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Analytics, Artificial Intelligence, Business Process, Software Development, Technology Strategy

What Is ERP? The Business Management Benefits of Enterprise Resource Planning

Posted on April 17, 2024

By Jim Hutchings

May 24, 2024

ERP systems have been successfully serving big companies like Amazon and Toyota for quite some time now. Plus, many other businesses are migrating to ERPs every day for more streamlined and well-integrated business management. But what is an ERP? And will your company fall behind if you don’t get one?

Simply put, ERP systems are libraries of all possible useful business tools. This ranges from accounting and procurement to HR and customer relationship management. Individual modules in the ERP take care of each of these functions.

Understanding Enterprise Resource Planning (ERP) Systems

You can think of an ERP as a one-stop solution for all your business management needs. As the name suggests, these software systems help organizations make the best use of all their resources, run more efficiently, reduce costs, and manage relationships.

ERP systems provide you with a central console for all the major operations of your company. They also automate most of these processes and integrate the data involved. As a result, your management is consistent and error-free. Moreover, ERP has various reporting and analytical tools. You can use them for setting strategies, planning budgets, and forecasting to avoid risk. The seamless integration and flow of data between the various aspects of your business promotes collaboration in the company. This helps your staff make the best decisions in the quickest possible time.

Key Business Management Features of ERP Software

ERP systems essentially work by helping previously siloed segments of business management data in your company talk among themselves. The software features various modules to do this job:

Foundational Module

Finance is the core, or foundational, module of an ERP system. There are several useful components in this module. For example, the balance sheet component can provide you with a quick overview of the company’s overall financial situation by showing its assets, equity, and liability.

Meanwhile, a general ledger component would keep a record of all the transactions your business had to date. The module also helps you with functions like analyzing profitability, managing revenue, invoicing, expense reporting, etc.

Purchase Module

Also known as the procurement module, the purchase module oversees all the purchase-related activities in your company. Employees can use this module to submit a purchase requisition for goods or services. Then, the system can take care of the approval, authorization, and tracking of this requisition.

The procurement module can also help maintain a list of suppliers based on their records. Thus, helping your procurement professionals work with the best vendors in the business.

SCM Module

The SCM module helps you visualize all the complex supply chain activities at a glance. As a result, you can plan, monitor, and control all these activities from a single interface. This can give companies a competitive advantage when launching a new product.

HR Module

This module is concerned with one of the most valuable resources of any company -its employees. You can think of it as the central hub for all the data regarding your staff. It contains many of vital information about your employees. For example, performance status, salary sheets, attendance records, contact information, etc. This module is especially handy for organizations that have employees scattered all across the world.

CRM Module

The customer relationship management module of an ERP system is essentially a smart client database. It contains various useful information such as their preferences, past purchases, communication, and general information. Companies can analyze these data with ERP tools to identify trends and gain insights into their audiences’ expectations. This helps to come up with better-selling products.

Warehouse and Inventory Modules

These modules streamline warehouse management and provide real-time visibility into inventory levels. As a result, it gives the user (manager/owner) precise control over their company’s warehouses across the map. This helps with optimal warehouse staff productivity and utilization of floor space.

Meanwhile, an ERP inventory module tracks all of your company’s currently held items. This ranges from raw materials to finished goods ready to be shipped. The modules keep accurate records and help you avoid situations like overstocking or understocking.

Fulfillment Module

This is also known as the order management module. It automates the process of order creation, delivery, and returns. The system can figure out the quickest route and most cost-effective shipment method for the transportation of goods.

Manufacturing Module

The manufacturing module is concerned with the production process. It can integrate with the fulfillment module and define the number of goods to be manufactured. Afterward, it will collaborate with finance and inventory to determine the required funding and raw materials. It will also ensure the necessary labor and machinery to manufacture this product.

Once the manufacturing process starts it will keep tracking the progress. The module ensures that the proper steps of manufacturing that specific product are followed. It would also track the time so that everything is on schedule.

Marketing Module

Some ERP systems come with a marketing module. You can think of it as a built-in digital marketing agent. The module can run email marketing and social media campaigns before a product launch. It can also evaluate the public responses to this campaign and plan forward.

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ERP Implementation Best Practices

Implementing an ERP system will be one of the best decisions you ever make for your company’s business management needs. However, your success with the technology depends much on how you implement it. Here are some of the best practices:

  • Evaluate the business tools your company is already using. This would help you get an idea of what improvements your system requires
  • Set well-defined goals you want to achieve with the ERP implementation. These should align with your company’s current targets.
  • Ensure all executives and stakeholders of your company are on board with the decision since ERP implementation will change much of how your workplace functions. Plus, the process requires significant budget allocation.
  • Pick the best tech-savvy professionals from your accounting, HR, Inventory & Warehouse, customer relations, and marketing departments to create an ERP implementation team.
  • Arrange training sessions to educate employees and familiarize them with the ERP system.
  • Assess and cleanse your business data for migration. Extract data from old legacy systems and transform them into suitable formats for ERP loading.
  • Test the newly loaded data for accuracy and completeness. Perform the tests multiple times before going live.

Discover Business Management Optimization

Hopefully, you have a proper understanding of what an ERP is and the amazing things it can do for your business management processes. However, ERP systems are complex, so it can often be hard to decide which one to implement for your business. In that case, our experts can help you develop a technology strategy. Contact us for more.

Steve Solt headshot

Jim has been a veteran in the software development and project management sphere before even joining KDG as our VP of Software Development. He has over a decade of experience in technology supporting the financial services industry, specifically investment banking and life insurance.

Want to learn more? Book a meeting with us today!

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