Enterprise Resource Planning (ERP) systems manage the day-to-day business activities of organizations, like finance, accounting, project management, procurement, manufacturing, and supply chain.

Enterprise Resource Planning (ERP) software standardizes, streamlines, and integrates business processes across human resources, finance, distribution, procurements, and other departments. These systems are helpful to collect and organize critical business information and help organizations run efficient operations even as they are expanding. This article explains what ERP is, how it works, its benefits, and how it is helpful for businesses. 

ERP software market revenues worldwide
Enterprise resource planning (ERP) software market revenues worldwide from 2019 to 2025 (in million U.S. dollars): Statista

What Is An ERP System?

To put it simply, an ERP is an application that automates the business processes and offers insights and internal controls by drawing on a central database that collects inputs from departments consisting of manufacturing, accounting, marketing, sales, supply chain management, and human resources (HR). 

After compiling the information in the central database, leaders gain cross-departmental visibility. It empowers them to analyze different scenarios, explore process improvements, and generate significant efficiency gains. Hence, results in cost savings and enhanced productivity as less time is spent digging for necessary data. 

An ERP system tailored to meet the requirements of an individual business pays significant dividends, thus making these systems a crucial tool for businesses across different industries and of all sizes. Mainly, an ERP system is helpful to unify people, main business processes, and technology across an organization. 

Why Should Businesses Use ERP?

Market share of leading ERP software companies
Market share of leading enterprise resource planning (ERP) software companies worldwide in 2021: Statista

Businesses keen to wisely use their resources can undoubtedly benefit from ERP systems. ERP systems help the leaders reallocate human & financial capital and build more efficient main business processes to save money without compromising performance or quality. 

It is also greatly helpful in planning & coordination. The system allows employees to see currently available inventory and customer orders in detail and compare supplier purchase orders and anticipated future demand. If needed, adjustments can be made to avoid problems. This software also enhances communication and collaboration, and it allows the workers to check on the status of other departments and make more informed decisions. 

Understanding Of Working Of An ERP System

how erp works

ERP systems use a defined and standard data structure. Here, the information entered by one department is instantly available to all the authorized users across the organization. It keeps everyone on the same page. For instance, a salon chain has several locations that usually share stock and personnel. As the quality, sales, and employee data from the various sites is entered into the ERP system, it is then formatted, indicating the location it is coming from. Then, the real-time data is interlaced into business processes & workflows across the departments. The business leaders can observe if one location is better at avoiding wastage than a sister site and figure out why, whereas the operations can ensure that staffing levels align with the traffic patterns. The finance department can compare sales to rents helping executives decide whether to consolidate. 

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These systems deliver the most value when an enterprise has modules for each primary business function and ensures timely and accurate data entry. The more access stakeholders have, the better it is. When an enterprise uses business systems from many vendors, integrations are usually possible, making data automatically flow into ERP. Then this real-time data can be used throughout ERP instances, benefitting all processes and workflows. 

How Can ERP Help A Business Grow?

erp for business

ERP system allows enterprises to identify business areas that can improve or have opportunities to expand. With access to many employees, teams’ chances to spot problems, be it a spike in demand for a specific product, an impending cash flow crunch, or late shipments from the supplier. Then the employees can proactively work to mitigate the issue in the best possible manner. ERP software is known to automate many error-prone tasks, such as order processing, customer billing, and account reconciliations, and provide the information needed by teams to operate more efficiently.  

However, the best part of ERP is that it gives a broad overview of the company’s health and comprehensive insights into a particular process or KPI by storing and organizing data and recognizing patterns, and flagging irregularities requiring investigation. 

ERP allows to access data from anywhere: With an ERP system, employees do not need shuffling via piles of papers or files scattered across a desktop. A cloud-based ERP makes it possible for the warehouse manager to log in from a mobile device while being on the shop floor, or a salesperson can check inventory while being at a customer site. 

Up-to-date information: As the ERP system is constantly receiving information from numerous departments, it instantly updates when inventory is pulled, emails are sent to the customers, or payment is posted. It is the main advantage as decision-makers can base their choices on up-to-the-minute data. 

Who Uses ERP?

Who Uses ERP

All companies across various industries and with diverse business models have realized the advantages of ERP. These flexible solutions with extensive functionality can also cater to multiple organizations and requirements. 

Verticals that count on ERP to run their businesses are: 

  • Education
  • Consulting
  • Energy
  • Campus stores
  • Manufacturing
  • IT Services
  • Healthcare & Life Sciences
  • Health & Beauty
  • Professional Services
  • Non-Profit
  • Media & Publishing
  • Food & Beverage
  • Financial Services
  • Apparel, Footwear, and Accessories
  • Retail
  • Restaurants & Hospitality 
  • Advertising & Digital Media
  • Wholesale distribution
  • Transportation & Logistics
  • Software & Technology

Now within these organizations, several job functions benefit from ERP, consisting of: 

1. Finance/Accounting

Often, the accounting team first adopts the ERP software. The team tracks and reports on all the transactions and other financial information in the system, comprising accounts receivable (AR), accounts payable (AP), and payroll. ERP system allows financial planning & analysis (FP&A) experts to turn detailed financial data into forecasts and reports on expenses, revenue, and cash flow. 

2. Supply Chain

This team consists of inventory planners, purchasing agents, senior supply chain leaders, and warehouse managers focused on operations. These employees count on the ERP system to ensure a smooth & constant flow of goods from supplier to customer. They rely on the detailed and accurate information the ERP system offers to optimize the inventory levels, maximize on-time shipments, prioritize orders, identify inefficient or manual processes, and avoid supply chain disruptions. 

3. Sales & Marketing

The sales team can use ERP software to increase productivity and drive better results for the sales team by automating lead management and monitoring interactions that prospects have with the organization. The sales representatives can document the discussions and alter prospects’ status as they move through the sales funnel. Then using the duplicate records, the marketing team can automate & manage outreach across different channels, from emails to display advertisements to social media, and measure the effectiveness of these messages & channels to allocate the marketing budget well.

3. Human resources

The Human Resource department is responsible for tracking all employee information and broader workforce trends in ERP. The HR dept. Can quickly find the contact details, benefits details, compensation, and other documents for each employee. It even monitors metrics like average pay by title, retention by department, promotion rate, and other metrics to well allocate its staff and help line-of-business managers. 

What Are The Benefits Of ERP Systems?

Countless benefits come with an ERP solution, such as:

  • It allows saving costs by automating several repetitive and straightforward tasks. As that minimizes errors and the need to hire employees simultaneously, the business grows. It also allows deploying all the resources, from labor to inventory equipment. 
  • It allows workflow visibility as in ERP solutions. All the workflows and information are in one place, so the employees with access to this system can see projects’ status and the performance of various business functions relevant to the jobs. 
  • ERP systems allow companies to analyze and understand Data through their impressive reporting and analytics tools that enable data to track KPIs and display any metrics or comparisons they want. This way, businesses can understand how a process problem in one department affects the entire company. 
  • As ERP solutions can access real-time data across the entire company, they can uncover impactful trends and offer extensive business insights. It improves decision-making by company leaders who can easily access entire relevant data. 
  • Financial reporting standards and governmental and industry-specific data security regulations constantly change in the technology industry, and with an ERP solution, your company can stay secure and compliant. The solution offers financial reports complying with standards & regulations, and SaaS apps are well-equipped to assist companies with PCI-DSS compliance.  

The many other benefits of ERP solutions include risk management, collaboration, data security, flexibility, scalability, customer & partner management, and customization. 

Can Your Business Use An Enterprise Resource Planning (ERP) Solution?

Initially, the ERP solution was designed for enterprises. However, the scenario has changed today. These days cloud-based software-as-a-service (SaaS) ERP offerings have lowered the barriers to entry, helping numerous emerging & midsize firms to enhance their visibility, efficiency, and profitability.

Is An ERP Model Ideal For Your Company?

It works well for all the companies to constantly review their existing technology and ask themselves: Is the technical help, or is it holding the business back? Suppose the current technology is outdated or inadequate. In that case, it will cause inefficiencies, cause inaccurate data, high error rates, lack of integration among systems, too much reliance on email & spreadsheets, and cannot support the changes the business is looking to make. Then it is time to get a new solution. It involves costs to purchase and deploy an ERP solution, but it delivers a quick return on investment (ROI). If you are looking to get an ERP solution for the business, at EmizenTech, we can help with an ideal and effective solution. 

Author

CTO at Emizentech and a member of the Forbes technology council, Amit Samsukha, is acknowledged by the Indian tech world as an innovator and community builder. He has a well-established vocation with 12+ years of progressive experience in the technology industry. He directs all product initiatives, worldwide sales and marketing, and business enablement. He has spearheaded the journey in the e-commerce landscape for various businesses in India and the U.S.