Enterprise Resource Planning (ERP) is a relatively new form of computerized business support system. The aim of an ERP system is to integrate reporting for every management process and provide as close to real-time business performance reporting for the key decision makers.
The Gartner Group first developed the concept of ERP in 1990. It was an evolution of manufacturing resource planning (MRP) and computer-integrated manufacturing. In time systems were developed to provide integration beyond manufacturing, to include all aspects of a business, from supply management through to client services and human resources.
The greatest change in ERP came during the early 2000s when ERP systems became web-based and moved online. These new systems were initially called ERP II, however, with the advent of Cloud ERP systems (the current industry standard) they are now simply called ERP. Cloud ERP systems can be accessed from anywhere and allow Enterprise Resource Planning to include data from all business locations and to integrate with client and supplier systems.
The biggest advantage for managers is that reports can be run in real time. So long as all departments are inputting data as part of their business process, the information is fed to the central database where the business reports are produced.
The Advantages of Adopting Cloud ERP
The key advantage of ERP is in understanding how well a business is performing at any point in time. Before the creation of modern ERP, managers and decision makers relied heavily on good management accounts, however, these are generally produced monthly and changes in market conditions may only be identified when it is too late to act.
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With ERP businesses are able to respond much faster to changes in supply and demand and this gives a competitive advantage over other businesses. For example, if a particular product or service becomes more popular, an ERP system will report this immediately and priority can be given to the marketing and sales teams to focus on winning a greater share of the new market. To competitors it will look like you are driving the market, but you are really just responding more quickly.
What business sectors Cloud ERP can benefit
Businesses that have a complex production line benefit the most from ERP. Larger businesses certainly benefit the most from these systems. A good example would be of an online retailer who has a team processing online orders, a network of warehouses and delivery teams, product buyers, marketing and sales teams and a customer support team. ERP allows management to know exactly how well the business is performing and can quickly highlight areas that need improvement.
However, although early ERP systems were designed specifically for larger organizations, today there are many ERP systems that are well suited to smaller businesses. The modular nature of ERP allows businesses to build a system to suit their requirements. Some businesses may not need ERP to cover human resources or customer services, only needing the manufacturing process.
Cloud ERP not only benefits large, dispersed organizations, it also benefits smaller businesses. Using a cloud based business support system means that no new computer hardware or software is required. The whole system can be accessed via a standard web browser, and with secure logins it can be accessed from anywhere. This is ideal for entrepreneurs who may be working from multiple locations and often traveling on business.
One of the first improvements an ERP system can help implement is the reduction of operational costs. ERP is central to an efficient continuous improvement program. This helps to make a business more efficient in all areas, and ultimately more profitable.