Why Do Businesses Need a Good ERP System?

. 6 min read
Why Do Businesses Need a Good ERP System?

Businesses and enterprises have progressed considerably over the past few years. Large scale globalisation and digitisation have paved the way for faster and better processes. An ERP system is one such suite of applications designed to take care of some complex management tasks of a company.

What is ERP?

ERP stands for Enterprise Resource Planning. It simply integrates all the integral processes of running an enterprise into a single system. These core processes that are essential for the survival of a company are finance, HR, manufacturing, supply chain, services, and procurement, among others. Machine Learning and Artificial Intelligence have turned these processes into an advanced system capable of carrying out complex tasks. Intelligence, efficiency, and visibility are the three key components of an ERP when it is implemented correctly.

How Does an ERP System Work?

An ERP System is more commonly called an ERP Suite. It is a collection of applications an enterprise decides to integrate. These applications interact with each other and share databases to make the functioning of an enterprise smoother. The common starting points for enterprises implementing ERP are finance, human resources, logistics, and sales. Industry-specific modules like manufacturing are also in huge demand.

Types of ERP Systems

Modern ERP systems can be on-premise, cloud, or hybrid. Some of the ERP systems that the enterprises install are:

Cloud ERP Systems

Cloud ERP, as the name suggests, is handled and managed by the provider on their cloud computing platform. The cloud also provides maintenance. There’s the option of both public and private cloud.

On-Premise ERP Systems

On-premise ERP, as the name suggests, is installed in the enterprise. They work like the traditional software and applications, albeit they are interconnected with one another. The responsibility of data management and system installation and maintenance lies with the staff.

Two-tier ERP or Hybrid ERP Systems

In hybrid ERP Systems, often called two-tier ERP, some of the applications and data are stored on the cloud while the others are on-premise. The reasons may be owing to better security and personal management for some data, while easy availability of others. It usually happens in large organizations with different layers of security. The office staff must manage on-premise ERP.

The Need for an ERP System

The fast-paced world today cannot sustain the older methods of communication and database. An ERP system is an investment that can improve the overall functioning of an enterprise, indirectly boosting productivity. The hassle-free system can help integrate all the processes of an enterprise and have them communicate in the same language. Some of the reasons why an ERP System is an important requirement for any enterprise are:

1. Standardization of Software

An unmanaged system at a workplace is the home of chaos. Different applications for similar uses between departments have often been the case, introducing more time, hassle, and scope of errors, not to forget the confusion and disparity. An ERP system helps bind all the processes together with the help of a common interface. It also helps save time in training and understanding as a single interface can combine all the applications, thus making it easier to train people.

2. ERP Systems are Upgrade-Friendly

ERPs are integrated solutions for enterprises. One common interface and suite allows a host of applications to be used separately as well as interact with each other seamlessly. If different applications are used out of ERP suite, there can be upgrade issues, especially when one application becomes obsolete, and there’s a requirement to upgrade all the processes simultaneously. ERP Suite is the answer to upgrade worries, with the suite being one for all, it becomes easier to upgrade.

3. Cost-Cutting

An investment in an ERP system is a cost-cutting measure. In a true sense, it saves an immense amount of time for all the people. This, in turn, saves money, as the workforce can be used efficiently in the tasks that aren’t menial and can help improve enterprise performance. The ability to get all the information and tools from one centralized system also helps in reducing the hassles and thus saving time and improving productivity. Training costs can also come down considerably since a unified system is in place, with the interface common to all the processes.

4. CRM

Customers don’t want to know which department’s fault has resulted in problematic order delivery or service. Customer Relationship Management should ideally be about solving problems and providing better products and services. With a unified system, the problems can be highlighted and pinpointed, and thus solved. There’s also this problem of being occupied in paperwork and not the real customers. ERP takes care of that as well.

5. Improved Communication

With a single streamlined suite connecting all processes, the greatest benefit is the improved communication within the enterprise. The workflow management is smooth, and employees from even different processes become part of a unified system, hence making the entire work process more convenient for everyone involved. It also leads to lesser misunderstandings within the team as there’s no verbal or handwritten communication, but it is done via a unified system.

6. Lower Risk

Risk is considerably lowered when a system is introduced, considering that proper back-up management is there. In case of paperwork or verbal communications, there can be miscommunication, errors related to the inability to understand handwriting of someone else, and so many other issues. Risk is reduced with a single system which speaks a common language and font and can be understood by all processes in the enterprise.

7. Quicker Response Time

Response time is visibly improved when the entire workflow is centralized. Everything, from order to delivery, for example, goes through the same ERP. The speed, thus, is considerably faster. There’s no requirement of movement of files physically. There’s no requirement for verbal or message reminders. The system will automate many solutions for the enterprise, thus resulting in a marked improvement in the turnaround time.

8. Data Analysis

An integrated ERP system contains all the data at the tip of your fingers. Since the time required to collate the data is saved, it turns out to be a fruitful exercise to analyse the data in more ways than earlier possible without assistance. Every process can have its own data, while the unified system can provide combined data too. Data analysis is one of the key factors in the growth of any organization as it helps them solve their problem issues, see the red zones, and also the growth opportunities.

9. Compliance

Compliance is an important part of businesses. A unified system will not only unify all the loose strands of the company but also help in getting the compliance part done, and thus mitigate risk management with regards to compliance. The concerned processes can look at their parts of compliance while the common interface highlights the red flags.

Is Your Enterprise ERP-Ready?

The following pointers can be marked as red flags for an enterprise and should serve as a reminder of their need for an ERP:

  1. If an enterprise spends more time on daily mundane tasks like closing the books, filing, and so on, then it needs an ERP to save time for more important processes.
  2. If an enterprise holds many unsolved problems in their processes, there’s definitely a need for an ERP that will reveal the workflow and help solve problems.
  3. If the business is getting harder for you to manage, it means that the tasks like processing, inventory management, etc., are getting out of hand. An ERP can definitely fix this problem.

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Q. My business is running smoothly. Do I still need an ERP?

Ans: An ERP isn’t there only to solve the problems in a business, but also elevate the scope of business. If growth is your agenda, an ERP will definitely help. Also, if the business is running smoothly, implementing ERP won’t be as difficult either, and thus it is the right time for the same.

Q. Can ERP be implemented by a small company?

Ans: An ERP comes in different sizes and with different specialities. ERP is built for all company sizes.

Q. Will it be hard to learn to work with ERP and its associated applications?

Ans: On the contrary, it is easier to embrace ERP. It is a simple suite designed to simplify IT.