What is an ERP system? How can it boost your business operations and just how does it work?
Enterprise resource planning (ERP) systems are a significant part of today’s businesses. In fact, 53% of IT managers concur that ERPs are a priority investment alongside CRM. The ERP market is growing aggressively and the total market size is projected to reach $49.5 billion by 2024.
Within the North American region alone the current market size is just over $10 billion. While the biggest adopters of ERP solutions are the defense and aerospace industries. SMEs are joining the bandwagon too with mid-sized enterprises leading the way.
But before we get ahead of ourselves, it behooves that we take a moment to understand what is ERP, its purpose and utility, and why it is an invaluable business tool in today’s modern business functions.
Enterprise Resource Planning Defined
Term ERP is an acronym that stands for Enterprise Resource Planning. The full name itself is still a little vague hence the need to explain ERP in terms of its function. In a nutshell, ERP is a software that allows the assimilation and integration of business processes in a centralized platform.
ERP is a system that aggregates inventory, procurement, human resources, management accounting, and customer relationship management (CRM) processes. All departments are able to access company data from this centralized database which boosts collaboration and streamlines operations across the board.
The Evolution of Enterprise Resource Planning
In answering the question, ‘What is ERP system’, a little history can help to understand the evolution of this system. We have to go back to the ’60s to find the origins of ERP systems. Back then, companies were battling with inventory management and figured that there must be a way to properly handle the ever-growing procurement needs.
Computers were not as prevalent as they are today. This explains why the first mention of inventory and procurement management systems is around the ’80s. At that time, Material Requirements Planning (MRP) systems were the most common inventory management solutions in use.
It wasn’t until 1990 that global research and advisory firm Gartner published a paper mentioning ERP for the very first time. The term stuck and as technology evolved so too did MRPs. MRPs grew to such an extent that they began to incorporate various other operational and spend management solutions and with time, these systems morphed into what we now know today as modern ERPs.
Benefits of ERP
What are the associated advantages that come from ERPs?
· Promotes business transformation
· Report automation and synchronization
· Encourages data-driven decision making
(a) Promotes Business Transformation
Firstly, ERP solutions can transform how your enterprise operates. Because of the centralized nature of ERPs, efficiency improves as employees and management can simply upload their respective data onto the communal platform in a real time. This cuts back on lengthy email chains and makes information readily available to anyone in need of it on an ad hoc basis.
(b) Report Automation and Synchronization
Secondly, ERP systems permit synchronization and make reporting easier. Gone are the days of manually uploading and merging reports. Through ERPs, employees can quickly generate reports and make them readily accessible to teammates in a hassle-free manner.
For procurement teams that have to manage complex contracts, ERP alongside procurement software simplifies things. These two entities allow orders to be placed with greater accuracy as well as making it less complicated for the accounts and finance departments to release pay to suppliers.
(c) Encourages Data-Driven Decision Making
Today’s businesses are focused on making data-driven decisions. With ERP solutions, data is available in a clear and transparent manner making it easy for better decisions to be made. The legacy way of decision making has been superseded thanks in part to ERP systems.
Selecting a Compatible ERP System
According to research published by Allied Market Research, on-premise ERP systems currently dominate the market enjoying a 57% market share while cloud-based ERP solutions retain 43% market share. However, choosing an ERP isn’t as straightforward as simply opting between a cloud-based app and an on-premise solution. If you’re wondering how to choose an ERP set-up and what things you should look out for, keep reading.
(i) ERP Scalability
An ERP that can be scaled as your business grows is preferable for enterprises preparing for rapid growth. ERPs form a strategic component of your company and settling on an ERP that can’t be scaled can complicate matters later on. Examine the ERP’s functions. Will it be able to provide adequate support as you expand?
(ii) ERP Customization
Ideally, the ERP chosen should have room for adaptation. Can you seamlessly integrate your procurement software for instance? Customization is critical if your business has global operations and thus should be readily accessible to employees from diverse backgrounds. You want a system that can switch between different languages and currencies for example.
(iii) Ease of Use
What is the learning curve of the ERP? How complex is it to use? There are some ERPs that have steep learning curves and this can prove problematic for organizations with remote global teams. If you end up settling for such an ERP because it offers you the functions there is one thing to remember. You may need to take employees through onboarding on how to effectively make use of the platform.
Get Started with Dynamic Procurement Solutions
Sourcing and procurement teams now have access to an array of software to help them mitigate organizational spending, improve efficiency within their procurement processes, and vendor management. ProcurePort proudly provides a suite of e-sourcing solutions that make handling vendor relationships easier including various procurement software. Contact us to discuss customized procurement solutions for your business.