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Enterprise Resource Planning How It Helps in Your Business

August 03, 2022 · Sri Prasad.M.T

ERP stands for Enterprise Resource Planning. It's a software that manages a company's financials, supply chain, operations, commerce, reporting, manufacturing. ERP is a software designed to manage and integrate the functions of core business processes like finance, HR, supply chain and inventory management in a single system.

Widely used in businesses of all sizes, ERP is considered a must-have for large enterprises and is increasingly being deployed in growing small businesses. The complexities of the global economy and modern consumer demands have made streamlining business processes and managing and optimizing data critical. ERP is typically the foundation of these capabilities.

Components of an ERP system

An ERP system consists of software components, or modules, each of which focuses on a distinct business process. Certain modules are considered "core" to nearly every type of business and the first to be deployed:

The ERP finance module automates basic accounting, invoicing, financial analysis, forecasting and reporting. It is often the main reason a company moves to ERP from standalone accounting software. The growing complexity of the business makes apparent the need to have a single system to manage all of the financial transactions and accounting for multiple business units or product lines.

Human resources (HR), also known as human capital management (HCM) is another core process that companies try to improve with ERP. Basic HCM handles employee records, benefits management and payroll but often adds talent management functions, such as recruiting and performance management.

Other ERP modules common to most businesses include order management, customer relationship management (CRM) and purchasing (procurement).

Companies involved in manufacturing or distribution typically add a supply chain management (SCM) module to track inventory levels and manage warehouses and transportation across the supply chain. If their business needs are complex, they might add a warehouse management system (WMS) and transportation management system (TMS) -- perhaps from different software vendors -- to manage these logistics functions.

Origin of ERP systems

In 1983, management expert Oliver Wight developed manufacturing resource planning (MRP II), which extended MRP to other kinds of operations, including financials, and added support for capacity planning and shop floor control, among others.

What are the advantages of ERP systems?

  • It enables growth by managing increasingly complex business processes.
  • Helps lower risk by enabling better compliance.
  • Fosters collaboration through data sharing and integrated information.
  • Improves customer service; improves supply chain management.
  • Saves money by streamlining processes.
  • Enables greater, often real-time visibility into parts of the business, such as inventory, that are critical for meeting customer needs. Enables better reporting and planning due to better data.

Manufacturing : It helps with monitoring quality tests , inventory and warehouse management, tracking stock level by lot and serial numbers, order management, purchasing and calculating overhead costs.

Accounting and Finance includes Accounts functions, forecasting and budgeting.

Human Resource Basic HR functions : Applicant tracking, hiring and onboarding, performance management, employee learning and development

Service Management covers the following :Service contracts , warranties , post-sales service, product lifetime costing

Some of its other functionalities include supply chain management, ecommerce, project planning, document management, and more.

The reach of an ERP system within any organization extends far beyond. It can be customized — depending on the specific business needs.

How Does ERP Supports a Business enterprise.

An effective ERP solution is capable of supporting both rapid and gradual growth of a business through its flexibility and scalability.

Here are some of the ways an ERP improves business performance:

A single ERP solution is an integrated system, which eliminates the need to use multiple applications. This centralization of data streamlines the process of accessing and inputting new data into the system , thus increasing greater efficiency across the whole organization.

It helps avoid duplication of work and also reduces the chance of human-made error. An ERP solution gives full visibility of the organization.

Top executives, managers, and decision-makers have access to business data in real-time. The entire company has access to a single flow of information, thus ensuring that every member gets the updated reports.

This smooth flow of information helps make fast and informed decisions. In this rapidly changing market dynamics, it becomes easy to adapt to customers’ demands quickly. Besides, businesses can smartly react to inventory shortages, order changes, and supply chain bottlenecks.

It helps to calculate the performance level of whole organization.

The advancements in technology like the cloud service have enabled users to access the system on-the-go.

These cloud solutions can deliver business data and functionality from any device with an internet connection. It syncs information across devices in real-time.

Thus, it makes it easy for employees to work remotely while also promoting collaboration. You can access production data and make updates on the go, thereby increasing productivity across the organization.

It eliminates the need to install various standalone applications for different functions. Furthermore, it tracks your production process, customer service, purchasing and sales, and more. With real-time insights, you can have a clear view of how the cost is being incurred.you can optimize the process if required.

Thus, having an ERP reduces your expense and allows you to allocate the savings into something else in the business.

Every business has to adhere to some rules and regulations based on their sector. Most of the time, it leads to a hefty amount of penalties, if failing to stay compliant. This issue can be solved by having an ERP system. It helps companies track all compliance by monitoring data. In fact, it automatically makes updates in case of any change in the compliance rules.

Today’s business models are more agile and less rigidly structured. An ERP solution can help organizations become more adaptable to the changing size and ever-evolving business landscape.

Another significant advantage of using an ERP solution is that it allows for fast growth and flexible options.

Changes are inevitable in every business. Whether the company is trying to add more product lines or trying to increase their existing production volume, the processes change with time.

Enhances Customer Satisfaction

Delivering products or services on time is critical to keeping your customers happy. Customer experience plays a significant role in the success of a business. Using an ERP system, you get increased control over inventory levels. Thus, you can ensure your customers that they don’t have to worry about the products getting out of stock.

Moreover, it streamlines the production process and increases the coordination of distribution channels.

This results in the timely delivery of products, ensuring a smooth customer experience.

What are the disadvantages of ERP systems?

Have a high cost to implement. Can be difficult to implement and transition to from existing systems. Requires training to all employees. ERP modules may be too generic for some companies and require additional modules or custom modules for specific business needs.

Data Policies

Even though you have implemented an ERP Data What you give is What you get. We have to ensure Quality This is applicable in case of data and manpower of an organization. Becuase if you want to get good result from an ERP the persons or staffs using ERP should be aware and make use of the best from the system.

References:

Web sites: Netsuite, oracle India. Microsoft , SAP , Wikipedia, Sage

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