What is ERP system and how to benefit from implementing it?
ERP (Enterprise Resource Planning System) system is a software tool for planning your strategic resources involved in business operations to control internal business processes and operations and make thoughtful decisions regarding business development in real-time mode. ERP is often confused with CRM (Customer Relationship Management) software, but it is different – CRM doesn’t provide supply chain management, but it also works as a single source of information for employees.
History of ERP system
The first systems of such a kind were developed in the early 1990s as a market reaction to the growing complexity of internal business operations and as a solution for a need to balance the management of company resources. First users of such systems were manufacturers, and after successful implementation and use, government institutions and companies from service sector started to implement such solutions. After 30 years of use, ERP systems are now must-have solutions in all industries and they keep developing to meet frequently changing demands of the business.
The market of ERP software is around 25 billion dollars yearly and keeps growing by 10-20% each year. Now there are cloud-based ERP systems, two-tier ERP (two-tier ERP is two ERPs in one to put it simply).
So, is it true that ERP software plays a significant role in company development? Does your company need such a ERP solution? How to benefit the most from such a solution? Let’s check it out.
How does ERP work?
ERP system includes numerous modules that are integrated with each other. Each of these modules is responsible for each certain aspect of business functioning: finances, production, human resources, marketing, sales, strategic planning, logistics, and so on – we’ll discuss them in detail below.
ERP, like the central nervous system, collects signals and information from all parts of the body, i.e. the enterprise. Moreover, the ERP system, like the central nervous system, is evolving, and the functionality of its modules is constantly growing.
ERP system implementation: is it important and valuable?
The main principle that the ERP system is based on is centralized data collection. All information is stored in one place, which helps all users – from the CEO to the accounting staff – to store, create, and use actual data of the company. Thus, if company uses separate databases for different aspects of business and tries to integrate all this data in Microsoft Office, the ERP system can easily integrate it all in a single flow of data.
In modern flexible and dynamic business environment, you have to use safe and flexible software that allows you to make fast, data-driven decisions.
You have to understand that world’s leaders of business have already thrown away old solutions, so use of such old-fashioned approaches puts you out of the competition.
ERP system main benefits
A holistic picture and a deep understanding of the current situation:
decision makers have a single and reliable source of information coming from all the “arteries” of your enterprise. Analytics based on artificial intelligence will allow you to quickly get answers to critical questions, recognize alarms in time, and consider each area of your business in maximum detail.
Better interaction with customers:
A centralized data warehouse provides all the necessary information about the customer base, which simplifies communication and reduces the time spent on customer service. And accurately collected and analyzed customer interaction data will help you optimize your strategy and be more accurate in forecasting demand.
Increased
productivity:
Core business processes automation allows you to use the saved time of your employees to solve other tasks.
Data security:
A large number of separate systems for processing information carries greater risks. A single and reliable data center will insure that your customers’ and employees’ personal and financial data is protected from unwanted threats.
ERP system benefits for different aspects of your business
ERP system helps to destroy barriers between different units and departments of the company and build a single management center. Below is a brief description of the modules that Microsoft Dynamics 365 Business Central (formerly known as Microsoft Dynamics NAV) contains:
Finance management
ERP system automates accounting process in accordance with international standards. System helps you to plan budgets, control their use, and build financial reporting.
Supply planning and availability
ERP system has business functions to plan logistics and time frames for your supply chains, based on analysis of production requirements, company’s consumption and sales forecasts.
Purchasing and payables
As for the procurement process, an important emphasis is that the system allows you to plan the supply of goods in accordance with production needs and customer demand.
Sales and marketing
ERP helps to build sales process, starting from price management to inventory management, and including the formation of sales and shipment documents. In marketing module, you have build customer journeys, based on collected customer data and pieces of advice from AI.
Warehouse management
A module for optimizing and automating warehouse management.
The complex chain of goods movement in the warehouse is divided into smaller operations and tasks performed by specific users with control over the execution of these operations.
Production
The main tasks of ERP in the production process are reasonable resource planning to meet current demand, control of the production process, quality management, optimization of production costs, etc. As well as the formation and calculation of the end-to-end cost of a product or service.
Project management
Project planning, including resource planning for each certain project, control of project development and sustainability.
Service management
Managing service requests, scheduled maintenance, and organizing the work of field staff.
Workforce management
The system allows you to manage the work of your employees and set tasks for them, monitor their productivity and identify issues.