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Why is ERP System Important?
Enterprise Resource Planning
Topics
How Does an ERP System Work?
How Can ERP Improve a Business?

What is ERP System? (Definition of Enterprise Resource Planning)

ERP System comes with a wide range of features and capabilities. It eliminates manual work and makes business processes less error-prone. It provides the capability to get real-time information about various ongoing processes for expense tracking, project planning, seamless integration, and other purposes. It helps decision-makers make strategic decisions based on a single source of truth, optimize resources, reduce costs, and increase profits.
Enterprise Resource Planning (ERP) can be defined as a software system used by enterprises to efficiently automate and manage their core business processes. Various departments work together to run the company effectively. An ERP system integrates these departments under a single platform to efficiently manage the numerous processes, enabling a seamless flow of data between them.
ERP software helps streamline numerous business processes such as manufacturing, supply chain, raw material procurement, human resources, finances, and others. By integrating these processes under a single platform, an ERP system avoids data duplication and maintains the integrity of the information.

Why is ERP System Important?

According to Allied Market Research, the ERP market across the globe is anticipated to reach $117.09 billion by 2030 which clearly indicates an increased CAGR of 10.0% in ten years.
ERP solution offers integration, intelligence, and automation required to carry out routine business operations. It is the central nervous system of a business. All the organisation’s data is saved in the ERP solution to offer a single source of information across all departments.

ERP software solutions are an integral part of businesses since it accurately plans and coordinates the numerous business functions. One major benefit of ERP solutions for companies is tracking the available inventory along with delivering customer orders.Additionally, it can compare supplier POs and predict demand in the future, thereby guiding companies to make informed decisions.

ERP solution helps the finance department to close the books instantly while the sales team leverages it to streamline all customer orders. Shareholders & the banking sector require ERP for precise financial records that can be developed through the system’s reliable data and analytics.

For large business units, the system can easily automate fallible tasks such as customer billing, account reconciliations, order processing and can also help teams to function more smoothly with the information gathered. An ERP solution can give you a detailed view of a business’s overall financial health through organising and storing data. It also checks irregular patterns and inconsistencies that need your investigation on priority. The increasing adoption of ERP among all industries indicates the rising trend where it has been predicted that its market would reach US $78.40 billion by 2026

How Does an ERP System Work?

An ERP System is comprised of multiple modules, with each module focussing on an individual business process. A business would have several business areas such as accounting, human resources, production, research & development, sales & marketing, supply chain & logistics, and more. The ERP integrates these different modules under a single platform with a centralized database, enabling seamless streamlining of these processes.
The companies can select the modules they wish to use while implementing an ERP solution for their business. With an ERP solution, companies get an integrated system with a shared database, real-time data and dashboard, unified user interface, and in-depth insights. Hence, companies can synchronize their activities to achieve efficient performance metrics. The ERP system supports industry-specific needs, be it the system’s basic functionality or app extensions that can be easily integrated with it. An ERP solution can be purchased as an on-premise (licensing model) or as a SaaS model (cloud subscription model). With the ERP system, real-time data can be easily turned into business functions and workflows through all departments. It can deliver outstanding results and ensure on-time delivery and accurate data entry. The ERP vendor can tweak their system to seamlessly integrate their other commonly used solutions, for a cohesive experience.
The ERP system supports industry-specific needs, be it the system’s basic functionality or app extensions that can be easily integrated with it. An ERP solution can be purchased as an on-premise (licensing model) or as a SaaS model (cloud subscription model).

With the ERP system, real-time data can be easily turned into business functions and workflows through all departments. It can deliver outstanding results and ensure on-time delivery and accurate data entry. The ERP vendor can tweak their system to seamlessly integrate their other commonly used solutions, for a cohesive experience.

How Can ERP Improve a Business?

ERP helps companies to check the business areas for any space for improvement. It is a simple rule that the more access employees have, the more chances are the team will detect problems. These problems include a certain rise in demand for specific products/services, delayed shipments, cash shortages, and more. It is exactly where the importance of ERP can be observed.
For all SMEs, the use of ERP software is to flawlessly automate various tasks by avoiding errors. These tasks include customer billing, reconciliations, order-processing, while also offering valid data to teams to operate more efficiently. An ERP application gives a bird’s eye view of a company’s operations and financial health. It also offers in-depth insights into a particular process, by collecting and analysing data.

Some prime advantages ERP can offer to businesses involve-

➤ Up-to-date Information
Since ERP applications are consistently receiving data from various departments, it gets updated instantly once the inventory is fetched or a particular shipment is sent to the consumers. It is an added advantage for all decision-makers since they always make a choice depending on the latest available data.

➤ Anytime, Anywhere Data Access
With the ERP system, there is no need to go through a number of paperwork and files. A cloud-based ERP helps warehouse managers to enter data into the warehouse management system, while also analysing patterns and diagnosing the faulty processes that need attention.

➤ Centralised Database
With a centralised database, all decision-makers are on the same platform, since there is no duplicity or conflicting information sources. Additionally, companies shall have the ability to distribute and schedule crucial reports dynamically. You can also easily get access to the detailed information once you generate detailed reports based on it.

History of ERP

The history of ERP dates back 100 years with the development of Economic Order Quantity (EOQ), a paper-based manufacturing system in 1913. During the period of 1964-1990, EOQ was transformed into an advanced system, Material Requirements Planning (MRP), which provided advanced capabilities. In the 1990s, a full-fledged ERP was developed with modern capabilities.

  • 1910s: Ford Whitman Harris develops the Economic Order Quantity (EOQ) model for scheduling production-related tasks.
  • 1960s: Introduction of Mainframe computers for finances-related tasks such as ledger maintenance, reporting, etc. In 1964, Black and Decker develops Material Requirements Planning (MRP) solution which integrated EOQ with computers.
  • 1970s: Development of distributed computing with stand-alone software for accounting, sales, inventory management, material planning, HR, CRM, etc.
  • 1980s: Development of MRP II with integrated modules across accounting, inventory management, etc. which had a central database.
  • 1990s: Gartner invents the term ‘ERP’, which were client-server systems with business intelligence, that could automate some business processes such as HR, project management, CRM, etc.
  • 2000s: Introduction of cloud-based ERP with web applications, improved KPIs and analytics, field services, dashboards, mobile app support & more.
  • 2010s: ERP in the form of SaaS and XaaS applications providing enhanced remote web-based solutions which integrated modern technologies like AI, machine learning, IoT, and secure databases, to provide comprehensive ERP Solutions.