Enterprise Resource Planning

What is ERP?

What is ERP?

Enterprise Resource Planning helps you:

  • Integrate and synchronize business processes
  • Share real-time insights through a centralized data repository
  • Automate tasks through connected workflows
  • Comply with industry and regulatory standards
  • Expedite customer service and tailor messaging
  • Analyze company financial health across departments

Integrate and synchronize business processes

Enterprise resource management (ERP) is a method of interweaving various front office and back office departments and workflows.It contains a range of capabilities, and its main purpose is to streamline operations, generate revenue and increase productivity through this connectivity.

For example, with ERP software, users could look at the budgets of different projects to help anticipate the cost of a future project. This reduces the amount of time spent negotiating for a certain spending goal. Another example would be the ability to look at the status of machines in the warehouse, along with the number of unfulfilled orders to measure optimal production speed.

ERP also ensures that everyone in a company is on the same page. If a product is out of stock or has been canceled, the sales staff could see that information in the ERP system and refrain from selling those items. Overall, ERP can help boost efficiency, increase revenue margins and reduce communication errors through the integration of various processes. ERP often includes the following workflows:

Share real-time insights through a centralized data repository

When people talk and write about ERP, the centralization of data and real-time information is one of the most prominently mentioned benefits. Because an ERP system contains data from across a business in one location, users can easily access insights from other areas of a company to inform analyses. This “desiloing” of information leads to more accurate insights and can lead to improved workflows.

For example, if the financial team has data insights on how many projects run over budget as segmented by department, this information could be easily accessed by the departments themselves without the need for the financial team to compile a special report. This increases productivity and information accessibility. In fact, some new data points might even be revealed that weren’t easily available when the information was contained on different computers and siloed by department. Alleviating the burden on other teams to compile statistical documents related to certain business aspects is a key benefit of ERP.

Automate tasks through connected workflows

Automation is a term that gets thrown around by people in the technology sphere all the time, but how can it actually work in a software system? ERP is a great example of a tool that leverages automation at its core. ERP systems are excellent candidates for workflow automation due to their emphasis on operational connectivity. Because these connections are already established, it’s relatively simple to develop automated processes.

Some automated functions might include automatic reordering of materials from a best-price vendor when inventory levels reach a set point. This helps alleviate the number of tasks that are on the plate of your staff members, therefore freeing up time for other duties that they might not have time for otherwise. ERP software often automates and streamlines financial reporting workflows. When sales orders are entered into a system, financial information can be automatically sent to the general ledger to track revenue. This also reduces keying errors and duplicate data entry issues.

Comply with industry and regulatory standards

Legal and industrial compliance are essential facets of a successful business. Many ERP vendors offer products that contain tools to help companies adhere to regulations to save money and time. Specifically, this may include quality management features that flag products that will need to be inspected further to ensure regulatory compliance.

Some vendors also allow quality managers to mark items that don’t pass inspections so that employees can go back to the drawing board and figure out what needs to be changed to meet necessary standards in the future. Here are some of the rules that ERP can help businesses comply with:

  • GAAP
  • IFRS
  • Importer Security Filing (ISF)
  • REACH
  • RoHS
  • Conflict Minerals

Expedite customer service and tailor messaging

Some ERP vendors enable users to optimize the customer experience through targeted messaging and retained sales information. By tracking the conversations that customers have had with sales representatives and the products they’ve purchased, you can improve customer experience by personalizing communications and reducing reiterative messages.

These programs can also store payment information to make the actual purchase process easier for all parties involved in a transaction. Here are some of the specific capabilities you might find in an ERP program’s CRM tool:

  • Contact Management
  • Marketing and Campaign Management
  • Email Integration
  • Pricing and Tracking
  • Salesforce Automation
  • Pricing and Tracking
  • Marketing Resource Management
  • Order Management

Analyze company financial health across departments

Financial tools are the bread and butter of ERP. Without financial data included in your system, ERP operates in a bubble that doesn’t account for actual market conditions and company standing or positioning. It’s a core tenet of ERP that is typically put into a system before any other functionality.

There is a diverse range of financial tools that vendors can include in their programs, so if you decide to purchase an ERP, it’s important to make sure that all of the features you need can be implemented into the system you buy. Here are some of the financial reporting capabilities that help make ERP such a valuable tool:

  • General Ledger
  • Accounts Payable
  • Accounts Receivable
  • Budgeting
  • Bank Reconciliation
  • Invoicing/Billing
  • Support for Multiple Currencies
  • Cash Flow Management
  • Payroll

FAQs

How Do ERP Systems Work?

ERP systems work by creating a centralized center for various business processes to operate. This system contains data from different workflows and uses this information to automate tasks and generate useful insights. Users can select the tools that they want to have included in their solutions based on their individualized business needs. These programs can be installed through different methods such as in-cloud, on-premise or hybrid deployment, making them an effective option for businesses of a variety of sizes.

How Do I Know I’m Ready for an ERP System?

There are a few key signs that your business might be ready to implement a system. Here are some of the factors that might indicate it’s time to upgrade your operations

  • Manual workarounds for business processes
  • Missed revenue opportunities due to too much on your plate
  • Customers annoyed at ineffective customer service
  • Inability to measure data across the organization
  • Large amount of time spent on tasks that should be simple

What Are the Different Types of ERP?

There a few different types of ERP deployment — on-premise, cloud-based and hybrid. The option that is best for your organization depends on factors such as needed accessibility, current workflows and level of investment. Now let’s go over the basics of these deployment methods so that you can decide which option is best for your business.

On-Premise

On-site deployment is a method of installation where the vendor or one of its partner organizations come to your company and install the software directly on staff computers. On-premise software is available to users when they are using specific devices. One of the key benefits of this deployment method is the ability to use the program when an internet connection isn’t available and an increased level of security because the platform will be hosted on your company’s own servers.

However, the initial investment required to deploy ERP software on-premise is relatively high compared to cloud-based solutions, which can be a dealbreaker for some businesses. The system also might not be available at any time and in any location due to the restrictions of on-site deployment, therefore reducing accessibility.

Cloud-Based

Cloud-based ERP allows you to access the program from any location and at any time as long as an internet connection is available. Depending on the priorities of your company and your business model, this might sound immediately attractive. The upfront cost of implementing cloud-based ERP is lower than that of an on-premise solution.

However, some businesses don’t like the idea that their information is in the hands of a different company and that it’s ultimately up to the ERP vendor to retain security. However, when considering this argument, it should be noted that cloud ERP is typically a very secure solution and that without proper privacy methods, cloud ERP wouldn’t be sustainable.

Hybrid

A hybrid deployment method is just as it seems — a mix between on-premise and cloud-based deployment strategies. With this method, companies can install core programs on-site while leveraging the cloud for additional features such as the “latest and greatest” add-ons. This helps businesses ensure consistency and reliability through the on-site portion of their package while also gaining flexibility due to the ease of adding new functions to the program.

What Are the Latest and Greatest ERP Technologies?

With the rapid development of new technologies, it makes sense for ERP vendors to follow suit and implement these new tools into their systems. Here are some of the technical abilities you might look for during the ERP selection process.

Automation

ERP is uniquely primed for automation due to its centralized business processes. This technology’s main benefit is its ability to increase productivity by reducing manual workflows. Examples of operations that can be automated include sending employees direct deposits for their work, reordering of materials based on set inventory levels and the monitoring of quality assurance to ensure adherence to industry and regulatory standards for items that you produce.

Artificial Intelligence (AI)

AI functionality can help businesses with tasks such as demand planning and forecasting to maximize revenue. This tool can look at historical data and processes to estimate the amount of goods customers will want, and then it can use this information to reduce inventory levels and product spoilage. Additionally, this tool could assist in identifying bottlenecks in the production system so that you can hasten workflows and alleviate any hindrances to your operations.

Internet of Things (IoT)

The internet of things is an extremely useful component when included as part of ERP. This technology is basically the connection of various physical objects through the internet. An example of how this looks in ERP could be through RFID tracking of objects and the monitoring of machine downtime. By connecting these devices to the internet, you can develop insights about them without being in their proximity.

ERP has a storied history. Although Gartner first introduced the term in 1990, it stems from MRP or material requirements planning systems that existed in the 1970s. MRP was focused mainly on manufacturing processes. However, users eventually started requesting integration with other tools such as finances, HR, sales and marketing. Therefore, ERP software was introduced to facilitate operations both in the front and back office. As technology changes, so does ERP. This is why it’s important to stay up-to-date with the latest features by selecting a vendor that leverages new functionality and methodology.

How Do I Select an ERP System?

When selecting an ERP that is right for you, it’s important to keep a few things in mind. You should consider your operational needs, the deployment method you seek to use, the size and industry that your company is in and your budget. These are just a few of the factors that can make or break whether or not a vendor belongs on your selection list.

The process of choosing an ERP can be arduous, which is why we at SelectHub have created an easy-to-use requirements interface to help you find the vendor that best fits your business needs. If you’re not quite ready for that, we’ve got tons of other resources to guide you along the way, whether it be our ERP Requirements Checklist or our list of ERP advantages and disadvantages.

Have a question about which software vendor is right for you? We’d love to help! Reach out to our team for individualized recommendations by messaging [email protected] or via phone at 877-692-2896.

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ERP articles are written and edited by:

Mariah Hansen

Lead Editor

As the lead editor at SelectHub, Mariah edits and manages content for more than 40 different software categories, as well as writing for a couple of them herself.

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Madeline Reinbolt

Market Research Analyst

Madeline Reinbolt is a Market Research Analyst at SelectHub. She writes content for Enterprise Resource Planning (ERP), Employee Performance Management and Recruiting.

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Thought Leaders

SelectHub has sought out and invited thought leaders to contribute to our ERP Industry articles and resources. These thought leaders ensure we deliver quality content with the most accurate information, focusing on what matters most. No thought leader is compensated for their contributions, but shares our belief that information should be democratized so everyone can make the best decision.

Laurie McCabe

Co-founder and Partner, SMB Group

Laurie brings more than 25 years of experience in the IT industry to her current role as Cofounder & Partner, SMB Group. Laurie has built widespread recognition for her insights in the small and medium business (SMB) technology market.

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Lisa Anderson

Founder and President, LMA Consulting Group

Lisa Anderson is the founder and president of LMA Consulting Group, a consulting firm that specializes in manufacturing strategy, end-to-end supply chain transformation and technology adoption that maximizes the customer experience and enables profitable, scalable, dramatic business growth.

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Eric Kimberling

CEO, Third Stage Consulting

Eric Kimberling is one of the most recognized and respected independent ERP systems experts in the world, giving unbiased advice to clients for over 20 years.

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Ed Cowsar

CEO, OspreyData

Ed’s more than 30 years of leadership and success in a variety of industries includes a unique combination of expertise and experience with product design, sales, engineering, operations, change management and innovation for technology and services firms, as well as highly-regulated industries.

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David Haimes

Senior Director, ERP Cloud Development

David Haimes is a senior director in the Oracle Cloud Applications Research and Development Organization, focusing on next-generation functional and technical architecture.

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David Dozer

CTO, Blaze IT

David Dozer is a business consulting and IT specialist with more than 15 years of experience in the enterprise software realm.

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Shelly Gore

ERP Architect, A Bigger View

Shelly Gore is CEO and co-founder of A Bigger View. For over 25 years, she successfully designed and implemented complex IT and Cloud-Based ERP systems for corporations in North America and Europe.

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Grady Brett Beaubouef

Business Value Realization Director, Oracle

Grady Brett Beaubouef is an ERP expert with 20 years of industry experience. He works as a Business Value Realization Director at Oracle

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Harsha Sarjapur

Co-founder, InfoSourcing

Harsha Sarjapur is the co-founder of InfoSourcing Inc., an ERP solution provider that assists businesses of all sizes with the implementation of ERP solutions. He has worked in the ERP industry for the last 20 years.

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Erik Kiser

CEO, Orderful

At 25 Erik started a consulting firm focused on writing EDI and B2B integrations for manufacturers. Through scaling the company he realized that there is a great opportunity to improve business for the manufacturers by providing a software hub approach.

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Chuck Langenhop

Senior Director, CFO Advisory Services

Chuck Langenhop is Senior Director with CFO Advisory Services in Richardson, Texas. His experience includes change management, process reengineering, ERP selection and implementation, and financial planning &
analysis.

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ERP Software Demo Best Practices To Reduce Vendor Confusion

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In order to narrow down the choices for an ERP software solution for your manufacturing company, it’s beneficial to utilize planning and forethought to reduce vendor confusion among your various ERP options. Due to the amount of time and effort companies spend on ERP discovery and product demonstration, effective preparation is recommended to provide maximum value and reduce the blurring of vendors during your search. Carefully planning your ERP demo assures that your company’s needs are met, your questions are answered and all requested information is available to facilitate a well-educated ERP selection.

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Discrete ERP Market Guide

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According to Statista, the ERP market is expected to reach almost $85 billion in 2021. As ERP software technology becomes more affordable and the manufacturing sector more competitive, manufacturers of all sizes are increasing their efforts to adopt enterprise resource planning (ERP) technology. For some manufacturers, this means adopting a discrete ERP. The main reasons for the high acceptance of ERP will be discussed further below.

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What is Project-Based ERP?

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Experts in software are continually asked, “Is ERP dead?” But frankly, this question isn’t very useful. As the disruption cycle shortens, ERP software vendors are continually adding the features and functionality their customers need to succeed. While one ERP may be ineffective for your company, there’s likely another that could be very beneficial. For instance, many businesses that don’t find traditional ERP useful are looking towards project based ERP.

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BPM vs ERP

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According to a 2018 BPTrends Report, 93 percent of companies are involved in multiple efforts to improve their processes. However, only 50 percent of those using a BPM software reported satisfaction with the tool. It’s possible that the other half of BPM users would be more satisfied with a different way of managing their processes, like with an ERP software. But first we need to understand the full breakdown of BPM vs ERP software.

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ERP Software Selection Criteria, Process and Vendor Checklist

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A good enterprise resource planning (ERP) system should have an impact on every single part of your business. These highly sought after enterprise applications help manage activities including planning, research and development, purchasing, supply chain management, sales, and marketing. There are countless ERP software solutions available, so it’s crucial that you make the right ERP choice that fits your organization. But do you know what the ERP selection process looks like?

Don’t worry if you’re not familiar! That’s the very reason we built this ultra-comprehensive, step-by-step guide on how to choose an ERP system. Packed with tips and recommendations, you can use this article as part of your ERP software evaluation checklist.

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ERP Functions List and Characteristics

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There’s definitely a lot of buzz surrounding ERP software these days. You might’ve heard it’s a necessary tool to stay competitive in today’s market. Or, you’ve heard how efficient it can make your business operations. But first, let’s start with something simpler. Enterprise resource planning (ERP) software is a business solution that integrates all your applications and manages your resources. So what can an ERP do specifically? To answer that question, we need to understand the basic ERP functions.

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7 Improvements from Running Back Office Management Software

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Anyone who hasn’t been involved in business for a couple of decades would be absolutely surprised by what they see if they walked back into a modern office. Today’s businesses don’t look much like those of the 1980s or even the 1990s, primarily because of new digital technologies that are changing many things about how we work and manage our commercial operations.

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Manufacturing Process Software: How It Works

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To be a successful manufacturer, you need to consistently produce at equal to, or higher than, your targeted rates. This must be achieved while staying within rigid parameters for cost and quality. In order to reach optimal levels of productivity and profitability, manufacturing processes need to be carefully enforced and perpetually monitored.

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The Future of ERP Starts with Industry 4.0

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The common impression that many have of enterprise resource planning (ERP) is based on the early functions of the systems. For example, an early function included manufacturing resource planning, which was designed to tackle a specific business process such as managing the mass production of standardized goods on assembly lines.

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Technologies That Enable a Distribution Management System

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Utility providers and related businesses use Distribution Management System (DMS) resources for several purposes related to tackling the delivery of energy to customers, as well as for other aspects of daily and long-term operations. But what falls under one of these important enterprise software umbrellas?

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The ERP Buyer’s Profile for Growing Companies

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We recently conducted interviews with 225 companies who were all looking for enterprise resource planning (ERP). The goal of this survey was simple – listen and learn from what these companies had to say about their individual decision-making strategies. We all agree that this is not a simple task. But we also agree that selecting the best ERP software is a critical factor for business success. Our intent is to analyze all these responses and present the most salient observations in a report that will help assist companies along this selection path to a successful conclusion.

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Import and Export Compliance with Distribution ERP

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For any company that distributes goods internationally, import/export compliance is a top concern. Import/export laws, standards and guidelines in various countries around the world add to complexity for these types of business processes. Customs work, accommodation of international taxes and tariffs, and significant documentation requirements often make importing and exporting rather labor-intensive.

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How ERP Evolved to SaaS

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The evolution of today’s technology happens at a lightning-quick pace, and ERP systems are no exception.  What was once an exclusively on-premise solution quickly became a cloud-based subscription service.  This evolution from on-premise business software to SaaS product was initially met with some skepticism, but quickly won them over with its enhanced features and greater flexibility.

Let’s step into the Wayback Machine and take a look at how ERP systems evolved into SaaS products.

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Key Differences Between Supply Chain Management and Enterprise Resource Planning

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When it comes time to choose or update pieces of a functional enterprise software architecture, procurement people and others responsible for evaluating this technology may be confused about what they specifically need.

One such question is on supply chain management software tools versus enterprise resource planning or ERP software products. What is the difference between supply chain management and ERP?

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5 Business Process Improvements Using Enterprise Resource Planning Software

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Making the transition from traditional management of commercial processes to enterprise resourcing planning software can be overwhelming for any business. However, it is important to understand that the profitability and growth of your business is dependent upon the quality of the processes that support it.

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SaaS ERP vs Traditional ERP: A Comprehensive Comparison of the Difference Between Them

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 Business owners have long understood the value of enterprise resource planning (ERP) software in terms of how it can handle data that’s vitally important to company activities. Nowadays, companies can optimize their ERP software usage by opting for SaaS ERP software. This software offers all of the benefits of traditional ERP software while being accessible via the cloud.
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