What Is Erp? And Erp System
Definition of Enterprise Resource Planning (ERP)
ERP stands for “Enterprise Resource Planning” and refers to a type of software or system used by a business to plan and manage daily activities such as supply chain, manufacturing, services, financials, and other processes. Enterprise Resource Planning software can be used to automate and simplify individual activities across a business or organization, such as accounting and procurement, project management, customer relationship management, risk management, compliance, business spend management, and supply chain operations through integration with a wide variety of platforms. learn more here.
Individual ERP applications can offer software as a service (SaaS), while a complete suite of ERP applications forms an ERP system that can be used to effectively communicate and bring together business processes to enable a flow of data between the applications, typically through common databases either on-site/on-premise or in the cloud.
ERPs connect every aspect of an enterprise. An ERP software system allows for better performance and project management that helps plan, budget, predict and accurately report on an organization’s financial health and processes.
A History of ERP (Enterprise Resource Planning)
The term “ERP” was first used in the 1990s by the Gartner Group, but enterprise resource planning software and systems have been used in the manufacturing industry for over 100 years and continue to evolve as the industry needs to change and grow.
ERP History/Timeline:
- 1913: An engineer named Ford Whitman Harris developed the Economic Order Quantity (EOQ) model, a paper-based manufacturing system for production scheduling.
- 1964: Toolmaker Black and Decker adopted the first Material Requirements Planning (MRP) solution that combined EOQ with a mainframe computer.
- The 1970s-1980s: Computer technologies evolved and concept software handled business activities outside of manufacturing, including finance, human resources data, and customer relationship management (CRM).
- 1983: MRP II was developed and featured “modules” and integrated core manufacturing components, and integrated manufacturing tasks into a common shared-data system.
- The 1990s-2000s: Gartner Group coins the term “ERP” to differentiate from MRP-only systems. ERP systems expanded to encompass business intelligence while handling other functions such as sales force automation (SFA), marketing automation, and eCommerce.
- 2000-2005: Cloud-based ERP software solutions arrive when ERP software makers create “Internet Enabled” products, providing an alternative to traditional on-premise client-server models.
- Today: Software-as-a-Service (SaaS) and Anything-as-a-Service (XaaS) offer new delivery models for ERP. Remote web-based access for cloud ERP solutions provides mobile solutions, security, and integration with the changing industries and smart technologies, including integrations with the Internet of Things (IoT), Internet of Everything (IoE), and even social media to provide comprehensive solutions for every industry
How Does an ERP System Work?
The main purpose of an ERP system is to increase the organizational efficiency of an organization by managing and improving how company resources are utilized. Improving and/or reducing the number of resources necessary without sacrificing quality and performance are keys to effectively improving business growth and profitability.
ERP systems typically cover all aspects of business operations and commonly provide:
- An integrated system
- Common database
- Real-time operation
- Support for all applications/components
- Common user interface across application/components
- On-premise, cloud-hosted, or SaaS deployment
ERP software has the ability to collect and compare metrics across departments and provide a number of different reports based on roles or specific user preferences. The data collected makes finding and reporting on data faster and gives a complete view of business performance with complete insights on how resources are being spent.
ERP synchronizes reporting and automation by reducing the need to maintain separate databases and spreadsheets that would have to be manually merged to generate reports. This combined data collection and reporting offers valuable insight, such as where to cut costs and streamline processes, providing the information to make real-time business decisions.
Types of ERP Systems & ERP Software Deployment Options
Enterprise Resource Planning software is considered a type of “enterprise application”, which refers to software designed to satisfy the software needs of an organization and improve business performance. There are many different ERP systems available today that range greatly depending on the size, function, and needs of an organization. Types of ERP systems generally refer to deployment options and include cloud ERP, on-premise ERP, and hybrid ERP (some systems in the cloud and some on-premise).
Each ERP solution system is often tailored to support different aspects of a business, meet an organization’s business requirements, and have different methods of deployment.
Big Business ERP vs. Small Business ERP
In the past, “big business ERP” addressed large organizations that often deployed onsite/on-premise ERP solutions and had an abundance of resources to dedicate to IT and other support to analyze, customize, upgrade and deploy their software solutions.
The phrase “Small Business ERP” or “SME (small and medium-sized enterprise) ERP” is commonly referred to as ERP software systems with business management applications typically created to meet the specific needs of a small to mid-sized business.
Today, these phrases are used less frequently as the important factor is not company size but determining if the ERP system is effectively addressing current and future business requirements, no matter the size of the organization. It’s imperative that organizations consider and select ERP systems that eliminate the need for costly customizations, adapt to the rapid pace of business change, address future technologies and meet other identified requirements.
Types of ERP Systems: Cloud vs On-Premise vs Hybrid
There are three main types of ERP systems that function with different deployment model options. The most common types of ERP systems include cloud ERP, on-premise ERP, and hybrid ERP.
- On-Premise ERP software is implemented onsite and maintained in physical office space within an organization, hosted on the company’s own computers and servers for full control, support, and ownership of the entire system once implemented.
- Cloud-based ERP software is a web-based solution, known as Software as a Service (SaaS), where an organization accesses and stores data on any device with an internet connection, usually through the purchase of a subscription. Continual support, updates, training, and flexible customizations are supported by the software provider.
- “Hybrid” ERP software refers to a combined implementation of cloud-based and on-premise ERP system solutions. The combination of hosting and deployment services vary by provider. These models can provide ERP users the flexibility to migrate between delivery models or integrate benefits not available in the existing implementation.
Different ERP vendors support different deployment model options. Combinations of options often referred to as “hybrid” deployment may offer a combination of hosting and deployment services. These hybrid models can provide users with a flexible ERP solution and integrate benefits that may not have been available within the existing implementation.
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