As industry experts Avantra explains (https://www.avantra.com/blog/sap-in-manufacturing), it is a process used in organisations to manage day-to-day activities. It combines core business activities such as accounting, project management, procurement, risk management, human resources and business compliance.
Enterprise Resource Planning (ERP) Software
ERP software is a system used to operationalise business processes. It plugs into every resource within the organisation and manages the business experience. From financial management to business operations, customer relationship management and inventory management, the software aligns business processes to deliver the expected outcome within the given timelines.
The Business Value of ERP
Every department has specific activities within the larger organisation. Each resource has a skill that forms part of the cog that drives the organisation. Despite their difference in approach and skill set, their roles synergise the centre to solve a common problem.
An ERP system is the centre where every department joins in and contributes to the success of the business. Some of the values ERP systems bring to the business include:
- Efficiency – aligns every resource to the common goal.
- Information Management – every resource plugged into the system knows its roles, deliverables and expected outcome.
- Planning – every process, relationship or data aligns into the pre-defined system, making execution easier.
- Predetermined outcome – with everything set, the decision-maker knows what to expect, which helps in business forecasting (ROI) and goal setting.
Components of an ERP System
Human Resources
It is the ERP end that manages people and relationships within the organisation. Depending on the complexity of the organisation, it handles workers’ attendance, payroll generation, performance reports, recommending promotions and working hours. By extension, it also processes leave days and statutory deductions.
Finance
As a business core function, finance fuels every department and quantifies its contribution to the organisation. This ERP component manages account payables, general budgeting, product costing and account receivables. It collates all financial data and helps the organisation evaluate expenditure versus income.
If the organisation has semi-autonomous divisions, an ERP system helps the holding company’s financial controller/CFO to oversee financial performance.
Customer Relationship Management (CRM)
Every business needs to understand its customers and align its products or policies to their needs. A CRM system tracks the customer generation process and helps the organisation convert them into consumers. The data generated helps craft sales and marketing campaigns with improved customer conversion.
Supply Chain Management (SCM)
It is a system of processes that oversees transforming raw materials into finished products and delivering them to the final consumer. Depending on the product type, the SCM system coordinates procurement, manufacturing, branding and distribution. The process is lengthy and labour intensive, making the SCM system vital for the organisation’s success.
Business Intelligence (BI)
It is among the latest inclusions in ERP systems tasked with collating data from all the departments. The aim is to evaluate business performance and help managers make informed decisions. Moreover, it shines some light on business processes and recommends structural or resource changes to enhance performance.
Other offshoots on an ERP system include
- Risk Assessment and Management – it comes as part of the Business Intelligence system. Managers can avert risks and plan better.
- Sales Management – based on the CRM system, the sales department can plan and deliver products to customers.
- Event management – planning and executing event programs based on given procedures.
- Asset Management – investment businesses know their worth in real-time, which can help them make faster investment decisions.
Benefits of an ERP System
Improved Productivity
Every resource within the process knows their tasks and timeliness, contributing to increased output.
Better Reports
Since the system manages every process and generates data to back up performance, managers get timely and accurate reports. It leads to faster and informed decisions.
Improves Business Flexibility
Every spotlight is on the business process. If it does not yield the expected output, decision-makers can adjust it in time to improve marginal output.
Data Management
Data derived from the system gives the organisation the tools to model programs, projects or products and execute them.
