What is Enterprise Resource Planning (ERP) and do you need it?
Here’s a simple blog to inform you about what is an ERP (Enterprise Resource Planning), what it can do, what it can’t, and do you need ERP.
An ERP or Enterprise Resource Planning system is an all-in-one software tool that helps you manage various or all parts of your business from one point. There can be different modules for different areas of your business with forms to both a) record data and b) create transactions.
Although the term ERP was officially first coined by Gartner in 1990, the history goes back to the 1980s when material resource planning tools were used. The advancements in computer and technology allowed integrating different parts of business software together which we today call an ERP.
What can an ERP(Enterprise Resource Planning) do?
With an ERP, recording, and managing all your business data and transactions becomes much easier than using multiple software or just using spreadsheets. All this data is linked so accessing data across business departments becomes very easy. This is achieved since all modules in an ERP share a common data source or database.[/vc_column_text][/vc_column][/vc_row]
| An ERP can | An ERP cannot |
|---|---|
| Help you manage all your business processes in one system | Manage your business for you |
| Visualize business data and records | Tell you what to do next |
| Help you manage customers, suppliers, and employees | Send them gifts on their birthday (but it may remind you to!) |
Benefits of using an ERP
ERPs are instrumental in mid-sized and larger enterprises. Every kind of business uses an ERP, be it manufacturing, distribution, retail, services, educational institutions, and even NPOs.
There are many benefits to using an ERP. As a baseline, let’s consider that you’re using spreadsheets or a set of software for managing your daily business processes digitally.[/vc_column_text]
Benefits of using an ERP
ERPs are instrumental in mid-sized and larger enterprises. Every kind of business uses an ERP, be it manufacturing, distribution, retail, services, educational institutions, and even NPOs.
There are many benefits to using an ERP. As a baseline, let’s consider that you’re using spreadsheets or a set of software for managing your daily business processes digitally.
1. Accurate and detailed Reports
Anyone who has used excel sheets to manage various sets of data will agree that generating reports is painful. If you thought that this is easier when using multiple software, think again. When cross-functional reports come into the picture, you need integration for the reports to work and that’s a different kind of nightmare. Reports in ERPs are accurate since all data comes from the same source.
2. Integrated platform
Since all the forms and modules are in one place, you don’t need to jump across different software to access data from different departments. This reduces friction when it comes to cross-team access control. To put it simply, your sales manager using one tool will need to ask the account manager for permission in another tool to approve the incentives of a sales executive.
3. High Productivity
Since an ERP has everything under one umbrella, no time is wasted in navigating across software and employees can focus on their work. This boosts productivity as employees won’t be fretting over data mismatch or reporting errors and can contribute to the tasks that actually need their attention.
4. Everything is backed up
Cloud ERPs have become more popular in the last decade after the internet has become better and more accessible. In a legacy ERP system, the software is downloaded to computers and may use the internet to synchronize data. With cloud ERPs, you only need a browser and an internet connection to access your ERP account.
5. Remote work
This is another concept that has gained popularity recently. The idea is that employees don’t have to travel to the office to do their job. They can sit in their homes, a coworking space, or a coffee shop. This, of course, does not apply to all professions, but for the lucky ones that they do, having a cloud ERPs enables ease of access enabling remote work.
Do you need ERP?
If you’re just starting out as a business and have say 10 employees, you can do without an ERP for some time. The need arrives when your organization scales and has hundreds of employees. At this point, multiple software for different departments and functions or spreadsheets don’t cut it.
Customer stories
Check out some customer stories of companies that have used an ERP system and how it benefited them. Some of them have switched from using multiple legacy software to an ERP.
What are the types of ERP?
So, now that you’re convinced that you want to use an ERP for your business. Let’s get an overview of the available options. ERP being software, there are some classifications that separate them.
- The difference in platforms:
- On-Premise/Offline/Desktop App: Software is installed on computers and may use the internet to synchronize data.
- Cloud: Accessed via the web browser, the computation and data are done by the server on which your account is hosted.
- Licensing differences:
-
- Licensed: A fixed license fee is paid per account and additional fees for implementation, maintenance, etc.
- Open Source: The source code of the software is publicly available and there is no need to purchase a license. You can host the ERP yourself on your servers or online hosting service. The Total Cost of Ownership is significantly lower in an open-source ERP. Some open-source ERPs can save you up to 75% or even more in total costs. Destino ERP is a popular open-source ERP.
- Freemium: Looks like open source but is actually freemium where some modules are free and the rest of them have to be purchased.
Let me conclude by saying—yes ERPs are expensive (some aren’t) but after you hit a certain scale in your organization, the cost of not using an ERP is higher than using one. Not trying to scare you but an ERP greatly improves the efficiency of operations and lets employees focus on their jobs. And who doesn’t want efficiency in their business?