What is Enterprise Resource Planning (ERP)?

 ERP or Enterprise Resource Planning software unifies and stores data from the entire organization — finance, manufacturing, HR, commerce, and the supply chain — from a single platform. 

That enterprise-wide connection allows data to flow freely between departments, locations, and individuals, allowing users to easily analyze and interpret all of that valuable information they’re sitting on.

It’s only natural that businesses of all shapes and sizes rely on the ERP to manage, monitor, and run all core operations.

In this blog post, you’ll learn more about what the ERP does to support your business (and ensure its survival).

What is an ERP?

The simplest way to define enterprise resource planning software is that it’s an integrated system designed to help orgs efficiently manage all core business operations. 

It serves as the single source of truth or system of record for the entire org – enabling reporting, process optimization, data sharing, and collaboration across all departments and locations. 

ERPs ensure that everyone stays on the same page re: budgeting, procurement, production, and so on – unlocking faster, more profitable decisions, greater efficiency, and a whole host of other benefits.    

This has been true since the 1960s, when the first ERPs (then known as material requirements planning (MRP) systems) burst onto the manufacturing scene. Though, as you might imagine, modern ERPs are a far-cry from the systems that were cutting edge even just five, ten years ago.

We’ve witnessed the rapid evolution from monolithic platforms, manual processes, and physical servers to cloud-based microservices with remote, web-based access play out in real-time.

Today’s ERPs offer a centralized system for managing the mountains of data and complex operations within an organization. They’re infused with intelligence and real-time reporting that help them prepare for all “what-if” scenarios and pivot on-the-fly whenever the next black swan event or apocalyptic disaster strikes.

Increasingly, we’re seeing more organizations move toward industry-specific ERPs, which are tailored to fit the needs of a particular industry. Think – finance, professional services, even cannabis growers.

For example, Brightpearl’s ERP is designed specifically for retail business models, while SYSPRO and Oracle Manufacturing Cloud are built for manufacturing and distribution companies. 

Other ERPs like Microsoft Dynamics 365 and Oracle NetSuite are industry-agnostic, but are designed to be customized and adapted to fit individual needs. 

What, Exactly, Does an ERP Do?

ERP software can cover many core functions, but companies typically select which applications they’d like to use based on several factors, including org structure, business model, and strategic goals. 

That said, here’s a look at some of the most common business functions you’ll find out-of-the-box:  

Finance

Finance and accounting have long been the backbone of the ERP. They manage accounts payable and receivable, the general ledger, and reconciliation. 

Built-in reporting tools provide a complete picture of financial performance, while AI-driven tools allow users to make smarter, faster decisions, model future scenarios, and generate accurate forecasts.They also automate core financial processes, enforce compliance, and mitigate financial risk. 

In this screenshot from Microsoft D365 Finance, you can see how a role-specific interface, predictive insights, and integrated chat logs work together to improve productivity:

Source

Human Resources

HR teams use ERP software to manage employee-related activities like recruiting, hiring, payroll, benefits, and performance, as well as company data.

HR pros gain access to a full-picture view – which enables them to proactively address personnel issues at the earliest sign of trouble. And – it allows them to leverage employee data along with insights from the entire business, competitors, and the market to improve performance, retention, and the all-around employee experience. 

Here’s a look at Odoo’s recruitment dashboard – which makes it easy to track applications, interviews, contracts, and more:

Source

Supply Chain

ERPs also help orgs track and manage inventory, procurement, logistics, and production processes. Many solutions include sourcing and contract management capabilities, supplier portals, and analytics that cover every data point in the supply chain. 

Accuserv, a company that supplies lighting and electrical components to construction and hospitality companies, used Netsuite to transform multi-facility operations. By unifying supply chain operations into a single platform, the company was able to triple its capacity and boost efficiency by replacing physical inventory counts with an automated system. 

Additionally, Accuserv added a services business to its portfolio, helping construction clients with decisions about HVAC, flooring, and fixtures. 

Manufacturing

Manufacturers also use these platforms to manage processes, procurement, workflows, project management, scheduling, inventory, production, and more. 

Modern ERPs support process automation, improve business communication, and boost efficiency. They also help manufacturers fulfill customer needs, while also preventing waste. This means, orgs can optimize costs without giving anything up in terms of performance or quality.

Commerce

Some modern ERP systems also support omnichannel commerce by unifying back-end operations with digital and in-person experiences, though in many cases, commerce solutions are available as an add-on module that extends the capabilities of the core platform. 

Customers benefit from AI recommendations and personalized journeys, while companies can boost productivity, reduce instances of fraud, and expand their business.

As an example, work apparel giant Carhartt built a new e-commerce experience using the SAP S/4 HANA ERP and Commerce Cloud. 

The Commerce Cloud module allowed Carhartt to leverage years of e-commerce data to redesign its website, revamp its product placement strategy, and improve load times and search functionality. 

As a result, fewer shoppers abandon their carts before making a purchase. The company is also rolling out new strategies like buy online, pick-up in-store and universal customer profiles, which make it easier to manage consumer data and comply with the latest legislation. 

Integration & Modularity are Literally Everything for ERPs

While the ERP remains committed to the same goals it always has, the old approach to enterprise resource planning is no longer cutting it. In fact, it represents a serious threat.

So, historically, ERP systems were monolithic platforms, containing a collection of suites that didn’t communicate with one another. 

Each suite required complex customizations to meet the unique business requirements of each department or unit. Updating ERP systems was expensive, slow, and overly complex. And – as a result, many organizations stuck with legacy solutions until they finally gave out. 

When organizations did start moving ERP operations to the cloud, it often meant building these patchwork stacks that didn’t really function as one cohesive unit. 

In both scenarios, organizations struggled with issues linked to poor visibility and inaccurate data. And, they had to untangle a web of complex configurations – all connected to core processes – in order to modernize their system.

Today’s companies need an ERP or Enterprise Resource Planning system that changes and grows alongside their business, their customers, and the world around them. That means, composability, integration, and interoperability are essential “qualities” for any ERP. 

As such, many ERPs are made from a series of integrated modules, each built for a specific function – manufacturing, finance, inventory management, etc. 

These modules all make use of a centralized database that captures, cleans, and organizes data from each source. Many of these systems also use a common data model, which means all modules share the same underlying data, presented in the same format. 

That way, when all departments are connected to the same system, all data flows freely between departments and real-time insights can be accessed and used by anyone with the right permissions.

So, if someone in finance changes a price in your product catalog, sales and customer service teams will automatically receive the update, ensuring that they don’t give customers the wrong price.

Business leaders can track performance between locations and figure out why, exactly, one site struggles with process efficiency and others don’t. They can look at patterns holistically and make changes that reduce costs or ramp up productivity in a big way.

Additionally, ERPs automate all sorts of manual processes — data entry, approvals, billing, reconciling accounts — helping employees get more done in less time, while also preserving data integrity. 

Final Thoughts

Look, the ERP is the foundation all digital strategies are built on. 

If your current solution is preventing you from meeting customers’ needs, undermining operational efficiency, or actively blocking future growth, it’s time to get serious about ERP or Enterprise Resource Planning transformation. 

Velosio experts can help you evaluate ERP solutions, migrate on-prem systems to the cloud, and unify all data and processes in one place. 

We’ll provide hands-on guidance and data-driven insights that help you realize business value faster and put you on the path toward future transformations. Contact us today to learn more.