What is Enterprise Resource Planning System (ERP)?

Yarab A |Updated on: December 13, 2021

• What is ERP?
• Functions of ERP Systems
• History of ERP software
• How does the ERP system work?
• What are the Benefits of ERP software systems

Often, you must have heard people talk about ‘ERP’ in events, session or you might have seen while you were browsing. No matter where you have heard this, it is important to understand the ERP basics.

ERP is the most common word in the space of technology. With the evolution of business, ERP systems are widely used by business right from small to large. Apart from managing business operations, the ERP system provides invaluable information for decision making. ERP systems have become an integral part of the business which is simply inseparable.

Let’s understand all about ERP and its functions. 

What is ERP?

ERP refers to ‘Enterprise Resource Planning’ software which integrates various functions of a business into a single unified system. A business, irrespective of size, has to deal with various function like purchase management, sales management, material management, payroll etc. Having a separate system to manage each of these functions is a nightmare. Here is why Enterprise Resource Planning (ERP) software helps the business.

Enterprise Resources Planning (ERP) systems bind various functions of the business into a single database. The following are some of the important business functions you can manage using ERP software.

What are the Features of an ERP System

• Integration of different functions of business
• Accounting and finance management
• Purchase and sales processing
• Inventory management
• Cost control and analysis
• Insightful reports
• Access to data on the go

Read: Detailed features of implementing an ERP system for your business

Functions of ERP systems

Among the above functions, below is the list of important functions of ERP systems.

• Production Management: ERP systems helps in planning and optimizing manufacturing processes such as manufacturing capacity, parts, components, and material resources etc. using the past consumption pattern and the demand.
• Purchasing Management: Here, ERP systems streamline the procurements process of stock and other supplies.
• Inventory Management: Key role of the ERP system in inventory management is to maintain optimum inventory levels.
• Sales Management: Increasing the process efficiency by streamlining the order management system right from order-to-Invoice-to-cash.
• Finance and Accounting Management: Major role of ERP in finance management is making available all the financial statements for on-time confident decisions.
• Human Resource Management (HR): Managing people process and payouts related to employees.

History of ERP software

In the 1960s, several businesses designed, developed and implemented centralized computing systems, mostly to automate their inventory requirements. In the 1970s Material Requirement Planning system was developed for planning material requirements according to the production requirements.

Between 1980-90, several systems were developed to synchronize the manufacturing processes with various other processes such as HR, Finance, Inventory etc. and was most commonly referred to as Manufacturing Resource Planning (MRP). The technological foundation of MRP paved the way for a new software system called Enterprise Resource Planning (ERP) at the beginning of the 1990s. From then onwards, many modules were added to the core module of ERP and extensions were made available to meet the business-specific requirements.

How does the Enterprise Resource Planning (ERP) system work?

Enterprise Resource Planning (ERP) software is designed to have a single unified database to manage various functions of the business. This means writing (a record) or reading (report) by all the users will be from a single database making it more powerful to render the consolidated information of various functions. Since all the functions are integrated and managed in a single database, making it possible to give a complete picture of your business.

What are the benefits of ERP software systems?

By integrating various facets of the business, it optimizes the efficiency at which you manage your business and immensely contributes to profitability. The following are some of the benefits of ERP software.

• You only need one system to manage all your business functions. This will save a lot of money which you would potentially invest in buying multiple software systems, tools, applications etc.
• Since it is designed to have a single database, it allows all the users operating at different functions to work faster. Thereby, the efficiency of each function increase.
• By automating the various process, it saves a lot of time and efforts involved in managing the business process and computing it.
• All the reports and statements are system generated
• Gives a complete view of the business and insights for confident business decisions.

ERP System for Various Business Size

ERP implementation is crucial for all businesses, irrespective of their size. You can also get industry- and company-specific functionality to meet unique business needs. Regardless of your business sector and size, you’ll want to plan your ERP implementation project carefully, following best practices.

ERP for Small Business

ERP software for small businesses can help business owners, move beyond the old school spreadsheets and archaic style of keeping their books of accounts updated. This automated system will help them efficiently manage every aspect of their growing company – from sales and customer relationships to financials and operations. 

Mid-Market ERP

Midsize companies aim at rapid growth and prolonged market sustenance. ERP systems nowadays, that aim at helping midsize firms grow at an increasing pace, come with features that cater to all of the crucial business processes -  financials, HR, supply chain management, and more. Midsize ERP tools help growing businesses scale and compete without the complexity and cost.

Enterprise ERP

Large companies with global or subsidiary operations need a robust, market-leading ERP system with embedded AI, machine learning, and analytics – and intelligent automation to transform processes. ERP systems can be deployed on-premise, in the cloud, or in a hybrid scenario depending on business requirement. These enterprises can integrate their existing software technologies with the ERP systems to get the desired output. 

Read More on ERP

ERP Software for Small & Medium Business, ERP Software for Manufacturing Industry, ERP Software for Distributors & Wholesalers, Types of ERP Software System, ERP Implementation Process, Features of ERP Software, ERP Software Advantages, Custom ERP Solutions