• Accounting
• Inventory Management
• Marketing Automation (MA)
• Customer Relationship Management (CRM)
• Human Resources (HR)

When you possess ERP resources like accounting, HR, CRM and more, you can automate and keep tabs on everything. You can manage potential leads, perform bank reconciliations, distribute client invoices, govern employee payroll, replenish inventory and more.

This system also supports other business sectors and practices, such as:

• Distribution
• Supply Chain Management (SCM)
• Manufacturing
• Product Lifecycle Management (PLM)
• Professional Services Automation (PSA)
• Business Intelligence (BI)
• Business Analytics (BA)
• Electronic Data Interchange (EDI)
• Computerized Maintenance Management System (CMMS)

Save money and time through automation

As previously mentioned, ERP enables you to automate repetitive tasks. When you allow this software to allocate invoices, reconcile data, analyze orders and more, you can focus on high-priority, administrative tasks. When you increase productivity, you save time and money.

For example, suppose you own a shoe manufacturing company, and your shoelace material runs low. In this case, your inventory module can alert you before running out. Your ERP also enables you to buy suitable materials to avoid overstocking items.

Enhance communication with real-time data

Real-time data, one of many vital ERP resources, allows you to communicate and collaborate with departments accordingly.

For example, the accounting department leader can input profits, losses, transactions and other financial information. Everyone can see it in real time. If updates are needed, the head of accounting can input the new information, and everyone will have the most up-to-date numbers.

If you need monthly KPIs, analysts can relay information or share dashboards with you to make more informed choices.

Communication is critical for any vital relationship. Real-time information ensures everyone stays on the same page at all times.

Monitor supply chains with in-depth transparency

The COVID-19 pandemic shifted our normal supply chain definition. The best way to combat supply chain insufficiencies is to know all the nooks and crannies and catch bottlenecks before they become significant issues.

Thanks to the right supply chain management tools, you can monitor every supply chain aspect in real time. You can leverage analytics, warehouse management, planning and other features to ensure products arrive to distributors and clients on time.

Some SCM tools even allow you to rate suppliers appropriately based on on-time deliveries and other KPIs.

Ensure compliance adheres to industry and regulatory method

All companies and warehouses follow industry, standard and local rules and regulations to remain in operation. Some laws change, and you need the ideal compliance management tools to keep you updated on revisions and updates.

For example, you may own a frozen food manufacturing business. You could invest in food and beverage ERP to manage recipes and formulas, perform lot and batch tracking, and manage compliances. You can also invest in enterprise quality management software (EQMS) to ensure high-quality products with corrective and preventive action (CAPA), audit management, supplier supervision and employee training management.

Another example may include owning an accounting firm or being a professional accountant. You must follow compliances like Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) and others.

• Contact Management
• Marketing and Campaign Management
• Email Integration
• Pricing and Tracking
• Salesforce Automation
• Pricing and Tracking
• Marketing Resource Management
• Order Management

Some standard compliances include:

• FDA
• International Organization for Standardization (ISO)
• Code of Federal Regulations

Following compliances ensures legitimacy and avoids temporary or immediate shutdown.

Brief History

The ERP concept came to fruition in the 1960s. The first ERP system was a material requirements planning (MRP) system to help manufacturers keep up with high production demand. SAP released its first ERP in 1972. Kinetic (formerly Epicor) and Infor’s SyteLine followed suit and remain software leaders. Gartner coined ERP in the 1990s, and the rest was history.

Currently, companies are moving to cloud-based ERP solutions for better hosting, security and cheaper pricing.

Different ERP Types

ERP research says there are several types of this solution to implement and leverage for your business and industry.

On-premise

This deployment option allows software vendors to install ERPs on your company computers and servers. You’re in charge of calling in for maintenance, upgrading the solution and ensuring data protection. Most vendors offer support packages for 24/7 support, customer portals, materials and other ERP resources.

This deployment option suits companies that have finite locations. On-premise is your best option if you’re an enterprise with one spot or a small business not looking for expansion.

Cloud

The cloud is one of ERP’s top buzzwords and trends. Vendors host software on their servers, and you can access it on any device anywhere via the internet. Cloud systems typically offer several security tactics to protect information from cybercriminals. Some techniques include:

• Two-step or Multi-factor authentication: Simple passwords are gateways to cybersecurity threats. In addition to long, complicated passwords, several other authentication methods add an extra security layer. Some examples include having codes sent to you via text message, using face or fingerprint recognition and security questions only you can answer.
• User Access Levels: Restricting and giving access to specific users (e.g., managers and supervisors) ensures sensitive data is only accessible to responsible, long-time employees instead of recruits.
• Data Encryption: Scramble your data in an unreadable code with this tactic. The only way to unjumble information is with an encryption key.

Ask vendors about these and other security measures that they implement. If vendors don’t offer security measures, declare them a red flag in your software selection process and move on.

Hybrid

Hybrid deployment merges the best of cloud and on-premise characteristics. Companies can install core programs on-site while leveraging the cloud for additional features such as the “latest and greatest” add-ons.

Two-tier

Two-tier ERP means that a business simultaneously runs two merged solutions. Businesses leverage this option when they have several subsidiaries and locations. One of many ERP resources, two-tier is a newer concept that more companies are slowly adopting.

Open-source

Lastly, open-source ERP is a solution that lets you tailor the solution’s source code with specific capabilities and tools to meet your organization’s goals.

Some people confuse open-source and free solutions. Usually, open-source ERP is free and publicly available. But ERP research says not all free ERP is open source. Some vendors make free solutions, but you can’t change the source code; you take the program as is or look for add-on modules.

Open-source solutions come with pros and cons. Some pros include customization management, vendor independence, community support and scalability. Some cons include coding complexities, lack of community support knowledge and lacking a vendor to ask for updates and maintenance.

How To Choose the Right ERP System

It’s no cakewalk to choose the right ERP system for your business if you don’t have a plan. SelectHub has you covered with our nine-step software selection process called Lean Selection. Let’s run down each step in this methodology:

1. Establish: Conduct an internal survey of why you need a new solution. Are you not receiving real-time information? Is company collaboration discombobulated?
2. Collaborate: Formulate a software selection team of department leaders, all stakeholders, IT personnel and more.
3. Define: Meet with your selection team to draft a requirements list.
4. Distribute: Analyze several software suppliers that match your requirements list.
5. Justify: Sit down with your team and determine if you need a new solution, add-on modules for your existing software or to end your software quest.
6. Prove: Ask vendors for demos, use cases and more to effectively showcase functionality performance.
7. Rank: Assort and arrange at least two to three potential vendors according to their demo scores and total cost of ownership (TCO).
8. Negotiate: Evaluate and barter terms and contracts with your ideal vendor. Seek legal counsel if the agreement seems skimpy. Redo this step with the following vendor if you and the provider can’t reach a compromise.
9. Sign: Sign the contract and establish an implementation plan.

Implementation Steps

Initiating a sound implementation plan ensures a smooth installation. Like Lean Selection, our implementation steps are straightforward to follow.

1. Create a Team and a Plan: Build an internal committee with a project manager, executive sponsor, implementation partner, end-users and more. Initiate a change management plan and implementation timeline for system tests, cost estimates, training and ROI measurements.
2. Budget: Develop and modify your budget as needed. ERP costs range from a few hundred dollars to $100,000, depending on the vendor and system. ERP research and experts say to account for factors like the number of users, customizations, deployment methods, training, upgrades and maintenance, time and productivity.
3. Transfer Data: Migrating existing data to the new solution takes careful execution. One wrong move can cause misinformation across your inventory, supply chain and deliveries. Allow your IT team or data scientist to comb through any duplicate or unnecessary information before conducting the migration.
4. Establish Training Sessions: Ask vendors for training materials (videos, webinars, courses and other ERP resources) for end-users. It’s vital to train before and after going live with the system.
5. Test the System and Go Live: Test the ERP before going live to ensure the interface, features and navigation work well.
6. Perform Post-go-Live Duties: Verify your ROI, employee productivity, client satisfaction, KPIs, maintenance and continuous end-user training.

It’s essential to perform your implementation plan in phases and to mark milestones along the way before going live.

Disadvantages

Everything has pros and cons, even ERP software. Here are a few drawbacks to purchasing an ERP and how to overcome them.

Cost

As aforementioned, ERP systems can range from $100 to $100,000. Sometimes more, depending on the vendor. When ERPs first launched, they served as a one-size-fits-all model for enterprises. It was difficult for small and mid-sized businesses to obtain ERPs because of the price tags and functionality overabundances.

However, as time progressed, cloud systems offered affordable subscription plans. The market has an overflood of postmodern ERP systems that cater to all business sizes and customization options to accommodate all needs.

Complexity

Some people find learning an ERP complex, especially those who use spreadsheets and other disparate systems.

Vendors typically offer in-depth training materials, webinars, how-to videos and articles, community forums and more. You can even take certification classes to become an expert.

Slow Implementation Process

Implementation tasks can run anywhere from six months to a year, depending on your company size and the vendor. There’s no workaround for this drawback.

As mentioned in the previous section, the best way to prepare for implementations is to have a plan, establish a budget and account for numerous monetary and non-monetary tasks.

FAQs

What does ERP stand for?

ERP stands for enterprise resource planning. It means that enterprises plan all of their resources in one centralized system.

What is an ERP system?

An ERP system is a solution consisting of several modules and functionalities that serve numerous business departments, from marketing and accounting to CRM, manufacturing, supply chain management and more. You can customize the solution with additional add-on features and choose the ideal deployment option to align with your workflows.

What’s the difference between ERP and MRP?

In our comparison of ERP vs. MRP, we’ve discovered that MRP focuses on the manufacturing sphere while ERP serves manufacturing, CRM, finances, marketing and other sectors. MRP users typically consist of manufacturing experts, employees, managers and supervisors. Numerous people can use an ERP, from the HR leader to the person in charge of inventory.

MRP system features only consist of manufacturing-specific tools like BOM management, capacity planning, master production scheduling and the like, with a few tools for inventory and accounting. ERP has a massive list of tools to streamline tasks.

What are the best ERP components?

ERP research says the most common software components and modules are:

• HR
• CRM
• BI
• SCM
• Inventory Management
• Accounting/Financial Management

Typically, every company uses all or most of these components to meet their needs, improve customer satisfaction and make vital business choices.

Why do I need ERP?

Managing software and other ERP resources have advantages and disadvantages. Here are several reasons why you should invest in ERP:

• Serves numerous departments
• Saves money
• Boosts productivity
• Enhances customer service
• Establishes collaboration and communication
• Monitors supply chains
• Adheres to compliances
• Gives your company a competitive advantage
• Provides scalability and flexibility

Does ERP serve any business size?

Whether you’re an entrepreneur, a Fortune 500 CEO or somewhere in between, there’s an ERP for any size. Most ERP solutions scale with your company as you grow in employees, locations, machinery and other assets.

How much does ERP cost?

ERPs range from $100 to $100,000 and more. Establish a flexible budget because of factors like customizations, add-on features, deployment, maintenance, implementation and more. Check out our in-depth pricing guide for popular ERP prices.

How Do I Select an ERP System?

Finding the best ERP requires patience, time and an effective plan. SelectHub’s nine-step Lean Selection methodology demonstrates how to find a solution and work with vendors:

1. Establish
2. Collaborate
3. Define
4. Distribute
5. Justify
6. Prove
7. Rank
8. Negotiate
9. Sign

Performing ERP research and having solid selection and implementation plans ensure you’ll find the right ERP system that matches your company’s objectives. For more features, review our requirements template. If you want to see more solutions and industries, take a look at our thorough comparison guide.

Have a question about which software vendor is right for you? We’d love to help! Contact our team for individualized recommendations by messaging support@selecthub.com or calling 855-850-3850.