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.
ERP Functional Requirements
There are a few things every ERP should contain. You can think of functional ERP system requirements as the benefits and experiences an ERP system provides.
These allow users to manage grouped tasks without switching applications or screens. All information needed for a certain operation should be housed in the same part of the system.
ERP systems rely on a central database from which all applications retrieve information. This provides all users with a single source of truth, ensuring all departments and teams work with the same set of information.
ERP applications are fully integrated and should work together seamlessly. This means users should be able to go from one part of the system to another without feeling completely lost or like it’s a different application. This also means the applications should freely share information with one another in real time. ERPs work to eliminate redundancies in your system and provide up-to-the-minute information.
ERP Modules and Functions
In addition to functional requirements, you need to look for the specific functions of ERP that will benefit your business. The following are popular ERP modules and functions buyers can seek out when searching for their perfect system.
Before ERP, there was MRP, or manufacturing resource planning. But businesses realized they needed support for their back-office operations as well. When back-office tools were added to MRP, it started to look more like the ERP systems on the current market. Manufacturing functionality has remained a staple to this day.
Manufacturing helps businesses manage their product development and production. This ERP functionality gives users the tools needed to manage resources, finances and the shop floor. Your manufacturing system should assist with planning and scheduling, budgeting, forecasting, procurement, and materials management. Additionally, many manufacturing solutions rely on project management tools to keep track of design iterations.
These tools should all work together to streamline your manufacturing process. This gives your team more time and resources to dedicate to product creation, rather than documentation or addressing errors.
As mentioned above, ERP came from the need to combine manufacturing and back-office functions. Accounting, as one of those back-office processes, has long been a main function of ERP. Accounting tools support accounts receivable, accounts payable and general ledger functions to manage your finances. Accounting software supports additional functions such as payroll, time tracking and tax reporting.
But accounting software works a little differently when incorporated into an ERP. In this situation, your ERP database automatically provides the accounting module with data from processes company-wide. This means a couple things. First, it reduces the time your accounting staff needs to spend on collecting financial information. Second, it reduces the chances of redundant entry and errors. Lastly, it gives your team a fully comprehensive look at your finances.
Human resources is another back-office function modern ERPs facilitate. ERP software covers all HR functions an employee goes through during their time with your company. One especially important ERP function is applicant tracking. Applicant tracking software allows users to keep tabs on prospective employees during the recruitment process. It enables your HR staff to search for the best candidates according to the criteria your team sets.
HR functionality also encapsulates the onboarding process and benefits administration. Additionally, HR deals with functions such as training, payroll and performance management. Performance management is aided in part by reporting and analytical tools. Thanks to the ERP database, all applications within your system pull data from the same source. This can help you recognize patterns in your hiring practices and employee performance.
Customer Relationship Management
A strong relationship with your customer base is the foundation for all your other business functions. Without loyal clients, there simply won’t be a business to run. Customer relationship management (CRM) tools make fostering these connections easier than ever before. CRM functionality helps businesses track campaigns, nurture leads and maintain client information. While there are plenty of standalone solutions that can perform these tasks, an integrated CRM can transform your business.
Without a fully integrated CRM, you may find yourself entering customer data into all your applications separately. Not only is this a waste of time, but it also opens up all kinds of issues. It’s unlikely that each entry is going to include comprehensive data on your customers. Your current team might be used to going to one source for purchase history and another source for billing information. But this gets complicated when you hire new team members. Instead of teaching the quirks and workarounds of your current system, you could simply adopt an integrated CRM.
A CRM as part of an ERP solution provides complete customer data in one place. It allows for quick user access when customer data is needed for shipping, billing or marketing purposes.
Since ERPs are predominantly aimed at businesses that manage goods, inventory management inevitably plays a large role in the system. Inventory management solutions give users more control and visibility over stock. But just like the modules above, inventory management works best as part of a larger multi-functional ERP.
When this is the case, inventory software exchanges data with manufacturing, distribution, sales and customer records. This gives greater visibility of the supply chain and helps users predict issues, such as late delivery due to low inventory levels, with greater accuracy. Inventory management software can also forecast demand with the help of analytics tools. This can assist with determining the best sales tactics for certain products during certain parts of the year.
Distribution involves the processes that get a business’s product from the warehouse to its final destination. Like with inventory management, distribution benefits from the other ERP functionalities it’s integrated with. Distribution tools manage functions like purchasing, order fulfillment, order tracking and customer support. Integrating inventory management data is especially helpful during these operations, as it gives users insight into where the product is and how much of it is available.
Further, CRM data is also useful during distribution. These tools provide billing and payment information, but can also provide insight into who is a priority. This ensures your most important customers get the attention they need first.
Business intelligence (BI) supplies users with the tools needed to take advantage of the data your ERP already processes. BI functionality collects data from across the ERP and analyzes the information to provide a deeper understanding of your business processes. Analytics can detail patterns in your operations, revealing positive and negative habits. Analytics can also predict future trends so you can see issues coming down the line.
BI uses reporting tools to convey data to users. Basic tools may provide tables, however, there are more advanced options offering custom dashboards, graphs and other data visualizations. Reports enable company leaders to make more strategic business decisions based on data and facts.
Hopefully, you know a little more about the functionality of ERP systems now than you did before. If an ERP solution sounds like what your company is looking for, you can move forward in your requirements gathering. We recommend checking out our customizable ERP functional requirements document template.
An ERP system can take your business to the next level but only if you take your time selecting the right solution. You might discover you need all the functions mentioned above, or maybe you really only want to focus on accounting and supply chain management. Whatever the case may be, thorough assessment of your business needs and clear requirements are key to a successful implementation.
What ERP functions will your business consider top priority during your software selection? We love to hear from our readers, so leave us a comment with your thoughts and opinions below!