Enterprise resource planning (ERP) is a software solution that companies operate to manage their back-office business functions. These generally include accounting, inventory control, material procurement, financial compliance, supply chain activities, sales, and customer service. The software platform automates, streamlines, and integrates numerous business processes into a common interface. This ensures the proper flow of information between them. It collects transactional data from different business sources and stores it in a centralized repository. The data is then available to top executives, managerial personnel, and employees to better understand business performance. This enhances data integrity and eliminates all forms of duplication.
How does an ERP software work?
The primary reason companies use an ERP software platform is to improve the internal efficiency of their businesses. The solution works by using a pre-defined and standardized data structure known as a schema. The information which the employees of one department record into the system accumulate into the common database. It is then accessible to those working in other departments within the business. If they try to renter the same information again, the software system generates an error message. This helps them in preventing data duplication and automates seamless workflow.
The ERP software system can analyze the data from sources and compare it with its key performance indicator (KPI) metrics. It then generates a variety of reports which top executives can analyze to make important decisions.
Why do companies need to use ERP systems?
Corporate enterprises of all sizes might need to use ERP software platforms when:
- Their employees are spending too much time performing simple tasks because of numerous independent business solutions,
- The current business solutions lack the metrics to enable executives to analyze key performance indicators to take important decisions,
- The independent business solutions are ineffective in managing inventory, controlling costs, or satisfying customers’ expectations,
- Numerous clerical errors arise when manually recording similar data from one business solution to another, and
- Opportunities to generate new revenue streams, dominate the market, or enter into new ventures are slipping away.
How do ERP software bring value to a business?
The advantages of operating an enterprise resource planning (ERP) software system for companies are as follows:
- The software platform streamlines, synchronize, and automates key business processes to ensure higher productivity,
- Generates different business intelligence reports to provide executives with better insights into performance to take important decisions,
- The solution minimizes potential business risks by providing better performance insights and ensuring proper compliance to regulatory guidelines, and
- The platform’s common database provides top executives with a single interface to get answers to critical performance questions,
- The system’s integrated software applications and common database simplifies the work of the employees, and
- The solution is agile enough to streamline operation and provide real-time data to executives for exploiting new opportunities.
Operating an ERP software platform enables companies to improve the internal efficiency of their businesses. However, the solutions they choose should be compatible enough to integrate into their current IT infrastructure. It should be flexible in adopting the latest technology as and when the need arises to perform and grow seamlessly in the market.