Ashutosh Roy
Ashutosh Roy 11 November 2022

ERP Systems: Characteristics, Benefits & Types

Accounting and procurement, project management, customer relationship management, risk management, compliance, and supply chain operations are tasks that enterprise resource planning software can automate and simplify across a company or organization.

Enterprise resource planning describes software and systems used to organize and manage an organization's primary supply chain, manufacturing, services, financial, and other processes. The worldwide ERP software market value 2021 was $ 50.04 billion in 2021 and will reach $ 117.68 billion by 2030, growing at a 9.87% CAGR during 2021-2030.

Characteristics of ERP Systems

The four main features of an enterprise resource planning system are automatic information generation, flexible, open, and centralized database design. This software system runs in real time from an all-encompassing general database. As a result, each ERP module has a consistent look and feel.

An ERP software solution's main objective is coordinating all business operations units to swiftly accomplish operational objectives. All enterprise processes are merged across all business units to synchronize information and processes across the entire organization.

Features of a modern ERP system: 

Consistent Look and Feel

An organization can lower the cost of training due to the ERP's consistent look and feel. Early vendors discovered that a unified style makes an organization seem more professional. Employees working in various areas of a business can rely on the same information as they work to meet customers' specific needs.

ERP integration allows a company to present a consistent face to the market while looking at its accounting software or simple spreadsheets of manual processes.

Operates in Real-Time

The real-time feature makes sure that every business process can easily access the information it needs in the Internet of Things (IoT) era, where devices are connected to each other using technologies like edge computing. A system called edge computing brings computing and data storage closer to the point of use.

The real-time feature of ERP makes it easier to spot issues and gives business executives more time to address them.

Types of ERP Systems

ERP systems are classified into three types: on-premise Software, cloud-based Software, and hybrid Software. Any organization's specific needs are primarily determined by its size, the computing devices it has access to, and how well the system can accommodate those needs.

On-Premise ERP Software

On-premise ERP software is installed on-site. After installation, it is primarily managed by the company or an ERP consultant. An on-premise ERP solution is required to gain control over the security of the ERP system. Organizations need specialized IT staff to handle application and server maintenance to implement this kind of ERP application.

Cloud-Based ERP System

This ERP system is frequently known as Software as a Service (SaaS), indicating that the service is managed by a third party. The adaptable design enables your staff to store and access data from any device with an internet connection. Pricing is typically based on a recurring subscription.

Hybrid ERP System

The two-tier ERP system is another name for the hybrid ERP system. It enables your business to integrate on-premises and cloud-based ERP systems. For instance, you don't have to give the ERP consultant full access to your data in order to benefit from their experience.

Working of an ERP System

An ERP system functions by reducing the number of resources required to run the company profitably and improve business operations.

It differs from a single application because the ERP system enables other enterprise business modules to operate from a single database.

The system gathers information from various departments of the company. It centralizes the data so that employees who require it can access it. It eliminates the silos that trouble many businesses and ensures that adequate information is available to those who require it.

For example, when a shipment order for the last item in stock is initiated, the inventory management modules must record this information and notify the appropriate departments to restock the inventory. Additionally, the sales team will be made aware so that it doesn't make guarantees it can't keep.

Benefits of Implementing ERP Systems

Sharing Information:  An ERP system promotes collaboration through integrated information sharing because it can immediately share critical information across the various departments of the business.

Improved business performance:  The integrated system will ensure that departments manage their primary functions rather than wasting time trying to find the necessary data. For example, through order tracking, revenue tracking, and purchase order generation, an ERP system could enhance a company's performance in sales forecasting.

Easy to manage: ERP systems are becoming easier to manage with rapid technology advancements. This is especially true for businesses that may lack the necessary skills or resources to integrate their systems. 

Reduce costs: Manufacturing companies implementing ERP systems into their organizations were able to reduce inventory levels by 22%. Organizations also witnessed a 20% reduction in the overall cost.

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