What is ERP and How Does it Help to Develop a Business?
ERP is an enterprise resource management and planning software that manages data and work systems in the organization. It is a system that helps an organization collect, store, manage, and integrates data from many business activities of departments across the organization including Warehouse, Shipping, Sales, Accounting, Finance, Production, Purchasing, and Human Resources (HR). It ensures that there is a single source of accurate data which provides visibility into all departments.
For example: Consider a business transaction in Purchasing Department and all its work processes: creating purchase requisition, reviewing and approval, shipping and receiving, and so on. Purchasing Department uses its own system to collect and store data from these processes. Meanwhile, other departments such as Accounting and Warehouse also use their own system to work on the same set of data. For instance, the Purchasing Department uses program A, the Accounting Department uses program B, and the Warehouse Department uses program C. This disconnected system results in data inconsistency and lack of a unified view of the organization’s workflow.
For small organizations without huge and complex data, these problems are easier to manage by systemizing the work processes. However, for medium and large enterprises holding big data, it is critical to manage all these complexities into a single system to save time and resources. That is why a system called ERP (Enterprise Resource Planning) was developed to help integrate different work systems. This leads to efficient work processes, and better decision-making by organizational leaders who now have wide visibility of organization’s direction through the access of all relevant data.
What is an ERP system and its function?
ERP system refers to a type of software for enterprise resource management, which stands for Enterprise Resource Planning. ERP acts as a centralized system that allows organizations to consolidate data from numerous departments. This single source of real-time data enables business units to work together on a common database and have unified work processes.
What are the two types of ERP and how does it work?
1. On-Premise ERP
On-Premise ERP is installed locally on the organization’s server and then shares data through this server. The On-Premise ERP is known for its high security, however, it remains for internal use only and needs a complex process to connect to the server externally. Moreover, On-Premise ERP also requires a team of experts to manage and maintain the system.
2. On-Cloud ERP
In contrast to On-Premise, On-Cloud ERP is installed on a Cloud Server, which requires renting the system and database space from the Cloud Service Provider. The rental fee will be charged on a monthly or annual basis depending on the contract agreement. Its advantage is that, just by securing stable internet connection, it can be accessed anytime, anywhere via web browser or mobile application.
What are the benefits of an ERP system?
1. Improves work processes and efficiency
One of the biggest advantages of ERP is that it is a system that allows your organization to automate and streamline tasks and business processes. Using one system makes all workflow easier and more efficient by eliminating the need to cross-reference and re-enter the same data into multiple systems.
For example, thinking about the purchasing transaction: when Purchasing Department inputs data on the ERP system, both the Accounting and Financial Departments can see the real-time data flow and can verify its accuracy. All departments involved in this workflow can issue related transaction documents without having to fill out new documents or numbers. Thus, it saves time, resources, and costs that lead to better overall performance.
2. Enables remote work
Gone are the days that employees need to collect and shuffle through piles of papers and documents. Nowadays, On-Cloud ERP helps you to manage and access data in real-time through a web browser or mobile application, which only requires a secure and stable internet connection. This system enables employees to work flexibly and fast even if they work from home.
3. Performs high security
Whether On-Premise ERP or On-Cloud ERP, both solutions provide a great way to protect all data. With On-Premise ERP, the system is easy to maintain and manage since it stores data on an internal server. While with On-Cloud ERP, it automatically backups data globally and distributed it across multiple servers, ensuring a great possibility of immediate and complete recovery if disaster strikes. Moreover, a strong cyber security system from your Cloud Service Provider can support protect the data against cyber-attacks to keep customers’ data safe.
4. Ease of access and use of data
ERP system is designed to be used by everyone in the organization. It makes data easy to share, manage, and consolidate across all departments in the entire organization using a standard system.
ERP system is designed to increase the efficiency of an organization’s work processes. Whether the organization is small or large, it can take full advantage of consolidating data through a single system. This allows all departments to easily access and utilize data across teams and departments even offsite work. ERP system also helps to eliminate redundant work processes.
More importantly, because ERP allows access real-time data across the company, this system provides extensive business insights into the status of all business processes. Therefore, organization’s decision-makers can analyze and forecast trends for accurate business planning and develop further growth.