ERP AND ALL THAT!

A. What is ERP?

ERP stands for enterprise resource planning, but what does ERP mean? The simplest way to define ERP is to think about all the core business processes needed to run a company: finance, HR, manufacturing, supply chain, services, procurement, and others. At its most basic level, ERP helps to efficiently manage all these processes in an integrated system. It is often referred to as the system of record of the organisation.

Yet today’s ERP systems are anything but basic and have little resemblance to the ERP of decades ago. They are now delivered via the cloud and use the latest technologies – such as artificial intelligence (AI) and machine learning – to provide intelligent automation, greater efficiency, and instant insight across the business. Modern cloud ERP software also connects internal operations with business partners and networks around the world, giving companies the collaboration, agility, and speed they need to be competitive today.

B. Why is ERP important?

Sometimes described as “the central nervous system of an enterprise,” an ERP software system provides the automation, integration, and intelligence that is essential to efficiently run all day-to-day business operations. Most or all of an organisation’s data should reside in the ERP system to provide a single source of truth across the business.

• Finance requires an ERP to quickly close the books. Sales needs ERP to manage all customer orders.
• Logistics relies on well-running ERP software to deliver the right products and services to customers on time.
• Accounts payable needs ERP to pay suppliers correctly and on time.
• Management needs instant visibility into the company’s performance to make timely decisions.
• Banks and shareholders require accurate financial records, so they count on reliable data and analysis made possible by the ERP system.

?The importance of ERP software to businesses is illustrated by the growing adoption rate. According to G2, “The global ERP software market is projected to reach US$78.40 billion by 2026, growing at a CAGR of 10.2% from 2019 to 2026.”

C. Six key benefits of ERP

A good ERP system offers many advantages — which can vary depending on how the system is deployed. The benefits of cloud ERP, for example, are different than on premise.

That said, there are six major benefits that apply to all modern ERP solutions:

1. Higher productivity: Streamline and automate your core business processes to help everyone in your organisation do more with fewer resources.
2. Deeper insights: Eliminate information silos, gain a single source of truth, and get fast answers to mission-critical business questions.
3. Accelerated reporting: Fast-track business and financial reporting and easily share results. Act on insights and improve performance in real time.
4. Lower risk: Maximize business visibility and control, ensure compliance with regulatory requirements, and predict and prevent risk.
5. Simpler IT: By using integrated ERP applications that share a database, you can simplify IT and give everyone an easier way to work.
6. Improved agility: With efficient operations and ready access to real-time data, you can quickly identify and react to new opportunities.

D. How do ERP systems work?

An ERP system – also called an ERP suite – is made up of integrated modules or business applications that talk to each other and share common a database.

Each ERP module typically focuses on one business area, but they work together using the same data to meet the company’s needs. Finance, accounting, human resources, sales, procurement, logistics, and supply chain are popular starting points. Companies can pick and choose the module they want and can add on and scale as needed.

ERP systems also support industry-specific requirements, either as part of the system’s core functionality or through application extensions that seamlessly integrate with the suite.

ERP software can be bought using a cloud subscription model (software-as-a-service) or a licensing model (on premise).

E. Common ERP modules

Enterprise resource planning systems include a variety of different modules. Each ERP module supports specific business processes – like finance, procurement, or manufacturing – and provides employees in that department with the transactions and insight they need do their jobs. Every module connects to the ERP system, which delivers a single source of truth and accurate, shared data across departments.

The most widely used ERP modules include:

1. Finance:?This is the backbone of most ERP systems. In addition to managing the general ledger and automating key financial tasks, it helps businesses track accounts payable (AP) and receivable (AR), close the books efficiently, generate financial reports, comply with revenue recognition standards, mitigate financial risk, and more.
2. Human resources management:?Most ERP systems include an HR module that provides core capabilities such as time and attendance and payroll. Add-ons, or even entire Human Capital Management (HCM) suites, can connect to the ERP and deliver more robust HR functionality – everything from workforce analytics to employee experience management.
3. Sourcing and procurement:?This module helps businesses procure the materials and services they need to manufacture their goods – or the items they want to resell. The module centralises and automates purchasing, including requests for quotes, contract creation, and approvals. It can minimise underbuying and overbuying, improve supplier negotiations with AI-powered analytics, and even seamlessly connect with buyer networks.
4. Sales:?The sales module keeps track of communications with prospects and customers – and helps reps use data-driven insights to increase sales and target leads with the right promotions and upsell opportunities. It includes functionality for the order-to-cash process, including order management, contracts, billing, sales performance management, and sales force support.
5. Manufacturing:?This is a key planning and execution component of ERP software. It helps companies simplify complex manufacturing processes and ensure production is in line with demand. This module typically includes functionality for material requirements planning (MRP), production scheduling, manufacturing execution, quality management, and more.
6. Logistics and supply chain management:?Another key component of ERP systems, the supply chain module tracks the movement of goods and supplies throughout an organisation’s supply chain. The module provides tools for real-time inventory management, warehousing operations, transportation, and logistics – and can help increase supply chain visibility and resilience.
7. Service:?In an ERP, the service module helps companies deliver the reliable, personalised service customers have come to expect. The module can include tools for in-house repairs, spare parts, field service management, and service-based revenue streams. It also provides analytics to help service reps and technicians rapidly solve customer issues and improve loyalty.
8. R&D and engineering:?Feature-rich ERP systems include an R&D and engineering module. This module provides tools for product design and development, product lifecycle management (PLM), product compliance, and more – so companies can quickly and cost-effectively create new innovations.
9. Enterprise asset management: Robust ERP systems can include this module – which helps asset-intensive businesses minimise downtime and keep their machines and equipment running at peak efficiency. This module includes functionality for predictive maintenance, scheduling, asset operations and planning, environment, health and safety (EHS), and more.

F. Types of ERP deployment

Modern ERP systems can be deployed in a number of ways: in a public or private cloud, on premise, or in various hybrid scenarios that combine environments. Here are some of the high-level benefits of each to help you identify the ERP development option that makes the most sense for your business.

Cloud ERP

With cloud ERP, the software is hosted in the cloud and delivered over the Internet as a service that you subscribe to. The software provider generally takes care of regular maintenance, updates, and security on your behalf. Today, cloud ERP is the most popular deployment method for many reasons – including lower upfront costs, greater scalability and agility, easier integration, and much more.

On-Premise ERP

This is the traditional model for deploying software where you control everything. The ERP software is typically installed in your data centre at the locations of your choice. The installation and maintenance of the hardware and software is your staff’s responsibility.

Many companies are modernising and upgrading their on-premise ERP systems to cloud deployments. This requires careful planning of your ERP upgrade as well as a thoughtful process of evaluating ERP software and deployment options.

Hybrid ERP

For companies that want a mixture of both to meet their business requirements, there is the hybrid cloud model. This is where some of your ERP applications and data will be in the cloud and some on premise. Sometimes this is referred to as two tier ERP.

Stay tuned for more and learn how to systematically evaluate your options, avoid pitfalls, and get started with the right innovations for your business.