Enterprise Resource Planning (ERP)

Enterprise Resource Planning or ERP is a platform that a company uses to integrate all the core business operations required to run a company. Basically, core business operations involve finance, human resource, manufacturing, supply chain, procurement and other services. ERP helps to manage all these operations in an integrated system effectively that provides transparency into your complete business process by tracking all logistics, financials and production aspects. It also provides customizations for your specific industry. Without an ERP application, each department would have its system optimized for its specific tasks only but with an ERP software, each department still has its system, but all of the systems can be accessed through one application with one interface.

How ERP works?

Enterprise resource planning or ERP system is made up of integrated modules or business applications that communicate with each other and share a common database. Every ERP module typically focuses on one business area but they work together using the same data to meet the company's needs. There are many components such as Finance, HR, Accounting, Procurement, Sales, Logistics and Supply chain. Companies can choose the module they want and can add on and scale as required. Once all departments are linked to the system, all data is collected on the server and becomes instantly available to those with permission to use it. It can generate reports with metrics, graphs or other visual aids a client might need to determine how the business and its departments are performing. Depending on the sophistication of the ERP vendor, individual modules may have numerous submodules that can be added to reflect how your business operates.

Types of ERP Deployment:

1. On-Premise ERP: It is hosted on the company's own computer and maintained on-site in physical office space within an organization. In this type the company is fully responsible for security maintenance upgrades and other fixes. An on-premise solution offers the security and control of using your own IT infrastructure to connect your people, processes, and systems.

2. Cloud-Based ERP: It runs on remote servers and is managed by a third party. It will provide great flexibility to access information and reports from anywhere with just an internet connection. There are multiple deployment options for cloud-based ERP that are single tenant and multi-tenant.
·Single tenant: It is a separate model of the ERP used by a single company that does not share service space with others and provides the client greater control over the software. It requires an in-house IT team to manage the operations.
·Multi-tenant: With a multi-tenant model, multiple organizations use the same software instance and server. It doesn't need any in-house IT team.

3. Hybrid ERP: Hybrid ERP system merges the characteristics of on-premises and cloud deployments. The hybrid system is a two-tier ERP due to its bimodal combination where a business maintains its on-premises ERP in place at headquarters but avails cloud systems for associates or regional offices. It gives the flexibility to turn to cloud systems for certain business requirements while sticking with their on-premises systems for other functions. It also can integrate several software systems easily and quickly such as CRM, sales and accounting.

4. Open Source: It is like other inexpensive or sometimes free open-source solutions that are suitable for some small-scale businesses. Various open-source ERP providers allow businesses to download their software for free. They will then be charged a minimal annual fee for cloud access. For this, you need a person with deep knowledge of how to configure and develop the software.

ERP Modules and Their Features:

1. Finance: The finance module is the foundation of every ERP system. It manages the enterprise’s all financial activities such as tracking of transactions, accounts payable, accounts receivable, reconciliations, and other financial activities.

2. Human Resource Management: The HRM module of the ERP system keeps employees’ records with detailed information like performance reviews, and available PTO. It also can tease out workforce trends in every department.

3. Procurement: This module deals with purchasing, whether raw materials or finished goods. It can minimize overbuying and underbuying when linked to demand planning. Procurement also can automate requests for quotes and purchase orders.

4. Manufacturing: The manufacturing process is complicated but the manufacturing module of the ERP system can ensure it is in line with demand and monitor the number of in-progress and finished items.

5. Order management: The order management module observes and prioritizes customer orders from all channels as they come in and tracks their progress through delivery. It can improve the customer experience by speeding up fulfilment and reducing delivery time.

6. Inventory Management: This module of the ERP system shows current inventory levels to the SKU level and updates those numbers in real-time. It also measures key inventory-related matrices and optimizes stock based on current and forecast demand.

7. Warehouse Management: It executes warehouse activities like picking, receiving, packing, and shipping. It saves the cost and time for the warehouse by identifying more efficient ways to execute these tasks.

8. Supply Chain Management: SCM or Supply Chain Management module of ERP deals with the flow of goods and services and includes all processes that turn raw materials into final products.

9. Customer Relationship Management: CRM or Customer Relationship Management is also a very popular module of ERP that tracks all communications with clients, assists with lead management, and can boost sales by enhancing customer service.

10. Ecommerce: This module allows retailers and brands to manage and market their online stores. With this, they can change the site’s look and feel and add and edit product pages of their stores.

Implementation of ERP Process:

1. Planning: Before looking for an ERP system, a company should form a cross-functional team to determine what they need from an ERP system. They should also identify the inefficient process and other obstacles to business growth.

2. Evaluation: After determining the requirements, the team should evaluate leading offerings and select the platform that can best fix the existing problems, satisfy all department’s requirements and boost the company’s growth.

3. Design: At this phase, the team decides whether the system can support existing workflows and which techniques may need to change. This is also the time to specify any needed customizations.

4. Development: After the designing phase, internal or external technical experts configure the software to fulfil your specific needs and begin relocating the company’s data to the new system. Then time is to decide how you will introduce employees to the system and begin scheduling sessions and producing required training materials.

5. Testing: This is a must-needed step in implementing an ERP system. It is very essential to make sure everything is working as expected and fix related problems.

6. Deployment: After testing it’s time to deploy the system in the enterprise. The company must prioritize employee training to mitigate resistance to change. Some businesses opt for a phased rollout, while other businesses make all modules live at once.

7. Support: Now assure your employees that they have everything they need to take advantage of the new system. With the help of specialized consultants, you can include additional configurations to this system. 

Advantages of Enterprise Resource Planning:

·Improves accuracy and productivity: Integrating and automating business processes eliminate success effort and improves accuracy and productivity. Departments with interconnected processes can synchronize work to achieve faster and better outcomes. 

·Improves reporting: Some businesses benefit from enhanced real-time data reporting from a single source system. Correct and complete reporting help companies adequately plan budget, forecast and communicate the state of operations to the stakeholders. 

·Improved efficiency: ERP allows businesses to quickly access needed information for client’s vendors and business partners. With improved planning, the ERP system delivers a huge increase in the efficiency of day-to-day and routine transactions such as order completion, on-time shipment seller performance, quality management invoice, reconciliation Sales completion etc.

·Cross-department collaboration: The more divisions your enterprise has, the more critical it is to manage internal communication techniques to avoid errors. And if your enterprise has branches all over the world, you must need a strategy for everyone to stay in touch across time zones and language barriers. With ERP communication tools, you can manage scanned documents, files, emails, texts and phone call recordings. 

·Data Security: Your company deals with a lot of sensitive data. An ERP system provides security by keeping all your important and secret documents and communications in one place. Cloud ERP’s cutting-edge security protocols to assure your company doesn't fall victim to harmful attacks.

Disadvantages of Enterprise Resource Planning:

·Complexity and Risks of failure: Sometimes ERP projects are not successful because business processes and data requirements are found to be too complex during the requirements gathering method and employers are forced to take part in change management. Because of a long deployment method, the ERP system might not keep speed with modifications that the business needs to make in a dynamic environment of intense competition. 

·Costly and Infrastructure needed: Setting up an on-premise ERP system requires a huge investment in Hardware, software and its teams. Traditional on-premise and Hybrid ERP requires on-site servers and networking infrastructure in the data center of the company. Not only that servers must be powerful enough to handle huge amounts of data, companies also need a strong and effective security system to protect every data. 

·Long Deployment Period: the process of deployment of any ERP system requires a long period of time as it involves many functions, departments and changes. Employees also take time to get comfortable with this system.

Conclusion:

Enterprise Resource Management stores all entered data into a single database, allowing all departments of an organization to work with the same information. The number main reason businesses need ERP is to make the operation of an organization simpler, easier and smoother and thereby helps the businesses to excel and grow faster. ERP systems bring together customer management, human resources, business intelligence, financial management, inventory and supply chain capabilities into one system. And if you are still not using an ERP for your business, you are already way behind your competition.