Enterprise Resource Planning (ERP)

The simplest way to define Enterprise Resource Planning (ERP) is to think

about all the core business operations required to run a company. Core
business Operations are basically finance, human resource,
manufacturing, supply chain, procurement, services, etc. ERP helps to

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manage all these operations in an integrated system effectively.

It also provides transparency into your complete business process by

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tracking all logistics, financials, and production aspects. It also provides

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customizations for your specific industry.

Most of the world’s renowned and successful companies have leaned

and applied ERP for the last quarter century. Now, this software can be
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designed and priced to fulfill the needs of all-size businesses.
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Definition of Enterprise Resource Planning

Enterprise Resource Planning (ERP) is a software-based process used by
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companies to manage and integrate core operations like finance, HR,

supply chain, procurement, supply chain, services, manufacturing, etc.
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or,
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ERP stands for Enterprise Resource Planning and refers to the software
and systems used to prepare and manage all the core supply chain,
production, services, financial and other operations of a business. ERP
software can be operated to automate and simplify particular activities
across a business, such as procurement and accounting, project
management, consumer relationship management, risk management,
observation, and supply chain management.

How does ERP Works?

Enterprise Resource Planning (ERP) system is made up of integrated
modules or business applications that communicate with each other and

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share a common database.

Every ERP module typically focuses on one business area, but they work

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together using the same data to meet the company's needs. There are
many components such as finance, HR, accounting, procurement, sales,

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logistics, and supply chain, companies can choose the module they want
and can add on and scale as required.
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Then real-time data is woven into business operations and workflows
across departments. Managers can see if one location is doing remarkably
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better at bypassing spoilage than a sister site a few towns over and work
to identify why, while operations can confirm staffing levels align with
traffic patterns. It delivers the most significance when a company has
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modules for each primary business function and provides timely, correct
data entry.
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When an enterprise uses business systems from multiple dealers,

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integrations are possible to make data automatically flow into the ERP
system. This real-time data can then be operated throughout the ERP
model to benefit any process.
Various Types of ERP
There are mainly 3 types of ERP systems that function in different
deployment environments;

1. On-Premise ERP:

It is hosted on the company's own computer and maintained onsite in

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physical office space within an organization. In this type, the company is
fully responsible for security, maintenance, upgrades, and other fixes.
Nowadays the popularity of this model has decreased.

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2. Cloud-Based:

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It is a cloud-based ERP system that runs on remote servers and is
managed by a third party. Users access the cloud ERP through a secure
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web browser. It will provide great flexibility to access information and
reports from anywhere with just an internet connection. There are
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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

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company that does not share server space with others and provides
the client greater control over the software. It requires an in-house
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IT team to manage the operations.

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● Multi-tenant: With a multi-tenant model, multiple organizations use

the same software instance and server. Within this model, the
software is upgraded frequently to the latest version. It doesn't
need any in-house IT team.

3. Hybrid:
Hybrid ERP merges characteristics of on-premises and cloud
deployments. The hybrid system is a two-tier ERP, where a business
maintains its on-premises ERP in place at headquarters but avails cloud
systems for associates or regional offices. These cloud systems are then
combined with the on-premises system. it gives the flexibility to turn to
cloud systems for certain business requirements while sticking with their
on-premises systems for other functions.

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4. Open Source:

It is like other inexpensive or sometimes free open source solution that is

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suitable for some small-scale businesses. Various open-source ERP

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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
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software.

Types of ERP Systems by Business Size

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If we consider the size of the business then we can find three types of
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ERP systems.

1. Small Business ERP:

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Small-size businesses should identify their requirements before starting

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to search for software of those specific specifications. This will keep costs
down and reduce the training required for employees. That's why cloud
ERP is probably the best choice for small businesses. This module has the
ability to scale up and support new features over time as well as a
straightforward implementation technique. It provides the scalability to
fulfill the business's necessities as it expands.
2. Midsize Business ERP:

Medium-size companies demand a platform that can support almost all

the functionalities that ERP has and is capable of scaling further to meet
future demands. Mid-size businesses need customizations at any time.

As mid-size businesses lack a prominent IT team, so, cloud and open

source ERP software are very effective for this type of business.

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3. Enterprise ERP:

Enterprise opts for software that supports all components of their

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business. They require a system that can capture, process, and interpret a

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huge amount of data and deal with the various business demands.

Hybrid and on-premises ERP fits perfectly with enterprises as some of

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the enterprises adopted ERP before the cloud was introduced so they can
take initiatives to move ERP from on-premises to Hybrid.
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ERP modules and Their Features

An ERP comprises 13 different types of modules. Here's a quick guide to
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all 13 mostly used ERP modules.

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1. Finance:

The finance module is the foundation of every ERP system. It manages

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the enterprise's all financial activities such as tracking of transactions,

accounts payable, accounts receivable, reconciliations, and other financial
activities.

2. 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.

3. Manufacturing:

The manufacturing process is complicated but the manufacturing module

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of the ERP system can ensure is in line with demand and monitor the
number of in-progress and finished items.

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4: Inventory Management:

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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
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forecast demand.

5. Order management:
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The order management module observes and prioritizes customer orders

from all channels as they come in and tracks their progress through
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delivery. It can improve the customer experience by speeding up

fulfillment and reducing delivery time.
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6. Warehouse Management:
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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.

7. 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.

8. Customer Relationship Management:

CRM or Customer Relationship Management is also a very popular

module of ERP that tracks all communications with clients, assists with

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lead management, and can boost sales by enhancing customer service.

9. Professional Services Automation:

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PSA module plans and tracks projects, including the time and resources

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spent on them. It encourages collaboration among the staff members and
simplifies client billing.
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10. Workforce Management:

WFM module of ERP system keeps track of all work roles with
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attendance and hours worked. This also records the productivity of

individual employees, teams, and departments.
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11. Human Resource Management:

HRM module of ERP system keeps employees' records with detailed

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information like performance reviews, and available PTO. It also can tease
out workforce trends in every department.
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12. Ecommerce:

This module allows retailers and brands to manage and marketing of

their online stores. With this, they can change the site look and feel and
add and edit product pages of their stores.
13. Marketing Automation:

The marketing Automation module deals with marketing efforts via the
web, email, social media, and other digital channels. It enables enterprises
to optimize and personalize their message. It can enhance sales, and
leads, and boost customer loyalty.

Implementation of ERP Process

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ERP implementation is very important. Without proper implementation, it

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can consume a lot of money and time. Here are some important stages of
ERP implementation:

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

2. Evaluation:
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After determining the requirements, the team should evaluate leading

offerings and select the platform that can best fix the existing problems,
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satisfy all department's requirements and boost the company's growth.

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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 fulfill your specified 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:

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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.

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6. Deployment:

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

Now assure your employees have everything they need to take benefit of
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the new system. With the help of specialized consultants, you can include
additional configurations to this system.
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Advantages of Enterprise Resource Management

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ERP boosts your business performance with these great advantages:

1. Workflow Visibility:

Before ERP systems were introduced, communication between multiple

workplaces took a lot of time and effort. If you need updates on an exact
part of your business, you had to call or visit the place in person. Large
companies with national and international sites also had to work around
time zones. And if there was a problem with one of your production
associates abroad, it could postpone your whole business while you made
constant phone calls and site visiting.

But now, fortunately, ERP systems introduced better workflow visibility.

With an ERP system, when you’re in your office headquarters, you can

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open a shared database from your ERP suite to get real-time details and
data about what’s occurring at your manufacturing plants and distribution

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centers anywhere.

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2. Business Intelligence:

ERP systems can access real-time data from across the company, so with
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these systems, you can uncover effective trends and deliver extensive
business insights. This leads to more promising decision-making by
corporate leaders who now have easy access to all relevant data.
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3. Easy Scheduling:
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Scheduling is very essential for any business. In an ERP system,

scheduling tools are a highly customizable part. With this system, you can
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supervise when employees come in for shifts, when inventory is supplied,

and when your plants require maintenance. After that coordinate each
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program into a single calendar so all your units and supply chain
associates stay on the same page.

4. Improved Efficiency And Productivity:

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, and asset management. Cycle
time is also decreased for sales to cash and procurement to pay
sequences.

5: Cross-Department Collaboration:

The more divisions your enterprise has, the more critical it is to manage

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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. Sometimes a

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miscommunication between your raw material supplier and distribution

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center can lead to expensive inventory blunders. But with ERP
communication tools, you can manage scanned documents, files, emails,
texts, and phone call recordings.
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6. Risk Management:
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Protecting your company from fraud is very necessary in this digital age. If
you are operating your business online, then you can be at risk at any
time. ERP system provides real-time risk management tools that provide
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your business additional security by conducting automated audits and

fraud monitoring.
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7. Data Security:
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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 ERPs use cutting-edge security
protocols to assure your company doesn't fall victim to harmful attacks.

8. Customization:
ERP software or suits also include customization features. It allows the
integrator to write code that adds a specific feature. But before going to
the custom route, take a closer look at your operations.

Disadvantages of Enterprise Resource Planning

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Besides the values that ERP brings, there are some challenges too. It is
important to be aware of those obstacles or disadvantages before

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adopting a preferred system.

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Here are some major disadvantages:

1. Time and Cost Sufficient:

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ERP systems were very costly before so only large companies can afford
those. But thanks to the SaaS system, which charges a small amount and
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more solutions designed for small and medium-sized businesses.

2. Complexity and Risks of Failure

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Sometimes, ERP projects do not successful because business processes

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and data requirements are found to be too complex during the

requirements gathering method and because employees are forced to
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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.
This can make an IT project unsuccessful.

3. Costly License, and Infrastructure:

Setting up an on-premise ERP system requires a huge investment in
hardware, software, and It team. Not only that company must pay for a
software license as well. The company also has to pay for those modules
which are not actually required.

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.

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Companies also need a strong and effective security system to protect
every data.

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4. Long Deployment Period:

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The process of deployment of any ERP system requires a long period of
time as it involves many functions, departments, and changes. Employees
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also take time to get comfortable with this system. When you start using
an ERP system, you'll have to input existing data into a new system. If you
have a large business then it will take a huge time to complete the data
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transferring process.

ERP Software
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There is a range of software that help to implement ERP systems within

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your organization.
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● Oracle Fusion cloud ERP

● SAP ERP
● Odoo (Open Source ERP)
● Microsoft Dynamics 365
● ERP Next (Open Source ERP)
● ERP5 (Open Source ERP)
 ● Dolibarr (Open Source ERP)
● Metafresh ERP (Open Source ERP)
● Ino ERP
● Tryton
● Helium5 ERP

MRP VS MRP II VS ERP

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The original MRP was a more premature computer-based process of
enhancing productivity within an industry. The system solely relies on

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collecting specific sets of data and analyzing them.

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MRP II, the successor of MRP I, holds the same core scheduling tools and
inventory management but adds functionalities like- forecast demand,
managing capacity, increasing quality, accounting, financial planning, etc.
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Ultimately, Here is ERP, a system that includes all features that MRP II
also has additional 7 features that MRP II doesn't have. ERP_ is a very
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modern and advanced successor of MRP II.

Here is a table that compares the features of MRP, MRP II, and ERP:
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Features MR MRP ER
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P II P
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Production Schedule Yes Yes Yes

Bill of Materials (BOM) Yes Yes Yes

Inventory Tracking Yes Yes Yes

Machine Capacity Scheduling No Yes Yes

Demand Forecasting No Yes Yes

Quality Management No Yes Yes

General Accounting No Yes Yes

Core Financials No No Yes

Customer Relationship No No Yes

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Management (CRM)

Supply Chain Management (SCM) No No Yes

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Human Resource Management No No Yes

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Marketing Automation

Project Management
No

No
No

No
Yes

Yes
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Enterprise Asset Tracking No No Yes
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MRP VS MRP II VS ERP Comparison Chart

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