Enterprise resource planning (ERP)
What is an ERP?
ERP (enterprise resource planning) is software that manages all the major functions of a company, including financials, supply chain, operations, commerce, reporting, manufacturing, and human resource activities, all in one system. It connects all your data for better insights that help you optimize your processes across your entire business.
An ERP system is comprised of integrated modules or business applications that talk to each other and share a common database. Each ERP module usually focuses on one business area, but they use the same data because it’s shared throughout the system. Companies can pick and choose the modules they want and add and scale as needed. ERP systems also have the ability to integrate with application extensions such as a CMMS to further enhance its value to the business.
ERP software can be bought using a cloud subscription model (software-as-a-service) or a licensing model (on-premise).
Benefits of an ERP
Three ways an ERP can improve your business include:
- Increased production and performance. Having all your data connected and integrated across your systems gives you access to insights into where improvements can be made for optimal operational performance.
- Ability to make quicker and smarter decisions. By connecting processes and data, you give greater visibility and flexibility to employees for taking action quickly and delivering more value across the business.
- Enhanced business agility. Many ERPs have the ability to adapt to your needs and grow with you, helping you proactively prepare for, as well as be able to readily respond to, any operational disruption or market change.
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Common types of ERP modules
Enterprise resource planning systems include various different modules, each supporting a specific business process. The most widely used ERP modules include:
Finance: The finance and accounting module 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 and receivable, generate financial reports, adhere to regulatory compliance, and more.
HR: Most ERP systems include an HR module that provides core capabilities such as time, attendance, and payroll. Add-ons and human capital management suites can be integrated into the ERP to deliver more robust HR functionality, including workforce analytics and employee experience management.
Sourcing and procurement: The sourcing and procurement module helps businesses procure the materials and services they need to manufacture their goods. The module centralizes and automates purchasing, including requests for quotes, contract creation, and approvals. It helps minimize underbuying and overbuying, improves supplier negotiations, and can connect with buyer networks.
Sales: The sales module records communications between prospects and customers, providing data that reps can use to target leads, offer the right promotions, and identify upsell opportunities. It includes order management, contracts, billing, sales performance management, and sales force support functionality.
Manufacturing: The manufacturing module 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, production scheduling, manufacturing execution, and quality management.
Enterprise asset management: Robust ERP systems can include an EAM module, which helps asset-intensive businesses minimize downtime and keep their machines and equipment running at peak efficiency. This module includes functionality for preventive maintenance, scheduling, asset operations, and planning, and environment, health, and safety.
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