--- title: What is ERP (Enterprise Resource Planning)? A Comprehensive Guide --- # What is ERP (Enterprise Resource Planning)? A Comprehensive Guide Last Reviewed: March 16, 2026 20 min read [36 comments](https://www.selecthub.com/enterprise-resource-planning/how-do-erp-systems-work/#comments) [ ![Khaleel Hayes](https://www.selecthub.com/wp-content/uploads/2020/07/Khaleel-96x96.jpg) ](https://www.selecthub.com/author/khaleel-hayes/) [Written by Khaleel Hayes](https://www.selecthub.com/author/khaleel-hayes/) Technical Content Writer [ ![Hunter Lowe](https://www.selecthub.com/wp-content/uploads/2023/11/cropped-Hunter-Headshot-96x96.jpg) ](https://www.selecthub.com/author/hunter-lowe/) [Edited by Hunter Lowe](https://www.selecthub.com/author/hunter-lowe/) Content Editor [ ![Lisa Anderson](https://www.selecthub.com/wp-content/uploads/2022/08/Lisa-Anderson-96x96.jpg) ](https://www.selecthub.com/author/lisa-anderson/) [Contributions by Lisa Anderson](https://www.selecthub.com/author/lisa-anderson/) Manufacturing & Supply Chain Strategist, [Thought Leader ](https://www.selecthub.com/thought-leaders/) [ ![Shelly Gore](https://www.selecthub.com/wp-content/uploads/2019/07/shelly-96x96.png) ](https://www.selecthub.com/author/shelly-gore/) [Contributions by Shelly Gore](https://www.selecthub.com/author/shelly-gore/) Expert Contributor Table of Contents * [What Is ERP?](#What%5FIs%5FERP) * [History of ERP: A Brief Summary](#History%5Fof%5FERP%5FA%5FBrief%5FSummary) * [How ERP Works](#How%5FERP%5FWorks) * [Primary Benefits](#Primary%5FBenefits) * [Who Uses ERP?](#Who%5FUses%5FERP) * [Key Features](#Key%5FFeatures) * [Accounting](#Accounting) * [Human Resources](#Human%5FResources) * [CRM](#CRM) * [Integration](#Integration) * [Automation](#Automation) * [Data Analysis](#Data%5FAnalysis) * [Reporting](#Reporting) * [Sales and Marketing](#Sales%5Fand%5FMarketing) * [SCM](#SCM) * [Deployment](#Deployment) * [On-premise ERP](#On-premise%5FERP) * [Cloud-based ERP](#Cloud-based%5FERP) * [Hybrid ERP](#Hybrid%5FERP) * [Trends](#Trends) * [Personalization](#Personalization) * [Artificial Intelligence (AI)](#Artificial%5FIntelligence%5FAI) * [Mobility](#Mobility) * [3D Printing](#3D%5FPrinting) * [Cost and Purchasing Considerations](#Cost%5Fand%5FPurchasing%5FConsiderations) * [How Many Users Do You Want?](#How%5FMany%5FUsers%5FDo%5FYou%5FWant) * [Do You Need Add-ons or a Brand-new System?](#Do%5FYou%5FNeed%5FAdd-ons%5For%5Fa%5FBrand-new%5FSystem) * [How Big Is Your Company?](#How%5FBig%5FIs%5FYour%5FCompany) * [Which Deployment Option Is Best for You?](#Which%5FDeployment%5FOption%5FIs%5FBest%5Ffor%5FYou) * [How Big Is Your Budget?](#How%5FBig%5FIs%5FYour%5FBudget) * [Software Selection Tips](#Software%5FSelection%5FTips) * [Implementation Steps](#Implementation%5FSteps) * [Moving Forward](#Moving%5FForward) Think of [enterprise resource planning](https://www.selecthub.com/category/enterprise-resource-planning/), aka ERP, as a pizza. Each slice represents one set of modules that serves a specific company department. Most people like [ERP software](https://www.selecthub.com/c/erp-software/) because it serves more than one industry. However, vendors also make ERP tailored to specific industries and operations. [Get our ERP System Requirements Template](https://pmo.selecthub.com/erp-requirements-template-site-vers/) This guide covers what an ERP is and its history, top benefits, standard features, deployment options, industry trends, cost and purchasing considerations, selecting the right ERP for your business and setting up an implementation plan. ## What Is ERP? An ERP system is a solution that consists of functions and modules for several company departments or a solution that caters to one area. These departments range from [accounting](https://www.selecthub.com/category/enterprise-resource-planning/accounting/), [manufacturing](https://www.selecthub.com/category/manufacturing/) and [customer relationship management (CRM)](https://www.selecthub.com/category/customer-relationship-management/) to [supply chain management (SCM)](https://www.selecthub.com/category/supply-chain-management/), [product lifecycle management (PLM)](https://www.selecthub.com/category/plm/) and more. ERP stands for enterprise resource planning. But there’s another coinciding part of this ERP definition. ERP can integrate with other solutions to keep your data in one centralized location. This system also automates repetitive tasks so you can focus on high-priority responsibilities. An enterprise resource planning system is a suite of integrated applications for managing, automating and connecting key business processes. Lisa Anderson, Founder and President of [LMA Consulting Group](https://www.lma-consultinggroup.com/), expanded on the centralization point of our ERP meaning: ![Lisa Anderson]() In addition to your comments about using a centralized database to reduce manual labor and simplify workflows, I think it is important to note that having a centralized database and process enables consistency of business processes, and more importantly, reliable levels of service to customers. Lisa Anderson Founder and President, LMA Consulting Group ### History of ERP: A Brief Summary Enterprise resource planning software has existed since the 1960s. Here’s a brief timeline of ERP from its preliminary stages to its existence in the 21st century. * **1960s:** The ERP methodology evolved into automated systems to manage ERP processes, which began to pop up in the 1960s in response to the growing factory industry. * **1972:** SAP released its first solution for real-time data processing, effectively pioneering ERP automation. Over the next two decades, technology advanced, and ERP became increasingly popular. * **1990s:** ERP adoption increased steadily into the twenty-first century. The rise of the Internet required vendors to adapt – and the cloud ERP system came along. * **Present:** Today, cloud computing dominates the enterprise resource planning delivery model. Mobile apps allow users to leverage system capabilities on the go. ### How ERP Works An enterprise resource planning system generally uses a centralized database for various business processes to reduce manual labor and simplify existing business workflows. An ERP typically contains dashboards where users can review real-time data from across the business to measure productivity and profitability. For example, an [SCM solution](https://www.selecthub.com/c/supply-chain-management-software/) might receive a customer order and automatically send that information to the distribution center for prompt fulfillment. If you ever noticed that your package return addresses from vendors aren’t always the same, you have likely seen the result of this technology firsthand. Depending on the ERP system you select, the solution may examine inventory levels, shipment times and other factors to decide which distribution center can complete an order in a timely and cost-efficient way. Without an ERP, department data is siloed and experiences company-wide access problems. An enterprise resource planning system enables multiple departments to share and visualize business information in a centralized location. This wealth of information and simplification can assist in the development of business goals and automate tasks to boost employee productivity. Anderson emphasizes: ![Lisa Anderson]() I think it is important to understand how ERP systems work in that a key benefit of an ERP system is the concept of a single source of information or truth. A compelling reason clients upgrade to an ERP system is to not have to work with multiple disparate sets of data; instead, it unites everyone on a single source. Lisa Anderson Founder and President, LMA Consulting Group Next on our agenda is an ERP’s benefits. [Get our ERP Software Requirements Template](https://pmo.selecthub.com/erp-requirements-template-site-vers/) ## Primary Benefits Enterprise resource planning has plenty of [advantages and disadvantages](https://www.selecthub.com/enterprise-resource-planning/erp-advantages-and-disadvantages/). Here are some perks of owning an ERP system: ![ERP Software Benefits]() * **Enhances Business Reporting:** Generate several required reports and files to manage orders, KPIs, transactions, profits, losses and more. * **Boosts Customer Relationships:** Leverage standalone [CRM software](https://www.selecthub.com/c/crm-software/) or equipped modules to manage client satisfaction rates, retention and other data to build better relationships for current and prospective consumers. * **Saves Money:** Automation, as aforementioned, expedites repetitive tasks to ensure you focus on other assignments. This newfound focus boosts productivity and revenue while saving time and money. * **Provides Real-time Data and Cloud Security:** Obtain real-time data for KPIs, bottlenecks, inventory levels and more. Vendors offer numerous security tactics when you invest in cloud software to safeguard information, such as [multi-factor authentication](https://support.microsoft.com/en-us/topic/what-is-multifactor-authentication-e5e39437-121c-be60-d123-eda06bddf661), user access levels, data encryption and more. * **Boosts Productivity:** Increase efficiency by automating tasks and receiving real-time data to detect and address workflow bottlenecks. * **Expands Collaboration:** Leverage an enterprise resource planning system to build internal communication and collaboration with leaders, stakeholders, teammates and more to keep everyone on the same page. * **Offers Compliances:** Maintain local and global industry regulations and compliances, i.e., [FDA](https://www.fda.gov/), ISO and more, to avoid immediate business shutdowns or lawsuits. [Get our ERP Requirements Template](https://pmo.selecthub.com/erp-requirements-template-site-vers/) ## Who Uses ERP? Small businesses and mega-corporations use ERP to streamline their workflows. Software providers tailor ERPs to meet [specific industry needs](https://www.selecthub.com/enterprise-resource-planning/erp-manufacturing-industries/). Some common industries include: * Retail * Manufacturing * Pharmaceutical * [Distribution](https://www.selecthub.com/category/distribution/) * Technology * Hospitality * Construction * Aerospace and Defense Depending on the vendor, you can personalize or configure software as necessary for your workflows. For example, many pharmaceutical companies that use ERP supervise legal regulations through their enterprise resource planning system, allowing them to update their workflow accordingly. Another example of ERP with industry-specific tools is a platform with [distribution](https://www.selecthub.com/c/distribution-software/) and [manufacturing tools](https://www.selecthub.com/c/manufacturing-software/). Utilizing these functionalities means fewer customizations or configurations to get the system running. Thus far, we’ve learned what an ERP is, its history, how it works, its benefits and who uses it. Next, we’re getting more technical with an introduction to ERP system features. ## Key Features One of ERP’s main selling points is the array of available features across systems. Because the central premise of an ERP is how these various modules interact with one another to generate actionable insights and perform business functions, it’s essential to verify if a vendor includes the primary and specialized features needed to streamline your business operations. ![Common Features of ERP]() Add-on modules can also fuse with your current enterprise resource planning system. Add-ons can determine if you need a new system or additional functionality for specific business needs. Some vendors offer a modular application, meaning you never have to choose a solution with unnecessary “core” capabilities. Anderson raised a point about modularity: ![Lisa Anderson]() . . .the advantage of this modularity and configurability is that it allows smaller companies to step into ERP slowly, yet most ERPs are scalable to grow with their business. Lisa Anderson Founder and President, LMA Consulting Group Some standard ERP features range from accounting and CRM to automation and HR. [Compare Top Enterprise Resource Planning System Leaders](https://pmo.selecthub.com/top-erp-software-site-vers/) ### Accounting Reduce the time your accountants spend on tedious tasks, such as manually inputting receipt information from expense reports. With an automated and integrated [accounting system](https://www.selecthub.com/c/construction-accounting-software/), you can automatically send invoices to clients with outstanding balances. This system pulls from customer history to automatically fetch contact information and the amount owed before invoicing the client. ![Invoice Management Example in ERP Software]() An example of an accounting software interface. This module is beneficial because it can look at operating costs to determine profitability and forecast potential revenue growth. You can also merge your ERP with [payroll software](https://www.selecthub.com/c/payroll-software/)to govern employee payments. ### [Human Resources](https://www.selecthub.com/category/hris/) Maintain candidate applications, employee PTO and bonus allocation, among other tasks, with the ideal [HR tools](https://www.selecthub.com/c/hr-management-software/). One ideal way to use HR functions is automatically reimbursing employees for leftover PTO at the end of the year by integrating this system with your accounting program. This function works by automatically looking at excess PTO days for employees across the company, calculating how much is owed and using employee bank account information to submit payments. ### CRM CRM tools boost customer relationships with your company and ensure a flawless experience. This module can analyze customer browsing and purchasing history to send targeted ads for products they may find interesting. It can also keep customers in the loop about order statuses. ![Microsoft Teams Dashboard]() A preview of CRM software. Think about the Domino’s Pizza screen that displays where your meal is in the cooking process. Buyers appreciate updates on the status of their purchases, as it indicates legitimacy and customer care. [Compare Top ERP Leaders](https://pmo.selecthub.com/top-erp-software-site-vers/) ### Integration It’s highly likely that your company already uses software in its day-to-day operations, whether it be [QuickBooks](https://www.selecthub.com/p/accounting-software/quickbooks-online/) for accounting or [Salesforce](https://www.selecthub.com/p/crm-software/salesforce/) for CRM. ERP integration allows you to combine your current software with your new ERP for a holistic approach. When browsing for ERP integration opportunities, notice if potential vendors offer customizable or configurable products. These words can make or break a possible option. Customizable solutions allow you to amend codes to add specific capabilities and features. Configuration offers software personalization without coding. Customization is a more labor-intensive process than implementing configuration requirements. Depending on your IT and development resources, you may prefer a configurable solution over a customizable one or vice versa. One of the reasons that integrations fail in the ERP experience is lacking plans for customization, budget setting and an IT resource allocation strategy. To push for successful integrations, create goals and employ foresight when analyzing solution options. For example, ask yourself, “Can I afford the base enterprise resource planning system and the specific features that I need?” If the answer is no, start looking at lower-cost options, add-on modules or pushing back your timeframe for ERP implementation. ### Automation As discussed in the benefits section, automating routine tasks saves time and money while boosting productivity. For example, you could own an on-demand bakery. Your ERP can track orders, recipes, inventory and more. This system can also allocate invoices and perform bank reconciliations to ensure transactions are correct and your clients pay for your products promptly. ### Data Analysis Whether you leverage [business intelligence (BI)](https://www.selecthub.com/c/business-intelligence-tools/) or [business analytics (BA)](https://www.selecthub.com/c/business-analytics-tools/) tools, you can manage all KPIs and performances in real time. You can access reports and dashboards for current numbers if you want to understand on-time delivery rates for all of your baked goods in your on-demand bakery. You can also supervise obstacles on your production floor, supply chain or inventory and rectify them expeditiously. ![BI Tool Interface Example]() An example of a BI interface. ### Reporting Whether you invest in simple or [enterprise reporting software](https://www.selecthub.com/c/enterprise-reporting-system/), you can generate numerous documents for evaluation and to make better business choices, from profit and loss, employee turnover rates, projected vs. actual budgets, etc. Some outstanding [features and requirements](https://www.selecthub.com/business-intelligence/enterprise-reporting/reporting-tools-features-requirements/) that this module offer includes: * Tables * Infographics * Formatting * Real-time Updates * Themes * Invoices * Metric Reports ### Sales and Marketing It’s not a walk in the park to maintain sales or marketing departments. You have to manage numerous email and other promotional campaigns. You also want to know if you’re reaching the right audience and if they’re interacting with your ads.[ Marketing automation (MA) software](https://www.selecthub.com/c/marketing-automation-software/) is one way to supervise these and other marketing strategies. ![Traffic Analytics in HubSpot]() A preview of MA software. Some ideal [requirements](https://www.selecthub.com/marketing-automation/marketing-automation-requirements-and-features-list/) to look for in this solution are: * Landing Pages * Lead Management * Campaign Management * Lead Scoring * Email Marking * CRM Integration ### SCM Lastly, SCM software allows you to supervise every aspect of your supply chain. You can also rate vendors to determine if they’re the right fit for your company. Suppose you’re running your bakery and notice some products don’t make it to customers on time, or that you have missing goods on certain routes. In this case, you can review supply chain analytics to gauge if certain distributors are stealing your merchandise. Some ideal [requirements](https://www.selecthub.com/supply-chain-management/supply-chain-management-software-features-requirements/) to consider when buying this add-on are: * Warehouse Management * Transportation Management * Collaboration * Order Processing * [Inventory Management](https://www.selecthub.com/c/inventory-management-software/) Next, we’re going to explain ERP deployment. Deployment is another critical factor when selecting an ERP; you should review your requirements to decide which method is best. [Get our ERP Requirements Template](https://pmo.selecthub.com/erp-requirements-template-site-vers/) ## Deployment Obtain on-premise, cloud or hybrid deployment for your enterprise resource planning system. Some vendors offer all three options, but many are shifting to cloud-based systems only. This shift is in response to [ERP trends](https://www.selecthub.com/enterprise-resource-planning/erp-trends/) because there’s an ever-increasing demand for cloud, and SaaS, ERP. ### On-premise ERP You can install this deployment option directly onto company servers and hardware. On-premise also means you must host and maintain your ERP with updates and maintenance as necessary. On-premise may be your best option if you have a few locations or a single space. ### Cloud-based ERP Vendors host this deployment option on the web via third-party servers, allowing you to access the solution anytime via a reliable internet connection. Typically, a cloud-based vendor distributes updates and handles system maintenance. There are a variety of [cloud-based deployment and hosting options](https://azure.microsoft.com/en-us/resources/cloud-computing-dictionary/what-are-private-public-hybrid-clouds/#overview) available. * **SaaS (software-as-a-service) ERP:** A subscription-based option, meaning you pay a monthly fee depending on the number of users you have. * **Private Cloud:** Hosted on your on-site data center or via a third-party service provider. * **Public Cloud:** Managed by third-party cloud service providers and delivered through the Internet. A cloud ERP carries several advantages. First and foremost, users can access the system anytime on any mobile device while on the go, and it doesn’t require complex infrastructures. Cloud vendors periodically distribute updates and maintenance fixes, so the system is always up-to-date. As a result, cloud ERP users save time and money with these easy-to-use systems. Shelly Gore, CEO and co-founder of [A Bigger View](https://www.abiggerview.com/), advocated cloud deployment. ![Shelly Gore]() An ideal cloud ERP solution only requires an internet connection and a web browser. This not only increases an organization’s effectiveness by enabling employees to work remote, it also facilitates remote support of their system. Shelly Gore CEO and co-founder, A Bigger View Gore explained enormous cloud deployment benefits. ![Shelly Gore]() Companies can hire the best consultants from anywhere in the world to support their operations, which can in turn be anywhere. My team currently supports corporations in 24 U.S. states and three international countries. Our team is, in turn, distributed over nine states and two countries. In the past, with on-premise solutions, this was impossible. Shelly Gore CEO and co-founder, A Bigger View [ReportLinker](https://www.reportlinker.com/p06306143/Cloud-ERP-Market-Research-Report-by-Component-Function-Type-Organization-Size-Verticals-Region-Global-Forecast-to-Cumulative-Impact-of-COVID-19.html?utm%5Fsource=GNW) predicts the global cloud ERP market will reach $66.87 billion in 2027. ### Hybrid ERP This merge of cloud and on-premise deployments offers a combination of hosting services, allowing you to dictate your own ERP experience. Whether you want to access data on the go from your phone or tablet or host the system on your HQ servers, you can find the option that best meets your company’s needs. [Compare Top ERP Leaders](https://pmo.selecthub.com/top-erp-software-site-vers/) ## Trends Some hesitate when investing in technological trends. They’re afraid they can’t understand specific trends or the machinery doesn’t align with their business needs. Remember that investing in all new technology isn’t wise. Like an ERP system, not all trends will meet your criteria. It’s best to find mechanisms that coordinate with your practices. ![ERP Trends]() Here are a few trends to consider: ### Personalization The idea of “what is ERP system?” has changed since its first iteration in the 1960s. In the beginning, ERP served the manufacturing industry with [material requirements planning (MRP) software](https://www.selecthub.com/enterprise-resource-planning/standalone-material-requirements-planning-software/). Then, the solution evolved into a one-size-fits-all platform with modules for accounting, CRM, distribution, SCM and more. This all-in-one model was ideal for enterprises but not for small, mid-sized or companies that serve specific practices. Soon, vendors started offering numerous solutions that you can customize as needed to fit your objectives. Like Burger King, you want a have-it-your-way solution, not a cookie-cutter platform that only broadly covers each department. ### Artificial Intelligence (AI) Believe it or not, AI exists in our everyday lives. When you ask Google, Siri or Alexa to tell you the weather, order a pizza or give or give you directions to the nearest grocery store, AI listens and provides the ideal response. If you can leverage AI in your home, why not implement it in your ERP or business machinery? This trend already dominates [accounting](https://www.selecthub.com/enterprise-resource-planning/accounting/accounting-automation/) and [manufacturing](https://www.selecthub.com/manufacturing/manufacturing-trends/) by automating routine tasks, i.e., sending invoices, balancing general ledgers, performing bank reconciliations and more. [ReportLinker](https://www.reportlinker.com/p05478480/Global-Artificial-Intelligence-AI-Industry.html?utm%5Fsource=GNW) expects the global AI market to reach $341.4 billion in 2027. ### Mobility Accessing your ERP on phones, tablets and other devices helps you stay in the loop of production rates, profits, vital KPIs, issues and additional critical information. As long as you have a strong internet connection, you can check your numbers as you travel to different company locations or perform business negotiations across global regions. ### 3D Printing Lastly, 3D printing enables manufacturers to create exclusive products or workpieces in hours or days instead of months, boosting productivity tenfold. You also reduce waste. [Fortune Business Insights](https://www.fortunebusinessinsights.com/industry-reports/3d-printing-market-101902) forecasts the global 3D printing market will reach $83.90 billion by 2029. [Compare Top ERP Leaders](https://pmo.selecthub.com/top-erp-software-site-vers/) ## Cost and Purchasing Considerations Many factors and considerations affect an [ERP’s cost](https://www.selecthub.com/enterprise-resource-planning/erp-cost/), such as the number of users, deployment options, company sizes and more. ### How Many Users Do You Want? Who intends to use your enterprise resource planning platform? Are you leaving it up to your IT personnel, or do you plan on letting your department leaders use it too? The more users, the higher the price. Developing a user target range will help you know which solution you’re searching for and how much it will amount to your [total cost of ownership (TCO)](https://www.investopedia.com/terms/t/totalcostofownership.asp). ### Do You Need Add-ons or a Brand-new System? This question can make or break your ERP system selection process. Ask yourself: If your refrigerator’s ice maker stopped working and you couldn’t fix it, would you replace the entire fridge, or would you get a new ice maker? Depends. If your current ERP system tackles manufacturing, SCM, CRM and accounting, but you’re lacking [PLM tools](https://www.selecthub.com/c/plm-software/), you’d likely look for PLM modules that integrate with your current system. If your current ERP is an outdated legacy system or the vendor no longer provides updates, you’d likely want to invest in a brand-new system. ### How Big Is Your Company? Are you a family-generation corner shop or a global enterprise with several locations? Are you looking to grow in the next five to 10 years, or do you want to downsize? ERPs no longer exclusively follow a one-size-fits-all infrastructure. You can ask vendors if their software caters to small or mid-sized companies. There are scalable solutions that grow as our company adds more employees and machinery. ### Which Deployment Option Is Best for You? As aforementioned, you can choose an on-premise, cloud or hybrid deployment model. Typically, on-premise solutions are more expensive, while cloud solutions offer subscription plans. Hybrid options can be pricey, depending on the vendor. Knowing your deployment can affect your TCO positively. ### How Big Is Your Budget? How much are you willing to spend on an ERP? Shopping for a new system is similar to buying an appliance or vehicle. You may have to invest considerably, but it’ll be worthwhile in the long run. Some solutions can cost anywhere from a few hundred to $100,000, depending on the vendor, modules, implementation process and more. ## Software Selection Tips If you Google ERP [software selection tips](https://www.selecthub.com/miscellaneous/technology-selection/software-selection-tips/), you’ll get a wide range of methodologies and steps to ensure a smooth software selection process. You may see 12 stages here, five steps there or 100 common mistakes when picking the suitable ERP. ![ERP]() At SelectHub, we offer a straightforward, nine-step methodology called [Lean Selection](https://www.selecthub.com/miscellaneous/technology-selection/software-evaluation/). This methodology helps you understand that software selection is a collaborative, analytical process. Here’s a brief overview of each step in the Lean Selection process and how it can help your company find the ideal ERP solution: 1. **Establish:** Ask yourself why you need a new solution. Are you not meeting productivity numbers? Are you losing production time because of repetitive tasks? Admitting your problems is the first step to finding resolutions. 2. **Collaborate:** Develop a software selection committee to help you understand what your company needs in functionality and deployment terms. Gather department leaders (accounting, marketing, CRM, etc.), colleagues, internal and external stakeholders, power users and more. After all, more heads are better than one. 3. **Define:** Sit down with your committee to list and prioritize much-needed requirements. Allow everyone to have input. 4. **Distribute:** Compare potential vendors with your [requirements list](https://pmo.selecthub.com/erp-requirements-template-site-vers/) to evaluate how well they stack up with your needs. 5. **Justify:** Shortlist vendors and ponder: Do you need a new system or add-ons for your current system, or should you end your software selection quest? 6. **Prove:** Whether you’re looking for add-ons or a brand-new solution, you can reach out to potential vendors and establish demos, use cases or proofs-of-concept (POCs). POCs give you a simulated experience based on a current or previous system user but is typically more expensive. 7. **Rank:** Score and classify vendors based on how well their software performs your desired functionality. The higher the score, the likelier you’re willing to choose a particular vendor. 8. **Negotiate:** After reviewing your demo scores and ranked list, sit down with your ideal vendor (note that this process should help you find at least two or three potential vendors you want to implement) to review their contracts and agreements. Have your legal team review the contract if it feels sketchy. If you disagree with the contract, move to your next vendor and repeat this step. 9. **Sign:** Once you’ve agreed with your ideal vendor, sign your contract and develop an effective [implementation plan](https://www.selecthub.com/enterprise-resource-planning/whats-best-way-implement-erp/). [Compare Top ERP Leaders](https://pmo.selecthub.com/top-erp-software-site-vers/) ## Implementation Steps Typically, implementations go wrong because they go over budget, they lack the right team to perform the task, people have far-fetched expectations or they lack a solid implementation plan. It’s vital to sit down with vendors and your internal team to establish a strategy. 1. **Define a Budget:** Set a reasonable budget. Allot some extra money in case delays or additional needs arise. 2. **Establish Data Migration:** Ensure you move all of your essential data to this solution. Any mistake can lead to misinformation about certain company aspects, such as inventory, finances and more. 3. **Set Up Training:** If you haven’t already, train and get your users acclimated to the system. Ask vendors if they offer helpful tips, reading material and training guides to help your business learn and utilize the system at total capacity. Training can be time-consuming, but you’ll see a higher return on investment (ROI) once acclimated. 4. **Perform System Tests:** Conduct system tests to ensure modules perform at optimal levels. This step is also a time to ensure your integrations work correctly and that the system can operate in your routine workflows. 5. **Go-live and Perform Post-go-Live Tasks:** Launch your system and evaluate its performance. Review employee and overall productivity, customer satisfaction rates and other crucial KPIs. ## Moving Forward ERP software is a versatile, widely-implemented solution that many companies use to facilitate business processes. You can tailor solutions to align with your specific needs and existing systems you already use, thanks to numerous customization and configuration options. Review our in-depth [comparison guide](https://pmo.selecthub.com/top-erp-software-site-vers/) and requirements template for more ERP solutions and modules. What additional questions do you have about how an ERP works? 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Contributions from Khaleel Hayes, Hunter Lowe, Lisa Anderson, and Shelly Gore. ## About the Contributors The following SelectHub team members and subject matter experts helped research, create, and review this content. [ ](https://www.selecthub.com/author/khaleel-hayes/) Written by [Khaleel Hayes](https://www.selecthub.com/author/khaleel-hayes/) Technical Content Writer Khaleel Hayes is a Technical Content Writer for SelectHub, with over 4 years of experience crafting content for manufacturing, PLM, ERP and technology selection audiences. He's also a freelance writer in his spare time. His body of work includes poetry, short plays, feature articles and film reviews either self-published or in Denver publications. He graduated with a B.A. in Journalism and an English minor from Metropolitan State University of Denver in May 2018\. When not writing, he enjoys classic movies and music, tasty burgers, tasteful bookstores, and breathtaking art and photography. [See Full Bio](https://www.selecthub.com/author/khaleel-hayes/) [ ](https://www.selecthub.com/author/hunter-lowe/) Edited by [Hunter Lowe](https://www.selecthub.com/author/hunter-lowe/) Content Editor Hunter Lowe is a Content Editor, Writer and Market Analyst at SelectHub. His team covers categories that range from ERP and business intelligence to transportation and supply chain management. Hunter is an avid reader and Dungeons and Dragons addict who studied English and Creative Writing through college. In his free time, you'll likely find him devising new dungeons for his players to explore, checking out the latest video games, writing his next horror story or running around with his daughter. [See Full Bio](https://www.selecthub.com/author/hunter-lowe/) [ ](https://www.selecthub.com/author/lisa-anderson/) Contributions by [Lisa Anderson](https://www.selecthub.com/author/lisa-anderson/) Manufacturing & Supply Chain Strategist [![Thought Leader Program Member](https://www.selecthub.com/display/images/thought_leader_std.svg)](https://www.selecthub.com/thought-leaders/) Lisa Anderson is the founder and president of LMA Consulting Group Inc., a consulting firm specializing in manufacturing strategies and supply chain transformation that optimizes customer experiences and initiates profitable, extendable business growth. [See Full Bio](https://www.selecthub.com/author/lisa-anderson/) [ ](https://www.selecthub.com/author/shelly-gore/) Contributions by [Shelly Gore](https://www.selecthub.com/author/shelly-gore/) Expert Contributor Shelly Gore is an ERP, Netsuite and IT expert for A Bigger View, a global network of IT and business professionals and innovation systems group (ISG) that covers the most current trends, including Netsuite and cloud-based technologies. Gore has expertise in several industries and business processes, including manufacturing, distribution, retail, construction, logistics and travel, life sciences, and professional services. [See Full Bio](https://www.selecthub.com/author/shelly-gore/) Khaleel HayesSAP vs. Oracle: Which ERP Software is the Winner in 2026? * ‹ * › ### Conversation (36) ![Avatar](https://secure.gravatar.com/avatar/281d3616cf761f3582c0d76c23517846?s=32&d=mm&r=g) Write a response [Cancel reply](https://www.selecthub.com/enterprise-resource-planning/how-do-erp-systems-work/?trk=article-ssr-frontend-pulse%5Flittle-text-block#respond) Your message Your name \* Your email \* Website Save my name, email, and website in this browser for the next time I comment. * ![Avatar photo](https://secure.gravatar.com/avatar/f4c9db453a7f364b7c7c554ded8a5a61558a995bdb6dda5092bfb654c07e5dd1?s=96&d=mm&r=g) #### **Eleni Maleviti** \- November 5, 2021 Dear Madeline Reinbolt, Thank you for sharing your knowledge about ERP. ” One thing I know, is that I know nothing.” Joy and health to all in SelectHub. **[Reply](#comment-96460)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Khaleel-48x48.jpg)](https://www.selecthub.com/author/khaleel-hayes/) #### **Khaleel Hayes** \- November 8, 2021 Thanks for reading, Eleni! **[Reply](#comment-97181)** * ![Avatar photo](https://secure.gravatar.com/avatar/f86ab53f6444f3c659ba5781bd77fa3a3ce77ea1d154c4b9f2c70a852e21e74b?s=96&d=mm&r=g) #### **Fidelis Esemene** \- October 16, 2021 I attended an enterprise meeting yesterday on ERP and the vendor to adopt its solution. It all looked unclear to me but now I understand better. This article is a complete breakdown of ERP Thanks. **[Reply](#comment-93314)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Khaleel-48x48.jpg)](https://www.selecthub.com/author/khaleel-hayes/) #### **Khaleel Hayes** \- October 18, 2021 Thanks for reading, Fidelis! **[Reply](#comment-93632)** * ![Avatar photo](https://secure.gravatar.com/avatar/2dbba4d2b8b3fe1b2a3ccb4ab324fcccd3e44500212a9794ba9ba08fcea07c9a?s=96&d=mm&r=g) #### **Charles** \- July 16, 2021 This is the right website for anyone who wants to find out about this topic. You know so much its almost tough to argue with you (not that I actually would want to…HaHa). You certainly put a new spin on a topic which has been written about for a long time. Excellent stuff, just great! **[Reply](#comment-80656)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Khaleel-48x48.jpg)](https://www.selecthub.com/author/khaleel-hayes/) #### **Khaleel Hayes** \- July 19, 2021 Thanks for reading, Charles. **[Reply](#comment-81108)** * ![Avatar photo](https://secure.gravatar.com/avatar/02504a8b94d28b228ac4821f0c7ecc470160927da47b73668a801b8ea1901678?s=96&d=mm&r=g) #### **Dipo** \- June 17, 2021 This was very informative now i understand the full picture **[Reply](#comment-76028)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Khaleel-48x48.jpg)](https://www.selecthub.com/author/khaleel-hayes/) #### **Khaleel Hayes** \- June 21, 2021 Thanks for reading! **[Reply](#comment-76653)** * ![Avatar photo](https://secure.gravatar.com/avatar/b55e594c60093126a3056afd4fb611cf0592bae81239ba84a78430058cf97242?s=96&d=mm&r=g) #### **Eliza Evie** \- May 20, 2021 its very Informative **[Reply](#comment-71873)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Khaleel-48x48.jpg)](https://www.selecthub.com/author/khaleel-hayes/) #### **Khaleel Hayes** \- May 20, 2021 Thanks for reading, Eliza! **[Reply](#comment-71959)** * ![Avatar photo](https://secure.gravatar.com/avatar/fb8ac3067f4778271c1137a9c75c29d3a2d4833905ce2d3ed8a35dabc88b11e2?s=96&d=mm&r=g) #### **Shayur Maharaj** \- April 14, 2021 As somebody working as a marketing analyst within an SaaS company, understanding ERP is vital! Thanks for sharing this piece and drop so much knowledge in such an easy to understand piece. **[Reply](#comment-68526)** * ![Avatar photo](https://secure.gravatar.com/avatar/4a87d839a6e213231717e63d310bb8bb00d1d218d855a5404549e556965a46a4?s=96&d=mm&r=g) #### **Jaber Hussain** \- March 21, 2021 It is so much helpful to understand ERP help to customize our system…thanks for sharing **[Reply](#comment-65428)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Khaleel-48x48.jpg)](https://www.selecthub.com/author/khaleel-hayes/) #### **Khaleel Hayes** \- March 22, 2021 Thanks for reading, Jaber! Glad you found this article helpful. **[Reply](#comment-65545)** * ![Avatar photo](https://secure.gravatar.com/avatar/86d0a8ae8612d054edcf9b6069568e424a7b1d1ca148151df89186a9b70d6264?s=96&d=mm&r=g) #### **Binod Kumar** \- March 15, 2021 how to prepare the PQ of ERP software **[Reply](#comment-64745)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Khaleel-48x48.jpg)](https://www.selecthub.com/author/khaleel-hayes/) #### **Khaleel Hayes** \- March 15, 2021 Thank you for sharing, Binod. **[Reply](#comment-64789)** * ![Avatar photo](https://secure.gravatar.com/avatar/04c76d2825529849fa3bb53539e96e09e54a24499fe1367575347fa15d7a3229?s=96&d=mm&r=g) #### **John Lee** \- November 8, 2020 This is great after I visiting your site I learned a lot about ERP software It’s very helpful and useful information. Thank you. **[Reply](#comment-52950)** * ![Avatar photo](https://secure.gravatar.com/avatar/3e0aea7aabb3a2afef3a66acbad1a99c8d19481dea767b6bb15c8175899d6093?s=96&d=mm&r=g) #### **hana** \- November 7, 2020 how an ERP can connect and integrate the revenue, expenditure, human resources/payroll, and financing cycles of a business. **[Reply](#comment-52829)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Madeline-48x48.jpg)](https://www.selecthub.com/author/madeline-reinbolt/) #### **Madeline Reinbolt** \- November 18, 2020 Hi Hana, thanks for leaving us a comment! **[Reply](#comment-54090)** * ![Avatar photo](https://secure.gravatar.com/avatar/b399b91abe041952ab4317867c35c3aa9b19680b5656aec6948ef149675b9d96?s=96&d=mm&r=g) #### **Personal Tax Accountant Auckland** \- November 5, 2020 I am so happy I found your blog and I absolutely love your information about how do erp systems work! I liked and it is wonderful to know about so many things that are useful for all of us! Thanks a lot for this amazing blog!! **[Reply](#comment-52626)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Madeline-48x48.jpg)](https://www.selecthub.com/author/madeline-reinbolt/) #### **Madeline Reinbolt** \- November 18, 2020 Hi Stuart, we’re so glad this article was helpful to you! **[Reply](#comment-54091)** * ![Avatar photo](https://secure.gravatar.com/avatar/d728549c04adbf96b177839bde28822908972a4a604c8091a5dfd1fd52b22684?s=96&d=mm&r=g) #### **James Link** \- October 29, 2020 More detailed information and guidance regarding ERP was found here. Maybe this article may motivate businesses to switch to ERP systems. Thanks for sharing in-depth information about ERP systems in your article. **[Reply](#comment-52121)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Madeline-48x48.jpg)](https://www.selecthub.com/author/madeline-reinbolt/) #### **Madeline Reinbolt** \- November 18, 2020 Thanks for reading, James! **[Reply](#comment-54098)** * ![Avatar photo](https://secure.gravatar.com/avatar/61833eaa8e6dd9e85ab555e8e69a4b96f2d5d5af21cb866953c96d757c67d4e1?s=96&d=mm&r=g) #### **EOS Teknologi** \- August 28, 2020 Thank you, very useful and allow references on site **[Reply](#comment-45412)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Madeline-48x48.jpg)](https://www.selecthub.com/author/madeline-reinbolt/) #### **Madeline Reinbolt** \- September 2, 2020 Thanks for reading, EOS Teknologi! **[Reply](#comment-46133)** * ![Avatar photo](https://secure.gravatar.com/avatar/19d82d030caf57650c772d3bea29787c42cdd449d0431fb9f9df880c593778d1?s=96&d=mm&r=g) #### **Nithyashree** \- April 18, 2020 It is very informative fr students Thank you **[Reply](#comment-34817)** * ![Avatar photo](https://secure.gravatar.com/avatar/cfdc2b1079ef743a602bf012795fb7d0172a8e8b4562fac6c88af79947619361?s=96&d=mm&r=g) #### **William Gonzalez** \- April 5, 2020 Outstanding informative piece on ERP. Thank you. W.A.G **[Reply](#comment-34117)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Madeline-48x48.jpg)](https://www.selecthub.com/author/madeline-reinbolt/) #### **Madeline Reinbolt** \- April 21, 2020 Thanks for reading, William! **[Reply](#comment-34969)** * ![Avatar photo](https://secure.gravatar.com/avatar/cd91327652fc8450c0a20767514047158e839ea33e5ecf0ed0d39fa5f856868a?s=96&d=mm&r=g) #### **Kwabena Nhyira** \- March 20, 2020 Wow I had little knowledge on ERP, but after visiting your site , i have learnt a lot. very helpful information **[Reply](#comment-33240)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Madeline-48x48.jpg)](https://www.selecthub.com/author/madeline-reinbolt/) #### **Madeline Reinbolt** \- March 23, 2020 I’m so glad our website was helpful to you, Kwabena! **[Reply](#comment-33414)** ![Avatar photo](https://secure.gravatar.com/avatar/d0cd3ee2d0e958063ace21a63109e19cc5334e67b123aa0480c90ca13093ec35?s=96&d=mm&r=g) #### **Sunday** \- June 18, 2020 Can erp be use in a church **[Reply](#comment-39419)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Madeline-48x48.jpg)](https://www.selecthub.com/author/madeline-reinbolt/) #### **Madeline Reinbolt** \- September 2, 2020 Sunday, ERP software can be used to manage operations at a church. Fill out our requirements template: or give us a call at 855-850-3850 for more help. **[Reply](#comment-46136)** * ![Avatar photo](https://secure.gravatar.com/avatar/99180524eb44e2a681c365aa980f24e86873da9f94b7f02f9c331ce12abbe5f5?s=96&d=mm&r=g) #### **Rumesh tharindu** \- March 8, 2020 Greate one **[Reply](#comment-32401)** * ![Avatar photo](https://secure.gravatar.com/avatar/4c404e9a1ec7a877356c9b4418cd2d3b53868cbdd1eca86afb8bd8d6022e3094?s=96&d=mm&r=g) #### **Zahoor khan** \- March 3, 2020 Please share a video how to use **[Reply](#comment-32084)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Madeline-48x48.jpg)](https://www.selecthub.com/author/madeline-reinbolt/) #### **Madeline Reinbolt** \- March 4, 2020 We’ll take this suggestion into consideration, Zahoor! Thank you for reaching out. **[Reply](#comment-32238)** * ![Avatar photo](https://secure.gravatar.com/avatar/b2a425a906d6119c9e7ae6f238a6b4a4e47375b8e2937cf263e5247c4237d327?s=96&d=mm&r=g) #### **Laurel Larsen** \- July 23, 2019 This article did a great job explaining enterprise resource planning. It’s really cool that ERP is so customizable and can fit tons of different situations. The fact that it’s used across a huge variety of businesses only adds to the impressiveness. **[Reply](#comment-21919)** [![Avatar photo](https://www.selecthub.com/wp-content/uploads/2020/07/Lindsey-1-48x48.jpg)](https://www.selecthub.com/author/lindsey-jenkins/) #### **Lindsey Jenkins** \- July 24, 2019 Thanks for reading, Laurel! I’m glad that you found the article useful. **[Reply](#comment-21935)** **Tier 1:** Fully/moderately supported out-of-the-box allowing for quick and easy deployment. Fully or moderately supported out-of-the-box with industry-leading capabilities and is immediately available after installation without needing any add-ons, integrations, or custom development. **Tier 2:** Supported with workarounds or add-ons that may require additional costs. Not directly available in the software, but can be accomplished using other built-in features, workarounds, or add-ons/products from the vendor with or without any additional cost. **Tier 3:** Requires partner integrations or custom development that is often at an additional cost. Requires additional integrations, plugins, marketplace applications from a third-party vendor, or custom development using the APIs, libraries, extensions, and development framework supported by the software, with or without any additional cost. 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