What is ERP?
Enterprise resource planning software attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments' particular needs.
It is an attempt to build a single software program that serves the needs of people in finance as well as it does the people in human resources and in the warehouse. Each of those departments typically has its own computer system optimized for the particular ways that the department does its work. But ERP combines them all together into a single, integrated software program that runs off a single database so that the various departments can more easily share information and communicate with each other.
This integrated approach can have a tremendously positive impact on your business.
For example, when a customer places an order, that order begins a mostly paper-based journey from in-basket to in-basket around the company, often being keyed and rekeyed into different departments' computer systems along the way. This causes delays and lost orders, and all the keying into different computer systems could cause uneeded errors. Meanwhile, no one in the company truly knows what the status of the order is at any given point because there is no way for the finance department, for example, to get into the warehouse's computer system to see whether the item has been shipped.
ERP replaces the individual programs for each department with a single unified software program. Finance, manufacturing and the warehouse all still get their own software, except now the software is linked together so that someone in finance can look into the warehouse software to see if an order has been shipped.
How can ERP improve a company's business performance?
ERP is often referred to as back-office software. It doesn't handle the up-front selling process. ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling it. When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order (the customer's credit rating and order history from the finance module, the company's inventory levels from the warehouse module and the shipping dock's trucking schedule from the logistics module, for example).
People in these different departments all see the same information and can update it. When one department finishes with the order it is automatically routed via the ERP system to the next department. To find out where the order is at any point, you need only log in to the ERP system and track it down.
What will ERP fix in my business?
There are five major reasons to consider emplamenting ERP into your business.
- Integrate financial information—Finance has its own set of revenue numbers, sales has another version, and the different business units may each have their own version of how much they contributed to revenues. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system.
- Integrate customer order information—ERP systems can become the place where the customer order lives from the time a customer service representative receives it until the loading dock ships the merchandise and finance sends an invoice. Companies can keep track of orders more easily, and coordinate manufacturing, inventory and shipping among many different locations at the same time.
- Standardize and speed up manufacturing processes—ERP systems come with standard methods for automating some of the steps of a manufacturing process. Standardizing those processes and using a single, integrated computer system can save time and increase productivity.
- Reduce inventory—ERP helps the manufacturing process flow more smoothly, and it improves visibility of the order fulfillment process inside the company. That can lead to reduced inventories and can help users better plan deliveries to customers, reducing the finished good inventory at the warehouses and shipping docks.
- Standardize HR information—HR may not have a unified, simple method for tracking employees' time and communicating with them about benefits and services. ERP can fix that.