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  • What is ERP?

What is ERP?

To succeed in today’s increasingly competitive and complex business environment, you need to put systems in place that allow you to easily streamline, automate, and scale. This resource will put you on the right track toward choosing, implementing, and managing an ERP system at your organization.

December 06, 2018

Businesswoman using ERP system on laptop

ERP stands for Enterprise Resource Planning. ERP software is comprised of powerful and strategic business process management tools that can be used to manage information within an organisation. While every company and organisation operating today is different, they all face a common challenge: in order to stay competitive in today’s business environment, they need a dependable and efficient way to store and access information. That’s where ERP systems come into play. ERP systems integrate all facets of an enterprise into one comprehensive information system that can be accessed by individuals across an entire organisation.

With effective ERP software in place, business owners and leaders can automate and streamline tedious back-office tasks, help employees become more productive and successful in their roles, and get real-time visibility into the inner workings of their operations. This resource will provide you with an in-depth overview of the topic of Enterprise Resource Planning. 

Evolution of ERP & Current Trends

The term “ERP” or “Enterprise Resource Planning” was originally coined by industry analyst, The Gartner Group, in the 1990s. It evolved from MRP, a term that was already well-known in business at that time. MRP stands for both Material Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII). These systems were created back in the 1960s when manufacturing-based companies were looking for ways to improve efficiency and decision-making for production line managers.

In the 1990s, The Gartner Group and other businesses sought to apply MRP systems to other business types, and desired to expand capabilities and processes to other areas within an organisation, and thus ERP as we know it today was born. In its early days of existence, ERP focused on organising data and streamlining processes that related to back-office areas, such as inventory management, fulfillment, purchasing, human resources, accounting, IT, manufacturing, planning and scheduling, and other related areas.

Later, with the introduction and widespread use of the Internet, ERP was expanded further to include other areas of a business, such as customer relationship management (CRM), supplier relationship management (SRM) and supply chain management (SCM), business intelligence and ecommerce.

Today, ERP systems integrate into all areas and functions within an organisation, with the primary purpose being to help leaders and managers better understand all moving parts of their operations, identify opportunities, and make more informed decisions that will ultimately have an impact on the future success and viability of their businesses.

Despite the use of the word enterprise in the name, ERP systems are used by businesses of all sizes, large and small. There are two primary types of ERP systems being implemented at organisations today, On-Premises and Cloud-Based. The differences between the two will be explained in another section in this resource.

“The Compass software reports have been especially eyeopening. For example, the low margin sales and cost change reports have helped us stay on top of pricing,” said Braaten. “We’ve increased our margins by adjusting items that weren’t priced correctly. Our soft lines margins have increased by 6 percent companywide.”

“Additionally, in one of our locations we saw an $80,000 increase in margin alone with the implementation of Epicor solutions, all because we have reliable information to see where to make modifications within the business,” said Braaten.

Basic ERP Concepts & Glossary of Terms

There are hundreds of concepts and terms that relate to enterprise resource planning, but here are ten worth understanding now, before you decide whether you want to implement an ERP solution at your business:

  • Enterprise Resource Planning (ERP): Business process management tools that can be used to manage information across an organisation.
  • On-Premise ERP: ERP software that is installed locally on your hardware and servers, and managed by your IT staff.
  • Cloud-Based ERP: ERP software that exists and is managed off-site by your provider.
  • Supply Chain Management: the flow of goods and services from origin point to point of consumption.
  • Third-Party Vendors: Businesses or partners that can be integrated into your ERP system.
  • Capacity Requirements Planning: A method used to determine the available production capacity of a company.
  • Mobility Solutions: The ability to access your data through your ERP from anywhere, and by using mobile devices.
  • ERP Deployment Options: The types of ERP system you can implement at your organisation.
  • Business Architecture: How an organisation is structured; all the moving parts.
  • Customer Relationship Management: Tools that businesses use to manage interactions with customers.

What is an ERP System?

An ERP system is made up of applications and tools that help all areas of your business communicate with each other more effectively. ERP systems integrate all facets of an enterprise into one comprehensive information system. Employees in planning and scheduling, for example, have access to the same data as the staff in financial management for their specific needs. All data is available in real-time, which enables employees to make faster, more informed business decisions. With ERP systems, all vital business functions—estimating, production, finance, human resources, marketing, sales, purchasing—share a central source of up-to-the-minute information. Enterprise resource planning systems streamline the collection, storage and use of your organisation’s data. The right ERP system can help you collect and store data into one centralised place from areas such as:

  • Finance & Accounting
  • Human Resources
  • Customer Relationship Management
  • Production Management
  • Business Intelligence
  • Warehouse Management
  • Inventory Management
  • Supply Chain Management
  • Point-of-Sale (POS)
  • eCommerce

Primary Benefits of ERP Systems

Why are more businesses of all sizes implementing ERP systems today than ever before? Here are some of the main reasons and benefits why organisations use ERP systems:

  • Finance & Accounting
  • Provide business leaders with real-time visibility into their operations.
  • Provide business leaders and teams with instant access to their global supply chains.
  • Enable business leaders to identify challenges, uncover opportunities, and make faster decisions that impact different areas of their businesses.
  • Help automate and streamline tedious tasks and redundant processes.
  • Give employees the tools and data they need to be successful.
  • Provide a single point of truth for organisations.
  • Can often be accessed from anywhere (off-site and from mobile devices).
  • Help increase productivity among your team.
  • Make it easier for teams to collaborate with each other, and with third-party vendors.
  • Offer powerful reporting and forecasting tools that you can use to make informed decisions about the future of your business.
  • Keep data secure, and help you ensure that your business continues to operate in compliance with global regulatory laws and guidelines.

How To Decide If/When Your Business Needs ERP

Every business is unique and faces different challenges at different times, so the question is, how do you decide if and when investing in Enterprise Resource Planning is right for your business?

If you’re able to check off most of the items on this list, it’s probably safe to start evaluating ERP software providers and working to allocate the resources needed for deployment:

  • Your team members are spending too much time on tasks you know could be automated and streamlined.
  • You don’t have easy access into the data you need to make informed decisions about your business.
  • You work with vendors and third-party applications across the globe.
  • You have a lot of different software tools and processes that you’ve adopted and implemented for your business over the years, but they are not connected to each other.
  • You don’t know what your inventory levels really look like on a daily basis.
  • You’re personally spending too much time searching for information, trying to boost productivity and efficiencies, and integrating new tools that are needed in order to scale. Your teams can’t easily collaborate or share information with each other.
  • You can’t access essential business data and information when you’re off-site.
  • You’re having trouble keeping up with changes in regulatory compliance.
  • You’re finding or addressing problems after it’s too late; in other words, you’re not able to be as proactive as you’d like when it comes to identifying problems that need to be fixed in order to keep your operations running smoothly.

If you can check off at least sixty or seventy percent of the list above, it’s time to start exploring vendors.

In order to justify the investment needed in order to use an ERP system at your business, use the checklist provided above. List the specific challenges you think your organisation is having, and talk with your decision-maker about how you think an ERP solution could help.

Types of Deployment Options for ERP Solutions

There are two primary types of deployments for ERP solutions available to businesses today: Cloud-Based and On-Premises.

On-Premises ERP is deployed locally on your hardware and servers, and managed by your IT staff. Businesses that choose this option want greater autonomy over their implementation.

Cloud ERP software looks and works the same as traditional ERP. The only difference is how it is deployed. With cloud ERP, instead of hosting your servers and storage hardware on-site, your ERP provider hosts this for you. To access your ERP system, you simply sign in to a website hosted online (in the cloud).

Cloud-based ERP brings enterprise-grade security to protect today’s businesses, as well as a lower cost of ownership, ease of use, and configuration flexibility. It also provides you with real-time access and visibility into your business information via your cell phone or other mobile device, no matter where you are in the world.

Epicor delivers ERP in the cloud, on-premises, and as a mobile solution—whatever works best for your business.

Learn more about the benefits of cloud ERP by reading the ten reasons business leaders choose cloud ERP from Epicor.

Wondering which option is right for your enterprise? Contact one of our experts today.

How to Choose the Right Solution

If you’re looking for your first ERP solution or looking to upgrade from an existing system, the evaluation, selection, and implementation process is a long-term strategic decision for your organisation.

To help you through this process, here are eight simple steps for a successful ERP system selection:

  • Step 1: Evaluation - Get members of your leadership together and get the initial conversations going about ERP. Make sure everyone has transparency into how you are evaluating providers.
  • Step 2: Make An Assessment - Look critically at your business and operations to determine what’s working well, what challenges you’re experiencing, and what you think you need in order to scale or make improvements.
  • Step 3: Establish Criteria - Develop a standard criteria to use when evaluating vendors. Criteria can include features, price, platform, and anything else your team thinks is important when making evaluations.
  • Step 4: Schedule Consultations - Schedule phone calls, in-person meetings, or online demos with sales representatives and product experts at the vendors you’re considering. Get a first impression about each company and try to make note of the differences between the vendors you talk to.
  • Step 5: Create a Shortlist - Narrow your list down to 2-3 candidates that you’d like to follow-up with.
  • Step 6: Make Contact - Contact vendors on your shortlist and schedule follow-up calls to learn more about how their products could help your business.
  • Step 7: Prepare Questions That Address Your Concerns - Prepare specific questions that you’d like each vendor to address during the follow-up call.
  • Step 8: Check Vendor References - Talk to other companies that have implemented ERP systems from the vendors you’re considering. Find out what they like, what they don’t like, what they weren’t expecting, if they’d actually recommend the vendor you’re asking about, etc. Get as much information from them as you can in order to make a final decision. Once you’ve selected the ERP vendor for your business and needs, spend the time to scope the entire project, from start to finish. Work with your ERP vendor to map your critical milestones and chart your course to success.

How Epicor Can Help Your Business

Epicor drives business growth. We provide flexible, industry-specific ERP software that is designed around the needs of our manufacturing, distribution, retail, and service industry customers. 50 years of experience with our customers’ unique business processes and operational requirements is built into every solution—in the cloud, hosted, or on premises. With a deep understanding of your industry, Epicor solutions spur growth while managing complexity. The result is powerful solutions that free your resources so you can grow your business.

To learn more about our solutions, click one of the links below:

Implementing an ERP System At Your Organisation

When you’re finally ready to implement an ERP system at your organisation, follow these best practices and tips to ensure your success:

  • Understand business processes and key requirements. Gain a complete understanding of all the areas, processes, and tools that make up your business. Spend time documenting problem areas, processes that work, questions you have, and any other observations you want to record in preparation for implementing a new system at your business.
  • Build a business case for ERP with a positive ROI. Make a list of the benefits of implementing ERP software. Share your list with team members, decision-makers, and key stakeholders. Focus on what’s not working at your organisation now, and how you think an ERP system will help. Decide on key performance indicators (KPIs) that you can measure against once the new system has been fully implemented across your organisation.
  • Ensure proper project management and resource commitment. Assign a member of your team with the task of managing the implementation process from start to finish. Make sure that person has the resources they need to be successful.
  • Gain executive and organisational commitment. Get the full support and commitment of everyone at your organisation, from to bottom. Make sure everyone understands what you’re doing, why you’re doing it, and how it affects them and their work.
  • Recognise the value of early planning. Reduce the amount of time it takes to fully implement an ERP system at your organisation by planning ahead. Think about the resources you’ll need along each step of the way to make the deployment phase go as smoothly and efficiently as possible.
  • Focus on data migration early in the implementation process. Decide how much historical data you want to migrate into your system, then make plans to start the migration process as early as possible. Waiting until the end can wreak havoc on your business operations. Invest in training and change management. Give employees and team members enough time to understand why you’re implementing a new system, and how it will affect their roles. Make sure everyone is on board and encourage team members to reach out to you if they need help.
  • Know why you’re implementing ERP. Remember why you’re implementing a new system in the first place. Define requirements, establish metrics, and build a business plan that clearly articulates what benefits the company expects from an implementation.
  • Get outside help when you need it. If you think you’ll need a little extra help during any part of the implementation process, reach out to a consultant and leverage them for their expertise and advice.

Following these recommendations and best practices will make the entire implementation process go a lot more smoothly. They will also help you get the buy-in you need from your employees in order to hit the goals and KPIs you want to be working toward once the system is in place.

Measuring the Performance and ROI of ERP

Measuring the performance of your ERP system is an important part of being able to validate the investment you made or continue to make over time. When implementing an ERP system at your organisation, set specific goals and KPIs that you can work against once the new system is in place. How you measure performance will depend on the nature of your business, but here are some general questions you should consider when setting your KPIs:

  • Will this system make my employees more productive? By how much?
  • Will this system make my employees and myself happier?
  • How will this new system impact customer satisfaction? Can I predict a measurable impact and set a specific goal?
  • Will this allow us to increase sales, repeat sales, conversion rates, customer retention rates, etc.? By how much?
  • Will this new system give us a strategic advantage over competitors? How?
  • Will this improve relationships and processes with global vendors? How can I track it and what are my goals?
  • Will this system improve supply chain and inventory activities? What are the main metrics we’re tracking now, and how will they improve after the system is in place?

Think about the metrics and goals you’re currently tracking against at your organisation, then make predictions and set KPIs to track success and progress over time once your new ERP system is in place.