An enterprise resource planning (ERP) system is a software platform that companies operate to automate their back-office business processes. These include accounting, inventory management, material procurement, financial compliance, logistics, and supply chain operations. The software system contains a complete suite of modules that integrates and streamlines all of these processes. This ensures the smooth flow of vital information between them. It even has a centralized repository that facilitates the proper collection and sharing of transactional data from multiple sources.
How do ERP software systems work?
The design of an ERP software platform centers on a specific data structure having a common repository. This is commonly known as a schema. The information which the employees of one department record into the system initially enters the centralized database. Other authorized users of the companies can instantly access it from this repository to perform their duties. Accordingly, they can modify, update, insert new additional details or delete them as per their requirements. Moreover, the uniform structure of various schemas helps to maintain data integrity and prevent duplication. This helps to simplify and streamline the workflow across the different back-office business processes.
When do companies need to install and operate ERP software systems?
Companies should consider installing and operating a suitable enterprise resource planning software system when:
- Employees are taking too much time to perform critical functions like maintaining accounts due to disparate applications,
- Lack of timely access to key performance indicators metrics on different standalone software platforms makes decision-making difficult,
- Inefficient business processes make managing inventory, controlling costs, and meeting customers’ expectations hard to accomplish,
- Lack of proper integration between the multiple standalone business software systems result in data duplication errors,
- The present standalone business software systems are inadequate in meeting growth needs and exploiting new opportunities, and
- The current standalone software systems do not have adequate security features to mitigate business risks
How do ERP software platforms facilitate better decision-making?
The different in-built modules on the enterprise resource planning software system correspond to specific back-office functions. These are finance, sales, purchases, inventory, human resources, warehousing, logistics, production customer relations, and supply chain operations. Companies can insert new modules in accordance with specific industries within which they conduct their commercial operations. The real-time information the platform contains managerial officials of the companies to make better decisions by:
- Analyzing the platform’s business intelligence metrics to assess production, cost, revenue, and profits levels,
- Identifying inefficient areas of the businesses and take the necessary correctives to improve business performance,
- Preparing marketing strategies by carefully scrutinizing the information on their customers’ purchasing patterns, and
- Planning budgets necessary to allocate funds to various departments based on companies’ financial health.
Operating an ERP software system allows companies to take their business operations to the next level. The automation and streamlining of their back-office business processes lend to a significant improvement in internal efficiency. This is evident from the substantial drop in clerical errors resulting in massive cost savings. Even their top officials of these corporate enterprises can get instant access to real-time data to get better business insights for better business decision making.