In the past, businesses consistently battled to support their diverse practices by utilizing resources from and in the wrong departments. This led to companies hiring extra staff to manage different departments and over-utilizing resources. To manage this, they consistently attempted to utilize Enterprise Resource Planning (ERP) in various forms over the years. Though it wasn’t called ERP initially, the concept existed.
Interestingly, ERP was first coined in the manufacturing industry, while applying the EOQ (Economic Order Quantity) model, which was a paper-based planning framework. This was taken over by the Material Resource Planning (MRP) system created in the late 1960s. However, modern-day ERP practices began during the 1990s with the introduction of computer software.
What is ERP?
ERP is the abbreviated form of "Enterprise Resource Planning". It is an integrated software suite that collects and sorts out business data to manage business resources efficiently. ERPs automate various business functions like manufacturing, production, accounting, etc.
In layman's terms, ERP improves how one handles business resources, regardless of whether it's raw materials or working hours for Human Resource (HR).
There are numerous definitions of ERP. Though they differ based on the users - IT developers, vendors, media houses, etc. the majority agree to the fact that ERP is proposed to serve all branches of an organization and bring in an efficient business process.
Kinds of ERP based on Implementation
There are different kinds of ERP software:
- Open Source ERP: Like any open-source software, this ERP allows the user to assess, alter, and improve the ERP source code. Utilizing an open-source ERP lets the businesses tweak application so that it can suit the working environment.
- On-Premise ERP: This is a type of ERP software that is transferred directly to the on-site device. These ERPs are designed for all business sizes but they are more suitable for SMBs (Small and Medium Businesses).
- Cloud-based ERP: This ERP software is accessible over a cloud-hosting service instead of an on-premise arrangement. That means, as long as there is internet connectivity, data can be accessed real-time. In other words, the data in this ERP can be accessed anytime from anywhere.
- Hybrid ERP: This is a blend of both on-premise and cloud-based ERP.
Advantages of ERP
Enterprise Resource Planning helps in better business performance with these extraordinary advantages:
1. Business Intelligence and Data Analytics
To maintain a business, decision-making should be guided by precise data. ERP software uses Business Intelligence (BI) tools to provide reports based on data collected and analyzed. Modifications to the ERP are sometimes possible to analyze data real-time and to roll out improvements in the process.
2. Scheduling Solutions
Scheduling tools are an exceptionally flexible piece in ERP systems. For example, businesses can schedule when the labourers come in for shifts, when stock is moved, when industrial facilities need maintenance, etc. Thus, to bring all departments and supply chain accomplices on the same page, the business can combine different schedules into one for better administration.
3. Cross-Department Collaboration
The more divisions an organization has, the more important it is to oversee communication practices. This is needed to keep away botches. Furthermore, if an organization has offices in different regions, the management needs a route map covering the entire workforce. This will help them stay connected in spite of time barriers or other obstructions.
A miscommunication between the raw material provider and distribution centre can prompt exorbitant stock mistakes. To save businesses of this hassle, an ERP communication tool can help to verify all the documents, messages, call recordings and related. Private and internal channels for quick communication can be integrated within the ERP too. Likewise, ERP integrated Customer Relationship Management (CRM) tools can help to plan external communications.
4. Work Process Visibility and Streamlining
Before the ERP era, planning between different worksites took a lot of time and exertion. Luckily, ERP frameworks changed the work process extensively. Today, in any event, whether one is present in the office or not, he/she can open a typical database from the ERP suite and get real-time insights into what's happening at various units.
5. Risk Management and Data Security
Shielding the organization from fraudulent practices is the top-most priority in this digital age. An efficient risk management system in the ERP can give the organization an added layer of security by performing computerized audits and observing any malpractices from time to time.
Since organizations handle a great deal of sensitive data, ERPs can help in securely storing significant documents and communications, all in one place. This will also help in eliminating data duplication too.
6. Customizable Solutions
Every organization is not the same. Fit-all software may not work every time. This calls out the need for customizable ERP. Keeping this in mind, some ERPs come with custom modules that accommodate precise business needs. The recent trends include Artificial Intelligence (AI) and the Internet of Things (IoTs).