Enterprise Resource Planning (ERP) streamlines business processes — human resources, accounting, order management, etc. — into one unified system so the various aspects of a business can be analyzed as a whole.
ERP software uses AI or machine learning to make sense of vast amounts of data. These systems often rely on a shared database with access to multiple departments within a company. This database allows various departments (accounting, sales or HR) to exchange information.
Benefits of ERP
Organizations that use ERP enjoy a number of time- and cost-saving advantages:
- Synchronized reporting: ERP software often offers automated reporting capabilities. This feature can free employees from menial tasks, such as data entry. ERP also allows employees from any department to pull information from other parts of a company. Some ERP platforms allow employees and managers to access key performance indicators through online portals.
- Enhanced customer service features: ERP tools allow companies to track important sets of data, including customer wait time, customer satisfaction and order fulfillment details. If order wait times pass a predetermined limit, ERP tools can alert supply chain managers.
- Improved automation features: ERP software automates repetitive tasks, such as order fulfillment, payroll deposit and inventory management. One example would be the automatic notification of a company's inventory and shipping departments when a sale is placed.
- Paperless workplace: Many prominent companies have committed to going paperless. There are environmental, administrative and public relations advantages to doing so. The automated features of ERP enable companies to achieve this goal.
- Real-time reports: Companies that require staff to literally pull folders out of a cabinet would benefit from ERP reporting features. The software platform can generate reports in real time, whether for a quick glance or formal presentation.
How Do ERP Systems Work?
ERP systems, sometimes referred to as ERP suites, consist of interlinked software applications that share a single database. There are three basic types of ERPs.
- Cloud-based ERP: Remote data centers facilitate the use of online tools that cloud-based ERPs use. By maintaining data and software in the cloud, a company can reduce the amount of hardware needed for day-to-day operations. Cloud-based servers are also considered less vulnerable to cyberattacks.
- On-premise ERP: Some companies prefer to run ERP networks through their own private data centers for maximum control. This option often requires a larger up-front investment in hardware.
- Hybrid ERP: This model blends cloud-based and on-premise ERP options. This system is sometimes referred to as a two-tier ERP.
What Types of Organizations Benefit From ERP?
Organizations that can benefit the most from ERP:
- Are currently growing or plan to grow significantly in the near future
- Are undergoing a merger or acquisition
- Are having operational problems
- Have outdated legacy systems that are inefficient
- Have forward-thinking leadership
Future Trends in ERP
As the digital revolution continues to shape business transactions across the globe, ERP continues to be a leading resource for business leaders. A 2019 article in CTND.com highlighted five hot ERP-related trends to watch for.
- The rise of additive manufacturing: 3D printing will transform how large-scale products are manufactured. ERP systems must be able to keep up, the article said.
- Built-in analytics: Newer ERP platforms come equipped with enhanced analytics capabilities.
- Cloud dominance: The cloud-based ERP market is projected to grow from $18.5 billion in 2016 to $29.8 billion in 2021.
- Direct machine integration: ERP communications will continue to see enhancements as internet-connected sensors find use in manufacturing centers.
- ERP as part of a broader strategy: Agile companies should see ERP tools as one part of a broader change management strategy.
Southern Illinois University Edwardsville's online Master of Business Administration with a Management Information Systems Specialization offers courses that cover the use of technology for business innovation. One of the courses explores the role of ERP software in the U.S. business environment. SIUE's School of Business is AACSB-accredited and the online degree program can be completed in as few as 12 months.
Learn more about the SIUE online MBA program with a Management Information Systems Specialization.
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