re also widely used by small businesses with simplified offerings that are easier to set up and customize than those designed for large companies.

Benefits of an ERP System

There are many benefits to an ERP system. The right ERP solution can help:

Reduce costs by improving processes and reducing errors

An ERP system provides a tool for every department in your company to use every day. By adding quality checks into the process, you’re able to reduce errors and improve processes across the board.

For example, if a salesperson enters an order incorrectly, it will be caught in the order entry process and addressed before it’s processed.

This reduces errors that can cause costly mistakes down the line (like shipping the wrong product or quantity) and improves your bottom-line results.

Increase profits by improving efficiency

As a business grows, you must have systems in place that allow employees to do their jobs faster, better and cheaper than your competition.

An ERP can help you streamlining processes, which can save you money, but it also means you can get products manufactured faster, fulfil orders faster and improve turnaround times so you can get more customers through your doors in a day (if it’s a retail business) or take on more projects per month if it’s a service business.

Improve customer service with a single view of your customers’ needs and requirements

ERP systems provide a central repository for key information on your customers, including their purchasing history and preferences. With this information, you can quickly tailor a response to a customer need, which helps you maintain customer satisfaction and loyalty.

Improve the efficiency of your marketing efforts

Instead of sending out mass mailings to all the people on your mailing list, you can use an ERP system to create targeted campaigns based on information about the recipient’s needs and purchase history.

For example, if you sell computers via your website, you can use an ERP system to send out specials on laptops only to people who have purchased desktops from you in the past and who have purchased upgrades in the past two years.

This approach uses less postage than mass mailings and targets only those most likely to be interested in buying what you’re selling.

Streamline processes by integrating the work flow in your company

You’ll be able to follow specific transactions and access data whenever you need it. An ERP system also allows you to quickly identify trends and make more informed decisions.

Various software programs combine vital applications like order entry, inventory control and accounting into a single system.

For example, when an order is placed, the ERP software can automatically update inventory records for each item in the order, create a sales invoice and post a journal entry to reflect the sale.

This automated process eliminates manual inputs, which reduces the risk of errors and increases efficiency.

Provide better reports and access to information that helps you make decisions more efficiently and effectively

ERP systems can also provide better reports and help you get better access to the information that you need.

Instead of having to pull data from multiple sources or manually enter numbers into a report, ERP systems can often help you quickly generate reports that contain real-time information that helps you make decisions more efficiently and effectively.

Control Costs Effectively

Some ERP systems also offer tools that help you control costs, such as production scheduling tools that help you minimize downtime and avoid bottlenecks in manufacturing plants or inventory tracking tools that let you track which products are selling well so that you can focus on keeping those products in stock.

What Will Enterprise Software Look Like in the future?

Enterprise Resource Planning software is a rapidly evolving landscape. Today’s ERP software packages can do amazing things, like provide real-time data analytics to help you make better business decisions. But where will ERP be in the future?

The next generation of ERP will take things a step further. Instead of real-time analytics, it will be predictive: it will use machine learning to predict what your best business decision will be before you even make it.

If you have an idea for a new product, ERP software with predictive analytics could tell you exactly how much it would cost to produce, who your target market is, and the best place to advertise—all without any human input.

As our computers get smarter, so does our technology. It might be hard to imagine now, but one day we’ll look back at today’s technology as primitive. The enterprise resource planning software of the future will be so advanced that we’ll just take it for granted—like how we take electricity for granted today.

The future of ERP, at a glance:

  • Today’s enterprise software applications are built on foundational analytics, but the next generation will move to predictive analytics and AI.
  • The future of ERP will be more integrated with other digital technologies such as IoT, machine learning and blockchain.
  • Digital technologies have made it imperative for ERP systems to be intuitive and user-friendly. Otherwise employees won’t use them.
  • In the future, ERP solutions will be more specialized to deal with specific business challenges rather than run end-to-end processes across the company.
  • As mobile usage continues to rise, ERP solutions will become even more mobile-centric in the near future.
  • Security is a key concern for any enterprise software system that stores sensitive data. Next-generation security features are expected to offer even greater protection from cybersecurity attacks on data flows and networks

Cloud ERP or on-premises ERP software?

With more and more businesses choosing to move their IT infrastructure to the cloud, it’s no surprise that enterprise resource planning (ERP) software is following suit. But just because cloud ERP systems are becoming more popular doesn’t mean they’re right for every business.

There are certain situations where on-premises ERP systems make better sense. And each has its own pros and cons.

Cloud ERP: In their early days, cloud ERP solutions were often perceived as more expensive than on-premises ones. Today, however, SaaS ERP can be more cost-effective for small businesses that are just starting out or don’t have enough IT resources to handle an on-premises solution. With SaaS, your monthly costs are predictable—and they’re easy to scale up or down as your business grows.

On-Premises ERP: This is the more cost-effective option for businesses with established IT teams and large budgets. If your company is planning to grow significantly in the next few years, it might make sense to invest in an on-premises solution and plan for growth accordingly.

When choosing between a cloud ERP or on-premises ERP, consider the following:

  • Flexibility: Cloud-based solutions allow more flexibility than on-premise software, with lower upfront costs and faster implementation.
  • Capabilities: Cloud ERP is more scalable and easier to customize than an on-premise solution. This can be a huge advantage when your business needs change.
  • Security: Cloud data centres are often more secure and better protected than most on-premise systems. However, you’ll want to assess your specific needs to ensure you’re getting the right level of security for your business.
  • Reliability: With cloud ERP, you don’t have to worry about backing up data or maintaining system uptime because this is handled by the vendor instead of in-house IT staff. Your files will also be accessible from anywhere with an internet connection so that you can stay productive no matter what.
  • Mobility: Employees can access information in real time using their mobile devices—no need to lug around laptops or wait until they get back into the office to sync with servers and update documents!

ERP is ever evolving and becoming more complex to tackle business challenges

ERP has evolved from a back-office software application to become the enterprise backbone of modern businesses. Today, an ERP system is being used for many things, including digital transformation and intelligent enterprise initiatives.

ERP providers are now offering more flexibility with their applications to ensure that users can make the most out of industry 4.0 concepts such as data-driven decision-making and real-time analytics.

The future of ERP is no longer just about accounting, inventory management or payroll—it’s about evolving your company and becoming more efficient with your business processes in order to succeed in today’s competitive market.

At Signum Solutions, we’re excited about where ERP is headed. We believe that the future of ERP is more flexible and complex, allowing for deeper customization and application of new technologies.

Whether we’re helping a client get up and running with a new ERP system or optimizing the one they already use, we believe that the future of ERP will continue to evolve as businesses do—and we’ll be there every step of the way!

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