What Is Enterprise Resource Planning (ERP) Software?
ERP Software is a digital solution that integrates a business’s critical data regarding processes such as financial, HR, supply chain, manufacturing, and more, in one single source of truth.
The objective of an Enterprise Resource Planning system is to allow data to flow easily between departments, promoting quick, accurate decision-making and streamlined operations through automated workflows.
A modern ERP system will offer modules for:
- Enterprise planning
- Budgeting and accounting
- Enterprise procurement
- Project management
- Risk management
- Compliance management
- Supply chain management
- Enterprise workforce management
Enterprise Planning Is Used For:
- Financial planning
- Supply chain planning
- Workforce planning
Budgeting and Accounting Add-Ons Cover:
- CAPEX (Capital Expenditure) budgeting
- OPEX (Operational Expenditure) budgeting
- Buffer budgeting for unknowns in a fiscal year
- International Financial Reporting Standards Foundation (IFRS)
- Financial Accounting Standards Board (FASB)
- Generally Accepted Accounting Principles in the United States (GAAP)
- HGB in Germany and PCG in France
- US Securities and Exchange Commission (SEC)
- European Securities and Markets Authority (ESMA)
Enterprise Procurement Is Used For:
- Human resource management
- Employee well-being monitoring
- Human resource upskilling
A Project Management Module Is Used For:
- Internal project management
- Acquisition projects
- Departmental projects
- Strategic projects
- Change management
- Short-term projects
Risk Management Functions Help to:
- Document risks
- Grade risks
- Project and plan for risks
- Navigate risks with risk mitigation actions
- Correlate risk dependencies
- Understand the impact if risk events happen
Compliance Management Is Used For:
- Define internal and external compliance factors
- Understand planned vs actual compliance
- Understand non-compliant areas
- Procedure to adopt if compliance is not met
Supply Chain Management Modules Aims to:
- Map the process from the production of goods to the delivery of goods
- Adjust for just-in-time (JIT) availability of raw materials
- Interlink between supply chain production processes
- Define parameters of goods/raw material acceptance
Workforce Management Is Used For:
- Managing internal and external workforces on site, plant, or other locations
- Assigning workforces to a project
- Time and labour management
- Define permit-to-work conditions
- Monitor health and safety conditions in the workplace
How Does an ERP System Work?
An ERP system acts as a data and information pipeline across all (or chosen) functions of your business. 95% of businesses that adopt an ERP system see an immediate operational improvement.
It works by collecting datasets from business processes and displaying data in real time via dashboards and workflows. An ERP then recommends automation procedures through predictive analytics to improve business processes.
ERP Systems enable you to capture information about:
- Customers
- Invoicing
- Procurement
- Production planning
- Production
- Operations
- Supply chain
- Logistics
- Warehouse
- Delivery
- Returns
- Human resources
- Financial planning
As the ERP system captures data at different stages of the business, it acts as an information repository for your business. This core component of an ERP system allows you to fully understand bottlenecks, acceleration points, and key drivers of your business.
What Are the Benefits and Business Value of ERP Software?
There are three key areas where ERP Software provides business value:
- Productivity through automation
- Collaboration through the flow of data
- Efficiency through total visibility of business processes
With increased business value in these areas, businesses implementing ERP Software will benefit from:
Complete Transparency & Traceability of Information
ERP systems provide transparency through the visibility and accessibility of data collected across all business departments. This boosts cross-departmental collaboration and promotes up-to-date and accurate information through real-time data collection.
Quicker Informed Decision-Making
Through accessible, accurate, and conformed information managed in a centralised ERP system, decision-making is accurate and accelerated. Important decisions are made through the analysis of cross-department data. Reporting capabilities also provide a level of detail required to make better business decisions.
Reducing Human Error Through Automation
Automating business processes eliminates human error and increases the speed of execution; ERP automation is no different. Through data integration, ERP Software can prompt automated inventory management, order processing, payroll processing, predictive analytics reporting, and more.
Fewer Risks of Data Silos
ERP Software enables the flow of accurate information from various departments. This steady flow of data is collected and managed in one system. The capability to collect data from all business areas aims to eliminate data silos, where key information might have otherwise been untracked or missed entirely. By reducing siloed data, managers can make informed decisions quicker and with more accuracy.
Real-time Insights Through Predictive Analytics
ERP systems manage and report on business operations and integrated applications that generate large volumes of data in real time from IoT (Internet of Things) sensors, customer chat logs, order processing tools, and more. Whereas other standalone tools have limitations on storing and presenting large amounts of structured and unstructured enterprise data, robust modern ERP systems harness that data to generate reports and predictive analytics/forecasting.
Increased Data Security
Web applications are at risk from phishing attacks, insider threats, and ransomware. 47% of information security breaches have led to compromised personal business information. Having a single data repository improves the safeguarding of sensitive business information. Through the enhanced data security of an ERP system, CIOs can ensure:
- Data integrity is upheld
- Sensitive data is protected
- Strict access control is in place
- Data recovery systems are initiated
- Compliance and privacy rules are followed
When Should Organisations Consider Implementing ERP Software?
When businesses consider implementing an ERP system, there is a mix of major drivers and minor drivers.
For instance, there are no set scenarios for implementing ERP Software; billion-dollar businesses have run their core processes on spreadsheets and micro businesses have implemented modern cloud-based ERP systems.
Yet, if there is one reason why most businesses implement ERP Software, it is for greater ‘Reporting, Analytics and Insight’.
People-Based Scenarios to Deploy An ERP System:
- Provide a single platform to work across different teams and departments
- Offer structured processes to complete tasks
- Improve speed of work
- Record intangible knowledge into systems
- Take a data-oriented approach to improve people-oriented processes
- Build a common data repository across different teams
Process and Workflow-Based Reasons to Deploy ERP Software:
- When a process has more than 5 stages
- Interdependent and interlinked process involving more than two departments/teams
- Distant process (for example, the on-site process is dependent on the off-site process)
- Looped processes where maintaining accuracy with a tolerance is important
- Collecting data is vital for compliance and efficiency improvement
Objectives, Targets, and KPI-Driven Reasons to Deploy ERP Software:
- Take data-based decisions to scale, be profitable, and be more efficient
- Improve speed and accuracy of decision-making
- Back decisions with data
- Use data to validate gut-feel-based decisions
- Improve reporting across the businesses
- Clarify priorities to drive business momentum
Successful ERP Software Implementation Examples
Cadbury: The UK multinational confectioner implemented a SAP-based ERP system to address the issues of their existing ERP tool, which failed to meet production and distribution requirements. The new ERP system enabled 11,000 employees to send data to a shared ERP system, which improved the efficiency and structure of their warehouse management protocols.
Audi: The German automotive manufacturer successfully deployed a cloud and on-premise hybrid ERP system throughout the business from the manufacturing plant to the automated payroll process. Audi integrated multiple applications that included apps for HR and their Procurements and Maintenance landscape.
N&N Moving Supplies: A small family-run moving company that tripled its location operations, they implemented Oracle NetSuite ERP to address issues with timekeeping and payroll. The ERP Software reduced payroll processing time by 84% and gave access to personalised dashboards and analytics on iPads to its employees.
How ERP Software Impacts Different Industries
Businesses implementing ERP Software have multiple operations, each with a specialised area of focus that requires complex planning and reporting. With this in mind, ERP Software is best utilised in industries such as:
- Manufacturing: Manufacturing ERP systems help manufacturers plan and schedule production, improve product quality, leverage product lifecycle management, optimise supply chain planning, and gain accurate inventory control.
- Retail/E-Commerce & Distribution: Retailers utilise e-commerce integrations and ERP modules such as order management, warehouse management, customer tracking, and supply chain management to improve control of sales and the customer experience.
- Healthcare: Hospitals, care homes, blood banks, and more, use ERP systems to manage medical inventories and supplies, digitalise patient records to build centralised patient portals, and create accurate financial forecasts.
- Construction and Engineering: Construction and engineering operations use integrated ERP applications to track and assign sub-contractors, control the inventory of building materials, plan for resource allocation, and improve project management on a large scale.
- Banking and Financial Services: ERP systems are used by financial services to control risk management, plan for “what-if” scenarios, secure data management, and track custom relationships.
- Education: Institutes, schools, and colleges use ERP Software to make sharable information available to parents, students, staff, and teachers, as well as help to build digital student records and improve the availability of educational equipment through resource planning and asset management modules.
- Food & Beverage: Tailored food and beverage ERP tools use information to analyse and improve food waste management, recipe management, ingredient tracking, and allergen and dietary safety compliance. As well as using warehouse and inventory management modules for storing products with temperature, weight, and date requirements.
