Definition of Enterprise Resource Planning (ERP)
Enterprise Resource Planning,or simply an ERP, is a business management software which comes with a set of integrated applications that allow a business to collect, store, manage and interpret data from its different activities in real-time, thus enabling overall smooth functioning. In simpler words, an ERP software helps integrate the different core processes of a business such as finance, supply chain, manufacturing, raw material procurement, marketing & sales, planning, etc. into a single system. This facilitates flow of real-time information across departments and empowers data-driven, proactive and accurate business decisions based on real facts.
ERP system actually helps organizations get rid of disparate systems and processes, taking form of a unified IT package, which gives the employees authorized access to the single-yet-shared database where data entered once can be used over and again. This eliminates data duplication, chances of errors, delays and manipulations and brings a degree of automation to the business. It also enables synchronized report generation on key business metrics, giving the required information when needed and in the way it is wanted.
A Brief History of ERP Systems
Although paper-based systems resembling the basic functionalities of today’s ERP have existed since the 1910s, the first computer-based software close to ERP that we see today was developed by IBM in the 1960s with the help of Mr. J.I. Chase. With the development of MRP II in the 1980s, ERP systems took a pivotal step towards their current form. By 1990, research firm Gartner coined the term “Enterprise Resource Planning” and following this, ERP took its current form with a unified database.
Then, the introduction of cloud ERP in the early 2000s transformed the game with reduced upfront investment and predictable operating costs. With companies not needing to install costly servers on-premise or hire technical staff for operation, ERP system made its way into the factories of micro, small and mid-size manufacturers along with big corporations. By increasing its scope with capabilities to integrate with other systems, has now become essential for every manufacturing organization.
The Modern Face of ERP Systems:
Although it is still built with the basic purpose of shared information, the face of ERP software has completely changed. Modern day ERP solutions have embraced technological advancements allowing business control from anywhere and at any time via cloud, along with being available on-premise. Not just industry-specific solutions, but availability of micro-vertical specific ones have drastically reduced the implementation time as well as the customization cost, while increasing the degree of fit in terms of processes and regulatory mandates.
Keeping pace with these improvements, an increasing number of vendors are coming up with ERP solutions that are fit for small businesses too, that are simple yet fast. For ex., SAP Business One, which was designed for big enterprises, now caters to smaller businesses as well. And with the advent of HANA, simplicity and speed of processing has gone up manifolds.
Moreover, the availability of online learning portals, e-courses, knowledge base and simplified workflows has substantially curbed the need for intensive training, which is one of the major concerns, fears and expenses for ERP adopters.
Why Businesses Need an ERP System?
Consider a food manufacturing company with numerous suppliers. This company can use an ERP solution to track the requisition and purchase of materials, along with ensuring that the material is followed at every step of the production process and the data related to enterprise workflows, business processes, reports and analytics can be recorded on a unified database. If a business requires such a granular visibility into their supply chain, they should realize the need of ERP system.
The company can also zero-in on factors affecting their production output including material losses, process redundancies, workflow discrepancies and packaging errors. A paper or spreadsheet based system can’t track, raise alerts and perform corrective actions in case of any risk events.
Moreover, the post-covid scenario demands only for the quality products that are in-line with government and industry regulations. Regulations, that are changing day-in-day-out to ensure worker and consumer safety. Staying at par with this dynamic environment through paper-based methods can be a road leading to recalls, customer dissatisfaction, brand defamation and such.
Therefore, ERP should be implemented as a business solution to obtain maximum value from every organizational effort from each employee and every process.
What to Look for in an ERP Software?
Every organization expects a newly implemented system to revolutionize their business. ERP software has the capability to deliver streamlined workflows, smoother operations, optimized processes and most importantly, increased profitability. However, this doesn’t happen overnight. ERP system offers benefits, both tangible and intangible, which are realized over a period of time, if and only if the choice of the ERP solution is right.
So, before choosing an ERP software, decision-makers should carefully evaluate their options, find the best fit for their organizational structure and consider the vendor’s experience & expertise. The organization should eventually choose an ERP system which is:
Scalable
Capable of growing with the business
Flexible
Can adjust with changing business environment
Economic
Has an optimal ROI
Easy to Use
Convenient for the end-user
Mobile friendly
Able to run tablets, smartphones along with computers
Integration friendly
Can integrate with other systems
What are the types of ERP Deployment?
On-premise: A traditional ERP software, or on-premises ERP, has a database that resides on an onsite server and hardware. It is managed by the IT staff of the company which has got it implemented.
Cloud: A Cloud ERP is provided as a service and hosted on vendor’s servers. In this case, the software and its data is managed centrally at a remote datacenter (internet “cloud”) by the ERP vendor and accessed by customers through a Web browser.
Hybrid: A hybrid ERP solution is the combination of the two ERP – on-premise & cloud. By opting for a hybrid ERP, a company can adopt cloud applications while also retaining its on-site ERP resources. Greater mobility, ease of installation and outside support are some of the benefits that make businesses go for hybrid ERP software.
What are the Modules of an ERP System?
The key components of an ERP software are the multiple modules, with each of them focusing on one specific area of the business. These modules are individually purchased, based on the specific needs and technical capabilities of the organization. Some of the most common ERP modules include those for:
Sales
Production
Marketing
Quality Control/Assurance
Inventory Management
Accounting
Planning
CRM
Material Procurement
Formulation, BOM, R&D
Finance
Business IntelligenceWho Should Implement ERP System?
ERP systems were predominantly developed to manage discrete manufacturing processes which involved production of goods that are easily distinguishable and can be physically counted like nuts, bolts, wires, etc. Such ERP software were ideal for industries manufacturing automobiles, mobile phones, furniture, toys, etc. With time however, the need for software for process manufacturing was felt because process manufacturing is based on formulas/recipes and involves blending, mixing, heating, etc.
This different set of needs could not be fulfilled through a software built to follow production on assembly lines. Thus, dedicated ERP software for process manufacturing came into existence bringing about key capabilities like - Physical property analysis, formulation, unit of measure conversion, density calculations, batch processing, etc. among many.
So, any business, be it large-scale, small-scale or medium-sized, ranging from manufacturing to catering, using discrete or process manufacturing, needs an ERP solution. This is because the challenges of small/medium businesses are no different from large industries. They need to follow the same guidelines, stick to the same regulations, maintain reports & documents, meet quality parameters, manage resources, cut costs, thrive on thin profit margins et al, just like the big daddies of business. Therefore, to standardize their processes, streamline operations, cut losses and wastage, stay audit-ready, exploit resources and improve profits, even start-ups, macro, small and medium industries should look for an ERP partner.
Understanding ERP Software Integration
A manufacturing organization may feel the need to install multiple software to administer control over various business functions, and an ERP can be integrated with such software to extend its capabilities to these independent systems. With ERP integration, the user doesn’t need to deal with disconnected systems and fragmented data. ERP can be integrated with systems like QMS, PLM, MES, CRM, HCM, eCommerce platforms, industry specific solutions and even other ERPs.
Customized adapters such as EDIs and APIs can be used to integrate ERP with other systems. An ESB (Enterprise Service Bus) and iPaas (Integration Platform as a service) can come in handy for ERP integration to eCommerce, IoT (Internet of Things) and machine learning platforms. iPaaS can also help with custom API generation, machine learning data integration, prebuilt content and a lot more. ERP software integration is critical in reducing the potential for inefficient workflows through its centralization of information.
Benefits of Enterprise Resource Planning System
An ERP software helps your business ensure numerous benefits, automation being the first. Check out the other advantages below:
- Streamlined processes: An ERP system integrates all the processes across departments from beginning to end and meets the specific needs of each individual business.
- Improved productivity & efficiency: An ERP system saves time and resources by automating manual business tasks and processes to promote productivity and improve efficiency. 82 percent* companies that implemented an ERP solution improved either key or all business processes post implementation.
- Enhanced business visibility: With the integration of all the business processes, ERP gives management comprehensive and real-time visibility into performance of each department and access to key business data.
- Quality analysis & reporting: An ERP software allows business managers to use interconnected dashboards to quickly analyze & report, thus facilitating informed and accurate decision making.
- Reduced costs & risks: Uniform and streamlined business processes reduce the operational and management costs while improved data integrity and financial control reduce risks.
- Industry & regulatory compliance: An ERP solution facilitates control over reporting processes and thus ensures compliance with regulatory requirements, meeting data integrity and enabling complete traceability, thereby keeping away hefty fines and image damage.
- Studies reveal that 54 percent* of the organizations that got the ERP implementation done were very satisfied with the overall ERP vendor experience. Further, 57 percent* of the companies who got the ERP implementation done viewed it as a success. This should give you a clear picture as to how beneficial ERP is to the success of businesses.
The Future of ERP Systems
In the last century, ERP has evolved a lot to accommodate latest technological trends as well as advanced tools to solve critical business problems. ERP vendors continue to evolve in order to make their offering more powerful, flexible and affordable, all at the same time. Some of the contemporary trends that will define the future of ERP include Cloud Technology, Big data analytics, IoT (Internet of Things), Artificial Intelligence, mobility, integration with e-Commerce and move towards public cloud. These trends will continue to make the businesses simpler.
And in all these years, the unprecedented response it has received and the faith which manufacturers across the globe have demonstrated in ERP, tells that ERP is here to stay for many more years to come.
BatchMaster Software is one of the market leaders in offering enterprise software solutions for the process manufacturing industries. With an in-depth industry analysis, gained through a vast industry experience with over 2000 implementations worldwide, we clearly understand the unique industry challenges. BatchMaster offers ERP solutions that are apt to support industry specific operations and handles critical processes of the micro-verticals. Process manufacturing companies around the globe have come to rely upon BatchMaster® to manage nearly every aspect of their manufacturing distribution, finance & accounting, Quality Control, Compliance and HR- related operations. With headquarter in Laguna Hills, BatchMaster has its offices in New Jersey, India and New Zealand.Read More
