What Is ERP? Complete Guide to Enterprise Resource Planning

You’ve probably heard of enterprise resource planning (ERP) — but how does it work, and how can it help support your business?

All companies create data. From tracking operational costs and inventory to storing customer information and managing campaigns, business data is the power source of any operation. That means all companies, even small ones, need to find ways to manage their data — and use that data to learn and grow.

Think about the information your company relies on to achieve its goals. If it’s stored across dozens of disconnected spreadsheets, databases, and platforms, you’re not alone. Many companies are reaching for new solutions that leverage data to improve their performance. Enterprise resource planning (ERP) is an increasingly popular way to do it.

What Is Enterprise Resource Planning (ERP)?

Enterprise resource planning (ERP) is a type of business management software that’s designed to help companies run more efficiently. By pulling all of an organization’s data into a central, easy-to-access hub, an ERP system connects teams, streamlines workflows, and automates core processes for optimal performance. Efficiency is why ERP exists.

How does ERP work?

An ERP system is made up of a number of different modules, one for each of a company’s core business areas. All of the modules share a common database, so all information across teams is fed into and retrieved from the same source. A good ERP system has the same user interface across all its modules, providing a consistent user experience for all team members.

Each module, tailored for a different business area, works to manage, automate, and optimize workflows in that area. Here, we’ll break down some of the most commonly used modules.

• A finance module — the foundation of most ERP systems — helps the finance department close the books, safeguard financial records to deliver to shareholders, and produce financial statements for governing regulators.
• A human resources module can track employee information and monitor employee retention by department.
• Supply chain modules support the smooth and secure flow of goods into customers’ hands, from purchasing and planning inventory to managing warehouses and transportation.
  Sales and marketing modules manage customer orders and track outreach across channels, from print advertising to social media, so teams can allocate their budget for highest impact.
• A service module ensures the timely delivery of services to customers, including tools for in-house repairs or field service management.
• Customer relationship management (CRM) modules serve to build trust between a business and its customers. They can track customer communications, manage leads, and identify trends to boost sales. Here’s the difference between ERP vs CRM.

What can ERP for manufacturing do?

Manufacturing requirements planning (MRP), one of the forerunners of ERP, was born to streamline manufacturing production. Its computerized calculations were built to identify efficiency gaps, so manufacturers could deliver more goods to feed increasing demand. MRP evolved until it integrated almost every aspect of manufacturing, from accounting and finance to inventory and scheduling.

ERP came next. By adding human resources functionality and more robust reporting, it made the software useful for a broader range of businesses. Today, ERP serves all types of companies, including advertising agencies, schools and universities, hospitals and health centers, restaurants and hotels, and nonprofits. Increasingly, ERP systems are supported by machine learning and artificial intelligence, making them even more efficient.

For manufacturers, who rely heavily on a complex network of suppliers and specialists, ERP systems can be even more valuable. A single source of truth and a reliable feed of real-time insights work to shine a spotlight on inefficiencies, so they can be quickly addressed. In a crowded industry where efficiency is key, it’s a good way to stay competitive.

What’s an ERP solution?

An ERP solution combines ERP software with a service partner who helps you get set up. Because ERP systems can be tailored for companies with different sizes and business goals, your partner organization can help make sure your system is customized to meet your needs.

Benefits of ERP solutions in manufacturing

Most companies opt for an ERP solution when they find that their data is becoming unreliable, or their employees are unable to access it. Manually updating spreadsheets takes time, and disconnected systems mean each team may be relying on different information, resulting in conflicting business needs, duplicative work, and a lot of confusion.

We’ll break down the benefits of an ERP system here.

• Adds efficiency. A central, accessible database creates clarity, allowing users to find answers and meet goals faster. Inefficiencies and opportunities for improvement are flagged by the system, so people and resources can go where they’re needed. Automating routine business processes leaves teams with more time for valuable, future-oriented work.
• Saves money. Automating manual processes means lower operational costs. Particularly with cloud ERP solutions, which rely on the vendor to manage the system, companies with ERP can save on staff. Finally, better real-time data powers more nimble responses to customer needs, keeping a business competitive and increasing profits.
• Unifies the business. Sharing a data source gives all team members a shared set of definitions — a common language to collaborate more effectively. Everyone sees the same information, so their decisions are guided by the same north star.

An ERP system also builds relationships outside of the company. Integrations work to connect leaders with business partners, and enhanced client satisfaction tracking allows for better customer care.

• Promotes improvement. ERP keeps the lights on, but it also spotlights opportunities for growth. More robust reporting and more visible data dashboards can help every team uncover trends and identify what’s working and what’s not. The efficiency and ease created by ERP systems also make for a better employee experience, so a company can attract top talent.
• Enhances security. An ERP system reduces risk of human error and ensures compliance. The system stores data securely, protects the business from cyberattacks, and tracks the lifecycle of each transaction, allowing for better auditing. Users can set specific access controls and create flows for approval, so nothing falls through the cracks.

How is an ERP system implemented?

Companies that decide to adopt an ERP system have a few options to implement it. We’ll break down the main deployment models here.

On-premise ERP

With on-premise ERP, a company purchases a perpetual license, which provides access to ERP software for an indefinite period of time. The company installs all the necessary hardware and software at a physical office location, and the company’s own staff are responsible for maintaining it. A skilled IT team is required to manage ongoing security checks, upgrades, and fixes.

Cloud ERP

With cloud ERP, ERP software is hosted in the cloud and delivered over the Internet. Companies can subscribe to cloud ERP as a service, paying a monthly or annual fee to a service provider. Team members can access the ERP from any device, through a web browser.

There are two types of cloud ERP solutions: hosted cloud deployment and true cloud deployment. Companies that choose a hosted cloud solution purchase a license from a software vendor, but run the ERP software on remote servers managed by a third party. Their data is stored in a dedicated, private cloud. True cloud deployment, on the other hand, allows companies to pay a fee for access to both servers and software managed by the vendor. With true cloud solutions, the vendor manages everything from quick fixes to periodic upgrades. Multiple businesses use that vendor’s same software and hardware, making true cloud deployment a multi-tenant solution.

Hybrid ERP, or two-tier ERP, combines the two models. Some modules are deployed on-premise, and others are deployed in the cloud. For example, a company might opt to keep on-premises ERP at headquarters, with cloud solutions for regional offices. Learn more about ERP tiers.

Companies with skilled technical staff sometimes opt to download open-source ERP software themselves. This route is usually free, with the option to pay a small annual fee for cloud access. The company is responsible for configuration, ERP implementation, and maintenance.

Which ERP deployment model is right for you?

Once you’ve decided to implement an ERP system, you’ll need to decide which method of deployment works best for your business. For most companies, that method is cloud-based.

On-premise ERP has seen steep declines in popularity in recent years. Its on-premise installment and upkeep requires IT staff with deep knowledge, training, and bandwidth. The necessary hardware, servers, and facilities are expensive. When it’s time for an upgrade, the process to redeploy the system across every user’s individual computer can be lengthy and complicated. And only users who are physically on the premises can access the ERP system, which limits the system’s usefulness — particularly in an increasingly remote world.

Cloud ERP is the more popular solution. The vendor takes care of periodic updates and maintenance, so businesses can direct their energy elsewhere. It’s less expensive, because it doesn’t require special hardware or specialized staff. True cloud deployment streamlines a business by eliminating dependency on third parties, and it unifies the business by allowing every user to access it from anywhere — team members just need an internet connection.

Some companies that originally opted for on-premise ERP are modernizing and upgrading their system to a cloud-based model. Cloud ERP can supplement or entirely replace outdated on-premise models, saving costs, time, and headaches.

How to get started with an ERP solution

While ERP was created for enterprise companies, ERP systems have demonstrated their value for companies of all sizes and types. The cost of a solution will depend on the deployment method, the software vendor, and the ERP modules your company needs. You can either purchase each piece of software you need from different vendors and integrate them with the ERP system, or buy all of your required modules from the same vendor — a simpler, lower-cost option.

Implementing an ERP system usually means performing a needs assessment, evaluating software vendors, adapting your old system, migrating data, training employees, testing the new system, and, finally, deploying. Like any new model, ERP solutions often involve a learning curve for employees, which can be moderated with training and support. You can calculate an estimate of what you’ll save over the next few years to see when returns will surpass costs.

At Godlan, we’ve been partnering with manufacturing companies and private equity groups to help them implement integrated technology solutions since 1984. For most of those years, we’ve been using InfoSyteline, an end-to-end ERP solution, to help businesses grow.

Here’s why we choose InfoSyteline:

• Built for manufacturers. Syteline delivers a range of capabilities, from planning and material management to financials, in one integrated system.
• Accessible. Syteline is a two-tier system, meaning it’s less expensive and easier to launch. It’s a good fit for midsize companies and small enterprises, and it scales with your business as it grows.
• Flexible. Syteline offers three deployment options: on-premise, hosted cloud, and true cloud. You can use the information provided here to help choose what’s right for you.

Godlan provides Syteline ERP consulting, implementation, and training services, as well as our own hosting and managed service offerings. As a preferred partner of Syteline, we offer deep knowledge and expertise, and we’ll recommend best practices for your business based on years of successful Syteline implementations.

Still have questions?

We’d love to discuss how ERP can help bring your mission to life. Contact Godlan Consulting to learn more.

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