What Is ERP (Enterprise Resource Planning)? ERP System Types & Uses
In the thrilling business world of SaaS, two main acronyms often duke out for the top position: ERP and CRM. In this article, we’ll help you better understand what is ERP in business and ERP system meaning.
According to Gartner, an ERP is “an integrated suite of business applications” combining the departmental powers of “finance, HR, distribution, manufacturing, service and the supply chain.”
In other words, ERPs are a totalizing business process and a streamlining and optimization machine for better efficiency, productivity, and cost-saving purposes. So, let’s see what these tools can do for your business!
ERP meaning: what does ERP stand for?
ERP stands for enterprise resource planning. An enterprise refers to a large business or organization. Resource planning aligns the business processes of many modules of one organization to optimize productivity in real-time. The meaning of ERP includes SaaS tools for CRM, HR, Accounting, SCM, sales, and inventory management.
So, what is enterprise resource planning?
As mentioned above, the ERP definition is a streamlined business process that brings together all the work of a company or organization's front and back offices. But what is ERP in simple terms? An ERP solution is a one-stop SaaS shop for all your app business needs.
The concept of ERP became quite popular from the 70s to the 80s with names like SAP and Oracle. These companies, along with others, helped solidify our current enterprise resource planning definition, its various features and business functions, and how a successful ERP deployment can increase efficiency, help with strategic business decision-making, cut down on costs and expenses, and optimize all aspects of a company’s business functions.
What is an ERP system and how do they work?
The enterprise resource planning process should not be too difficult to understand, although it may seem complicated at first.
An enterprise resource planning system is designed to streamline all the work across an entire organization, using tools like artificial intelligence, IoT or the internet of things, and BI or business intelligence, to aid with decision-making, material requirements planning, budgeting, scheduling, and for aiding with customer relationship management.
What’s more, all ERP systems are really data management systems that enable the user to look at organized data.
What this means is that while an ERP implementation is helping you manage your business operations, it is also gathering important information on many metrics of your business performance, like how long tasks take, how much do things cost, how efficient is each employee or piece of equipment, as well as providing data on customizable specific needs based on your industry.
All this data can form a great single source of information in a common database that any great ERP application will display on interactive dashboards.
What are the different types of ERP systems?
There are three major ERP types. These ERP system types usually deal with how your ERP implementation is set up, and where your ERP data is stored. Whether you are using old ERP modules or a new ERP will likely determine what type of ERP system you are using.
The three types of ERP systems:
Cloud-based ERP
On-premise ERP
Hybrid ERP
Cloud ERP
The benefits of cloud-based ERP are that it is effortless to set up and begin using as there is no lengthy installation phase on your own system. The same thing goes for precious ERP real-time data, which is stored on the cloud ERP’s servers, so you do not have to worry about protecting it as most ERP vendors have great data security.
You can also access your ERP dashboards and your data from anywhere. One drawback here is that you must rely on the software vendor always to be up and running, and you’ll have to wait for updates to be performed every now and then.
On-premise ERP
The next ERP implementation type is an on-premise ERP, which is the opposite of a cloud-based ERP.
Here, the software will be installed onto your own hardware. This is often the case with massive ERP software solutions for big companies like SAP or Oracle.
You have complete control over the apps, but also you get to store and protect your data however you see fit. One drawback here is that this ERP might not be accessible from anywhere.
Hybrid ERP
As the name explains, this one is a mix of cloud ERP solutions and on-premise ERP systems.
Nowadays, there are many more hybrid modern ERP options, and some e-commerce startups and small businesses prefer these because they can be more affordable. You can have some of your data stored on the ERP vendor’s servers but also have regular backups to your own hard disks.
The same goes for apps, where you can have offline functionality with on-premise implementation and on-the-go access with cloud-based systems.
Uses of ERP in industry: what is ERP software used for?
Next question, what is an ERP software system used for? There are many different ERP software uses, and we will go over a lot of them individually in the sections below.
But, to restate the important part, ERP systems are software that unifies the business requirements and business processes of companies and organizations, using automation and data for an ever-increasingly more optimized and streamlined business operation.
If you want a more detailed answer to the question what are ERP systems used for, then don’t worry; we got you covered. But first, let’s go over some of the business types and industries which can seriously reap the benefits of an ERP platform.
Industries that can benefit from the use of ERP software
Not all industries or company types really need an ERP. It is mostly thought of as being a big part of heavy industry, like manufacturing. Although there are modern ERPs from companies like Microsoft which know how to add value to many new kinds of companies. Here is a brief list of industries that need an ERP solution:
Manufacturing
Mining, oil, gas
Real estate
Agribusiness
Defense contracting
Telecommunications
Professional services
Shipping and logistics
Automobile and transportation
Healthcare services
Sports and fitness businesses
Hospitality and tourism
Restaurants and catering
Financial services
E-commerce operations
Government projects
Education
Nonprofits and NGOs
Features of enterprise resource planning software
Let us turn our attention and explore what does an ERP system do? We’ve already briefly mentioned its benefits and uses, so here we will unpack some of the major ERP modules, which are:
Marketing and sales
Project management
Supply chain management
Accounting
CRM
Human resources
Analytics and reporting
Marketing and sales
If you only need marketing and sales tools, then ERP is too much for you, and you could find a cheaper CRM or marketing and sales platform. However, if marketing and sales are two important but by no means independent departments in your organization, then an ERP can streamline marketing efforts and sales teamwork for a smoother customer experience.
For example, marketing can plan campaigns based on ERP data from past marketing performance success and sales ROI. Sales can immediately be connected to inventory, fulfillment, and shipping for faster delivery, while inventory can also be automatically alerted to restock low items.
Project management
While there are many excellent stand-alone project management solutions, when you combine PM with your enterprise resource planning, you can plan more accurately, reduce risk and unforeseen obstacles, and be ready to adapt to changes. Many ERPs have change management tools for this.
Folding your PM tools into your ERP system can pull together data for better production planning, helping to streamline the tasks of procurement, workload delegation, task dependencies and priorities, and budgeting. An ERP is indispensable if your operation engages in manufacturing resource planning projects or MRP II.
Supply chain management
In some ways, warehouse management, inventory management, and their umbrella module, supply chain management, or SCM, are some of the most core business process features inside your ERP solution if you are a manufacturing operation, or if at least you sell material goods. SCM brings together maintenance, inventories, shipping, warehousing, fulfillment, and more.
When your ERP stays on top of your supply chain processes, it constantly sucks up valuable data and insights that get fed through workflows into other elements of your ERP, for example, your project management or your accounting and financial purposes.
Accounting
If supply chains were the core modules of an ERP related to material production and deliverables, then accounting is the core ERP module for the immaterial and abstract work of numbers, dollars, profitability and taxes. Great accounting ERPs can also help with regulatory tax preparation, even if you are doing business in many countries.
Other great accounting tools you can expect with ERP software are your basic general ledger features, with accounts payable and accounts receivable. Then, you can sometimes expect more advanced finance features, like financial planning, forecasting, portfolio management, and financial reporting.
CRM
A CRM is your customer relationship management software. In some ways, this app is like the little cousin of an ERP.
So, what is the main difference between ERP vs CRM? A CRM will provide your ERP database with detailed contact information on everyone in your network, along with full engagement histories and shared docs. It can even comb social media to gather new contacts or automatically update the status of current contacts.
Many startups and small businesses are fine beginning with a CRM, especially if it has marketing, sales and support modules, along with some project management and team collaboration features. However, the CRM section of an ERP offers the wider business process actionable insights which can then be applied across the whole organization for added value.
You can use a CRM to see purchase histories and trends and use that data in marketing and sales. You could also keep an eye on past support issues to spot potential problems that could be solved before becoming too much of an obstacle.
Human resources
HR has a myriad of responsibilities within an organization. Human resources does hiring, firing, onboarding, employee issue resolution, management defense, worker satisfaction surveillance, and corporate loyalty monitoring. This department also has to make sure that the work environment is inclusive, egalitarian, and diverse.
At the same time, most of the best ERPs include a great HR module with all the necessary tools and features. Some of the essential features include recruiting, training, payroll management, time off and holiday planning, benefits and bonus packages, time tracking, talent management, healthcare plans, and human capital analysis. All of which you should expect in an ERP platform.
Analytics and reporting
As was mentioned several times, ERPs, like most business SaaS, generate a lot of activity on their platforms, and this activity results in a wealth of data and business intelligence. Combined with the power of workflow automation, the data can be automatically applied to run specific business processes more smoothly.
Data analytics inside your ERP is also crucial for regular reporting. You can set it up so that your ERP creates reports automatically at certain time frames or stages in a project and have those reports sent out to all the important stakeholders. Reporting can be highly customized based on metrics, KPIs or even just display preferences. What’s more, reports can be live, meaning they are constantly updated in real-time based on active data generation.
A deeper look at enterprise resource planning applications
Now that we have discussed some of what the core applications of an ERP are, let’s get into the deeper take on the benefits of ERP business applications. When you leverage the application of ERP, you deserve to expect the following boosts to your business.
Streamline operations
Streamlining is certainly the buzz word around ERPs. Combining automation, data analysis, and human input, an ERP makes work go more smoothly and quickly between workers, departments, and your organization and any outside parties or stakeholders. This means less downtime, fewer mistakes, less overspending, and more of an optimized, agile process.
Optimize productivity
From time immemorial, business owners have sought ways to be more productive. And technology has always been the best way to give your workforce a hand in being more productive.
ERP is one of the latest advancements in technology that serves this purpose well. Employees can focus on being more productive when they do not have to worry about doing repetitive administrative work.
Customization
There is no platform today that would be so incredible to use if it did not offer its users a degree of customization and personalization. Today, the top ERP tools have a great deal of customization. This helps save time when reviewing reports or using the various ERP tools and allows employees to feel they have control over the technology that’s there to help them.
Automation and workflows
By now, you are well aware of how much automation and workflows play a part in enterprise resource planning. What’s great with these programs is that you do not need to be a computer nerd or know any coding to run workflows, modify workflow templates, and create you brown workflows. It often functions by letting you use simple drag-and-drop interfaces with ‘if this, then that’ (IFTTT) logic.
Ready to look at enterprise resource planning solutions for your business?
So, now that you are an ERP expert in the general sense, how about learning a thing or two about the actual leading ERP business solutions?
It’s great to go over a list of the top ERP systems and explore your options. You are always better off being familiar with the feature lists and pricing so as to know what the market has to offer when it comes to the best business ERP system options.
Our conclusion on enterprise resource planning systems
Enterprise resource planning is a great way to take your business to the next level. It’s an invaluable tool for streamlining operations, optimizing productivity, and customizing processes to meet specific needs.
An ERP management system also gives you the ability to automate tasks and create efficient workflows. With access to real-time data and simplified reporting, ERP is essential for businesses of all sizes. Aligned with the right ERP system, you can look forward to a smoother, more efficient, and successful operation.
So if you’re ready to experience the benefits ERP has to offer, it’s time to start exploring which system is right for your business!
FAQs
What does ERP stand for in accounting?
In ERP accounting software, the acronym ERP stands for enterprise resource planning, and accounting is one of the main modules of ERP. ERP accounting features include things like billing, expenses, invoicing, accounts payable and receivable, budgeting, tax preparation, as well as more advanced tools like financial planning, analytics and forecasting.
What are two of the main objectives of ERP?
The two main objectives of an enterprise resource planning software solution are to streamline the business process and reduce costs. ERPs often use AI and automation to optimize work and align departments more closely. A more streamlined business process eliminates errors, makes workers more efficient, and lowers expenses.
What is the primary goal of an ERP system?
The primary goal of ERP systems is to streamline the entire life cycle of a business process, project, or product development. This process begins with initiation, planning, budgeting, and production scheduling, all the way to the final deliverables when the client or stakeholder is satisfied.
What does enterprise resource planning involve?
Enterprise resource planning, or ERP, involves bringing together all the core business processes to ensure an optimized work structure that eliminates wasted time and money. Among the many departments that are involved with ERP include sales, marketing, supply chain, inventory management, HR, IT, and accounting.
