At its core, an ERP is an application that automates business processes, and provides insights and internal controls, drawing on a central database that collects inputs from departments including accounting, manufacturing, supply chain management, sales, marketing, and human resources (HR).
Once information is compiled in that central database, leaders gain cross-departmental visibility that empowers them to analyze various scenarios, discover process improvements and generate major efficiency gains. That translates to cost savings and better productivity as people spend less time digging for needed data.
Most companies have some form of finance and operational system in place but most of the software that’s out there can’t go beyond everyday business processes or help with future business growth.

“ERP system helps unify people, core business processes and technology across an organization.”

ERP systems have become table stakes for businesses looking to use resources wisely. They can help leaders reallocate human and financial capital or build more efficient core business processes that save money without sacrificing quality or performance.
An ERP is also an asset when it comes to planning and coordination. Employees can see current available inventory and customer orders in detail, and then compare supplier purchase orders and forecast future demand. If necessary, they can make adjustments to head off problems. ERP software improves communication and collaboration as well because workers can check on the status of other departments to guide their own decisions.
As a comprehensive source of data, an ERP system also provides a host of reports and analytics that can be difference-makers for the business. Turning a vast trove of information into charts and graphs that clearly illustrate trends and help model possible results is an ERP capability executives find invaluable.

How Does An ERP System Work?

ERP systems work by using a defined, standard data structure. Information entered by one department is immediately available to authorized users across the business. This uniform structure helps keep everyone on the same page. For example, say a local food distribution chain has multiple locations that often share stock and personnel. As the quality, sales, and employee data from these sites are fed into the ERP system, it’s formatted to indicate which location it comes from.
Real-time data is then woven into business processes and workflows across departments. Leaders can see if one location is doing significantly better at avoiding spoilage than a sister site a few towns over and work to figure out why, while operations can make sure staffing levels align with traffic patterns. Finance can compare sales to rents to help executives decide whether to consolidate.
ERP systems deliver the most value when a company has modules for each major business function and ensures timely, accurate data entry. And, the more stakeholders have access, the better.
When a company uses business systems from multiple vendors, integrations are generally possible to make data automatically flow into the ERP. This real-time data can then be used throughout the ERP instance to benefit any process or workflow.

Why ERP is critical for your businesses

While there’s no all-up solution software for every business process, ERP technology is getting better and better at bringing processes together. Once your processes, systems, and data are connected, you’ll get the intelligence, acceleration, and adaptability you need to start optimizing your operations.
Here are three ways ERP can improve your business:

1 Drive optimal performance

With solutions that integrate artificial intelligence (AI), you’ll access insights that enhance your decision-making and reveal ways to improve operational performance going forward.

2 Accelerate the operational impact

By connecting processes and data, you’ll bring more visibility and flexibility to employees to help them take action quickly and deliver more value across the business.

3 Ensure business agility

Many ERP solutions are built to adapt to your needs and grow with you, helping you proactively prepare for—and readily respond to—any operational disruption or market change.

Three signs that you need ERP

Here are the signs that you need ERP starting today:
1. The basics aren’t letting you grow
Perhaps you’ve been doing fine with basics, but if your current software is putting limits on your market expansion and ability to grow on a global scale, it may be time for a better ERP system that does.
2. You’re dealing with disparate systems
As technology changes, you’re noticing that your disparate systems don’t work well together. You may notice that your new accounting software isn’t compatible with your old HR system, and you’re tired of wasting time and resources trying to stitch a solution together.
3. You can’t meet customer expectations
If your staff and customers are mobile and your system isn’t accommodating them, it’s time to invest in one that meets everyone’s needs. If you feel like you can’t afford to invest in meeting your customer’s expectations, and you’re not willing to give your staff the tools they need to succeed, you’ll lose them to a competing business pure and simple.

Future of ERP

Now that companies understand the tremendous benefits that come with an ERP, they’re looking for ways to up the game. Technology like artificial intelligence (AI), blockchain, augmented reality (AR) and the internet of things (IoT) are shaping today’s ERP trends. Many of these technologies are already embedded within industry-leading ERP solutions.
AI and machine learning, for example, can automate account reconciliations and flag transactions that call for a closer look. This saves the accounting team time and offloads a task most don’t look forward to. Machine-learning technology improves as it processes more transactions, and it can help develop more accurate forecasts.
Blockchain packages data in a secure format and can increase transparency among companies in a supply chain. Specifically, it can show the status of specific products in detail and creates an in-depth audit trail of an item’s journey from raw material to finished good. This also provides information from which the ERP can draw insights.
Augmented reality has gained a foothold in retail, allowing consumers to virtually place a rug or 3D image of a piece of furniture in their living rooms to get a sense of how it would look before purchasing. All the data points and images needed to make AR work can be stored in the ERP.
Finally, more companies are recognizing the value of IoT devices, like sensors, scanners, and cameras, that can feed information back to the ERP. A sensor that monitors the performance of a piece of warehouse automation equipment, for instance, could alert a manager when the machinery starts operating more slowly. That could be a sign the equipment requires repair, and the business can intervene before it breaks and disrupts operations. An IoT tracker on a delivery truck could show that drivers are taking inefficient routes and suggest they always use GPS.

Conclusion

Enterprise resource planning (ERP) manages and integrates business processes through a single system. With a better line of sight, companies are better able to plan and allocate resources. Without ERP, companies tend to operate in a siloed approach, with each department operating its disconnected system.