What is Enterprise Resource Planning?

Enterprise resource planning is a business management structure that centralizes the essential business processes. The goal is streamlining and maximizing efficiency, as well as enabling improved reporting and analytics.

While enterprise resource planning refers to a methodology, the term ERP usually refers to the specific software platform that enables such integration. ERP platforms are highly configurable and easy-to-scale systems that can draw data from different business units. 

What Processes Does Enterprise Resource Planning Handle?

In theory, ERP can handle any business process that is suitable for automation. High-end ERP software platforms allow configuration that suits the needs of almost any department. 

These systems often allow organizations to create bespoke front-ends for each department. So, it is possible to develop a logistics front-end and an HR front-end that look like separate applications, but which are both connected to a single ERP.

In practice, ERP software focuses on the most common business use cases, such as:

  • Human resource management: The ERP manages timesheets, shift schedules, vacation planning, and other elements of human resource allocation.  
  • Logistics and supply chain: ERP can handle ordering and inventory and perform order automation if required. In a manufacturing environment, ERP can track outputs and productivity. 
  • Sales automation: Sales processes automation is possible within ERP, including the order fulfillment process. 
  • Finance: ERP can track cashflow throughout the organization, which can help to flag up issues as they arise. This function also facilitates detailed financial reporting when required.
  • Compliance: ERP can understand regulatory rules if configured correctly. Automated processes will stay compliant at all times, while the ERP helps to identify manual breaches faster. 
  • Project management: ERP is an ideal platform for project management. Because it draws live data from other departments, an ERP platform can update project statuses automatically and notify participants. 
  • Business intelligence and analytics: ERP can output real-time data, giving business users access to informative dashboards. This gives analysts a detailed overview of the business without needing any additional data processing. 

ERP can handle any of these functions in isolation. However, to realize the full benefit of ERP, the organization will typically integrate multiple processes.

What are the Advantages of Enterprise Resource Planning?

The main advantage of ERP is centralization.

Standalone systems can handle all of the above processes. But when an organization has a stack with many different applications, it can be a challenge to pass data between them.

ERP puts all processes, and therefore all data, in a single location. ERP automation processes have access to everything that they need, without waiting for data imports or performing API calls on other systems. This offers a number of benefits, such as:

Smoother Processes 

ERP can integrate processes end-to-end across multiple departments. This leads to fewer bottlenecks and seamless collaboration across the business, especially in areas such as supply chain management, resource planning, and project oversight. 

For example, imagine a manufacturer using an ERP to manage their processes. The sales automation will tell the ERP how many orders are coming in each week. The ERP can then automatically order enough materials to fulfill those orders and organize dispatch when ready. If the company is busy and needs staff to work overtime, the HR module can schedule additional hours.

Improved Business Intelligence 

When drawing BI data from multiple sources, there is always an overhead. Either BI analysts are working with old data, or they’re expending resources on integrating all data.

ERP holds the most recent data for all associated processes, which allows for real-time reporting. Analysts can compare data from multiple processes, which enables them to see the big picture.

Support for Automation

Most modern ERP is cloud-hosted and supported by robust automation engines. This automation can handle a lot of drudge work, such as ordering and reporting. It also allows for faster reaction to situations such as a breakdown in the supply chain.

Automation is still a challenge for most organizations, and standalone systems can create a piecemeal approach, where some departments have adopted automation, while others are working manually. ERP also allows for end-to-end automation with no process breaks.

Improved Compliance 

ERP supports configuration based on compliance requirements. For example, finance modules can handle most of the key controls required to stay compliant.

Automated processing also leads to a more detailed paper trail. ERP will store data about things like cash flow, which allows organizations to produce more detailed records if they are subject to an audit.

What are the Disadvantages of Enterprise Resource Planning?

ERP is not right for every organization. There are some drawbacks, such as:

  • Cost: High-end ERP can be quite expensive, although scalable cloud solutions have made ERP more accessible.
  • Inflexibility: Working with ERP means taking the ERP approach to business processes, which may not suit all situations.
  • Learning curve: ERP software is not always the most user-friendly option. ERP configuration is especially challenging and may require the help of a consultant.
  • No specialized features: ERP software is feature-rich, but dedicated applications tend to have a bigger library of specialist functions.
  • Single point of failure: If the ERP crashes or suffers data loss, it may have catastrophic results for the organization.

In some instances, organizations may choose a hybrid solution, in which they use an ERP and integrate it with other standalone apps.

What are the leading Enterprise Resource Planning Platforms?

ERP has traditionally been an on-premise application for many organizations. However, recent years have seen more users switch to a cloud-based solution. The leading providers of ERP software include some big names, as well as some new players:

  • Oracle ERP Cloud
  • Oracle PeopleSoft
  • Oracle Netsuite
  • SAP ERP
  • Sage X3
  • Microsoft Dynamics ERP
  • Workday
  • Acumatica Cloud ERP
  • Syspro

Most ERP software platforms work on a relational database. Organizations can export data via an integrated data pipeline and store it in a repository such as a data warehouse if required.