WHAT IS AN ERP SYSTEM?
What are the primary business benefits of an erp system?
Enterprise resource planning software is ubiquitous in the business world today.
All kinds of businesses from small to large make use of ERP software in order to improve their processes and push the revenue ceiling.
ERP software belong to are a type of business software typically employing a number of modules that are closely integrated.
This close integration of different modules that handle different aspects of the business process allows an organization to collect, store, manage, and interpret data from many business activities.
As time progresses, the important of ERP systems in the business world will only continue to grow.
It was a logical next step in the evolution of competitive business processes due to the increasing computing power of microprocessors and their ever-decreasing market prices.
Innovations such as the downsizing of powerful computers to the office desk and the introduction of the Internet led to the first ERP systems being developed in the 1990s.
However, the roots date back to the 1960s with the creation of software programs for supercomputers to organize scheduling of work orders and monitor the inventories.
The main feature of any ERP software system is the ability to offer its customers a great degree of synchronized reporting and automation.
The system pools data into one database divided in to sections according to type, with integration among dependent data variables.
There would no longer be any need to maintain separate databases and spreadsheets for each type of data and then manually merge those spreadsheets to make reports, which ERP solutions offer.
Primary Business Benefits of an ERP System
WHAT IS THE IMPORTANCE OF ERP SYSTEMS IN THE BUSINESS PROCESS?
Enterprise Resource Planning (ERP) is essential for businesses operating today.
Operating a business without an ERP system is akin to attempting to complete a scavenger hunt without any clues at all.
While you may still be able to make gradual progress towards your goals for growth, you’ll only be acting mostly on clues and intuition with limited factual reports.
An ERP system creates order out of chaos, improving productivity, decreasing costs, increasing efficiencies, and streamlining processes.
Such achievements will help you to effective manage your business objectives and the processes to lead towards those objectives.
Implementing an ERP system brings with it expectations of the system acting as a vehicle for integrating people, technologies, and processes across your business.
Despite the fact that modern businesses need ERP systems more than ever, it is found that only 40% of manufacturers across industries make use of an ERP system and there are many businesses that fail in their ERP software implementation projects.
The aim of this article is to highlight the main benefits of a successfully implemented ERP system and the qualitative advantages that such an initiative can bring to the business.
WHAT IS AT THE HEART OF AN ERP SYSTEM?
The absolute primary function of an ERP system is to organize all the data received by a business organization, including data involved in the day-to-day business activities of the organization such as accounting, procurement, and project management into one unified source.
ERP systems are critical for managing thousands of businesses of all sizes in all industries. For these businesses, the ERP system is as important as the electricity that keeps their infrastructural systems operational.
All the members of the business organization ranging from the CEO to the office clerks can create, store, and use data from the same source using common processes.
Such a centralized storage or data ensures that data can be drawn from it and referred to with confident accuracy and completion.
Data integrity checks are often an automatic feature of many ERP software suites for every type of task performed throughout the organization.
In modern times with the prevalence of the Internet, ERP systems have been developed with cloud computing in the center.
Embedding ERP systems with the internet makes available new features and options for functionality while simultaneously offering affordability for smaller businesses, lowering operational expenses and capital expenses.
Cloud ERP solutions are hosted from an external source maintained by the ERP software suite developer.
This takes off the infrastructural load from the end user, enabling focus on more value-added tasks away from having to manage and maintain the infrastructure.
WHAT ARE THE BUSINESS BENEFITS OF AN ERP SYSTEM?
- Streamlined technological costs: As state earlier, ERP systems are designed to unify all of a business’ IT costs and improve efficiency. Having ERP means that there will be one system being worked by the staff instead of multiple different system with their different dedicated staff groups, infrastructure and equipment, support teams, and licenses. A single unifying system means that your employees will only have to learn one system, greatly reducing the resources required to train your employees and keeping them to maintain the system. Most ERP systems usually come with multiple functions and additions to the computerized business process such as customer resource/relationship management, manufacturing resource planing, HR management, accounting, and supply chain management, being modular in design. Such a design allows you to choose and focus on the features aligning to your needs.
- Reporting and planning with total visibility: Since the implementation of an ERP software suite across the departments of your organization introduces a single, unified reporting system for each and every process, the system can readily generate useful reports and analytics complete with valuable insights on your processes whenever you wish or whenever you schedule the system to do so. You can easily compare and analyze performances across departments without having to cross-reference multiple documents. Finance is often where ERP systems shine the best as reports such as income and cash flow are automated built-in processes allowing custom report generation very quickly.
An ERP system also allows complete access and view of every important process in your business by making all the data readily available to you and the management.
As stated earlier, the data is centralized which allows for collaborative use resulting in streamlined completion of tasks. You can track inter-departmental processes with maximum efficiency.
As an entrepreneur, the most important thing is to be able to see the complete picture at any given moment and this what the visibility accorded by an ERP system gives you.
- Improved efficiency: ERP systems reduce the time, effort, and resource expenditure from your workforce to carry out daily activities. A properly implemented ERP system greatly reduces and eliminates repetitive manual processes which leaves your employees free to focus on tasks that more directly affect the revenue. ERP software suites are also often updated with information on new industry practices and regulations, allowing you take action immediately and integrate them into your processes.
- Flexibility in customization: The modular design of most ERP systems is one of their biggest advantages. Most ERP vendors offer several different applications focusing on specific parts of the businesses process. Users can use these different applications at will depending on their requirements. Each application is designed to be used in conjunction with other applications and the system as a whole. The other aspect of customization in regards to ERP software suites is how the software itself is implemented. You can choose between on-premise and cloud-based systems with the former involving the installation of the software on all company computers and servers with the latter involving the software being hosted on servers maintained by the ERP provider.
- Customer service: Your business is not the only entity benefiting from the benefits of the implementation of an ERP system, your clients do too. This is because ERP systems centralize and streamline all client information, allowing your sales team to focus on building and maintaining customer relationships, instead of maintaining spreadsheets. The end-to-end tracking and insight offered by ERP software suites help you provide better customer interaction from targeted marketing all the way through late-phase customer service.
- Data security: The provision of a single input system allows ERPs to maintain a high level of data security. Merging information from multiple systems can often cause conflicts between sources while on the other hand, a single system feeding a singular repository of information greatly helps improve the accuracy, consistency, and security of your company’s data. An ERP system’s databases are also centrally backed up automatically to save your critical and sensitive data. Cloud-based systems enjoy an extra layer of security as your company’s data is managed through the cloud and security experts are employed by the ERP vendor to ensure protection.
- Data quality: For the same reasons, the quality of your business’ data pool is significantly improved upon the implementation of an ERP system. The feeding of data and information from multiple sources allow data to be cross-referenced and checked automatically for matches and consistency.
- Improved workflow: Any business thrives on collaboration and an ERP system makes this easy. The ERP platform streamlines the process of collaborating with others by providing employees with access to the data they need when it is needed. The close integration of the data systems allows for project updates to be presented and communicated clearly and quickly across the whole company. There is an on-demand access granted to the entire company’s wealth of data.
The prime benefit of this is that the tools required for making proactive decisions are made available easily, increasing efficiency and reducing operational costs associated with manual data tracking.
- Standardized business process: As stated earlier, ERP systems are designed with the best industry practices and current regulations in mind. These practices bring major benefits to a business that adopts and maintains them, allowing them to standardize their own process and systems. The consistent result delivery of the standardization of these processes allow you to continually improve how you operate your organization. The automation of these processes greatly reduce errors and costs, improving collaboration between between departments overall.
- Assistance in compliance with regulations: Meeting regulations while trying to be profitable can often become a hassle for a business. While you are legally required to maintain the best accuracy possible when it comes to your financial records, it is often easier said than done. ERP software suits aid in regulatory compliance through securing and ensuring the validation of data, combined with built-in reports. The reports may also be automated.
- Scalability: As your business grows, the specific needs of your business will evolve too. ERP systems are designed to allow enough control to facilitate new priorities and new types of data input. Adding new functionality to an ERP platform to fit the growing needs of your business is easy with the right system.
- Improved supply chain management: ERP systems greatly improve the supply chain management of companies dealing with production and manufacturing by shortening lead times and improving the timing of deliveries alongside a whole host of other benefits that lead to an overall more efficient manufacturing process.
WHAT ARE THE DISADVANTAGES OF USING AN ERP SYSTEM?
These can source from a failure to properly implement the system. The primary concern is cost; on-site ERP systems often cost astronomically high and oftentimes prohibitive for small business.
Luckily, circumvention is possible through the use of cloud-based ERP vendors, who charge a monthly fee depending on business models.
Maintenance is the next biggest concern as typically an ERP software suite development would come with the need to recruit more staff trained in IT and the need to invest in new hardware.
The customization abilities of an ERP system may often sometimes get complex and tedious as the process itself is time consuming requiring a lot of effort, expertise, and money.
Too much customization can also deprive the business from being able to readily adopt industry best practices.
Furthermore, the complexity with which an ERP software suite comes is often underestimated by many businesses, which leads them to find themselves in a tangle mess because the implementation process was not planned out meticulously.
While there are potential downfalls, the vast benefits and growing potential ERP software suites can give you are enough of an incentive to invest in ERP. The advantages outweigh the disadvantages. Plan ahead, plan meticulously.
Hope the above information answered your question on what primary business benefits of an erp system.