What is ERP?
Originally published on Deltek.com

The Definitive Guide

Enterprise Resource Planning (ERP) software helps companies manage business processes across finance, human resources, manufacturing, sales, marketing, and customer service. ERP solutions help organizations run efficiently by providing the tools needed to make better decisions, improve productivity, and streamline operations.

“Enterprise resource planning” was coined in the early 1980s when IBM introduced its first product for managing information technology needs. Today, it has become one of the most common terms used to describe any enterprise software solution managing back-office systems.

The primary purpose of an ERP solution is to provide a central repository for all company data. The software allows employees to access relevant information at any time and to monitor performance across the enterprise.

The history of ERP solutions

In the early 1900s, Ford Whitman Harris invented the economic order quantity (eoq), a paper-based manufacturing method for production scheduling. He published his findings in 1923. Over the next few decades, many companies adopted EOQ systems. By the 1960s, EOQ had become the industry standard for managing manufacturing operations.

In 1963, tool manufacturer Black & Decker introduced Manufacturing Resource Planning (MRP). This effort was the first significant change since the introduction of EOQ. Instead of simply tracking inventory, MRP allowed managers to forecast demand and plan production schedules based on those forecasts.

The 1980s saw the rise of enterprise resource planning, which brought together several disparate functions into one package. ERP was designed to help manufacturers manage their entire supply chain rather than just the manufacturing process.

ERP software has become increasingly popular in recent years because of the advent of cloud technologies. By moving away from traditional desktop-based vendors, Oracle and SAP, organizations can gain greater access to back-office data. ERP cloud seamlessly integrates with other services, including human resources, supply chain, procurement, and customer relationship management solutions.

Why use ERP?

There are many reasons why you should consider using ERP, including:

  • Improve efficiency: ERP systems allow businesses to automate repetitive tasks, making people more productive. They also help companies track every aspect of their business, identify bottlenecks and areas for business improvements.
  • Reduce costs: ERP solutions can save money by automating manual processes, reducing errors, and improving departmental communication. For example, accounting departments will require local storage and constant updates to record transactions in spreadsheets. With this solution, however, these records can be stored centrally and updated automatically.
  • Increase profits: ERP systems can increase revenues by increasing customer satisfaction and retention while decreasing operating expenses. Companies can avoid late fees and interest charges by ensuring that customers receive accurate invoices and payments. And by automating payroll processing, companies can reduce administrative costs and ensure compliance with tax regulations.
  • Improve employee morale: Employees who feel valued and appreciated will work harder and perform better. An effective ERP system will give employees visibility into how their efforts contribute to the overall success of the company.

Types of ERP solutions

ERP systems manage all operations, including financials, sales, marketing, manufacturing, distribution, and logistics. The main goal of ERP is to help companies improve productivity and profits.

ERP solutions must collect information about the entire organization to gain organizational improvements. Inventory levels, production schedules, and shipping routes are gathered and analyzed for real-time business insights.

The most common types of ERP solutions are:

  • ERP Software: This is the backbone of any solution. It collects and analyzes information about the entire operation, enabling informed decisions.
  • Financial Management Software: Financial management software helps companies manage cash flows and budgets. It’s often combined with an accounting package for more detailed reporting.
  • Project Management Software: Project management software allows teams to collaborate effectively and efficiently. Projects may include anything from building a website to launching a new product. Project-based ERP is a form of ERP built specifically for businesses who deliver projects.
  • Human Resources Management (HRM) Software: HRM solutions enable organizations to recruit, train, and retain top talent. They also help companies comply with employment laws and regulations.
  • Asset Management Software: Asset management software provides visibility into assets across the business. Companies use it to track equipment, vehicles, buildings, and other physical property.
  • Supply Chain Management (SCM) Software: Supply chain management software helps companies monitor the flow of goods throughout the entire process. From suppliers to distributors to retailers, it keeps everyone connected.
  • Customer Relationship Management (CRM) Software: A CRM solution enables companies to stay in touch with existing clients and potential new ones. It tracks customer interactions, including phone calls, emails, and social media posts.

Types of ERP Deployments

ERP implementations come in many different forms. Some companies deploy multiple instances of their system across different servers within a data center. Others use one instance of their ERP software running on a single server. Still others choose to host their ERP system in either a public or private cloud environment.

There are pros and cons associated with each type of deployment. Here are the three common types of ERP deployments:

On-premises ERP

On-premises refers to deploying software within an organization’s data center, physical server or virtual machine. On-premises installations typically provide good performance because there aren’t additional network latency issues involved. However, they require significant upfront investments in hardware and ongoing maintenance. They’re also limited in terms of scalability and flexibility.

Cloud ERP

Cloud ERP (or SaaS ERP) applications are hosted at a cloud service provider. Software-as-a-service solutions are delivered over the web as a service that you pay for each month. The ERP cost model differs from traditional on-premises installations where IT personnel install and manage the software locally.

Cloud providers take care of your account’s regular maintenance, upgrades, and security. They are responsible for ensuring that the system runs smoothly and efficiently.

For many organizations, cloud ERP offers significant benefits compared to traditional deployments. These include lower up-front costs, greater scalability, and faster implementation times. Additionally, cloud computing solutions allow companies to integrate data across departments and applications without managing those systems directly.

Finally, cloud ERP provides greater flexibility and agility, allowing businesses to adapt to changing conditions quickly.

Hybrid cloud ERP

Hybrid ERP is an approach that combines two deployment architectures, on-premises and SaaS. The two-tiered approach allows companies to manage their infrastructure, while also adapting to changing business models and technology trends.

For example, suppose your company has many employees spread out across several locations. Implementing a hybrid ERP solution would therefore be more cost effective than investing in a full-scale on-premises installation.

There are many advantages to implementing a hybrid solution. One of the most significant advantages is that it can help companies save money. Companies can reduce their overall investment costs by combining on-premises and SaaS ERP.

Another advantage is that hybrid ERP allows companies to leverage both technologies at once. Companies can use the same platform for both internal and external users.

The final benefit is that hybrid ERP allows companies to get started fast. With a hybrid solution, you don’t have to wait until all your servers are ready before deploying the software. Instead, you can start with a small pilot project and expand later when needed.

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