What is ERP, and why does it matter to you?

While large corporations were once the sole purveyors of ERP systems, even small businesses can make use of them today. Nonetheless, many manufacturers remain unfamiliar with ERP systems and doubt the value they can bring.

Of course, all of this raises the question of what exactly an ERP is. The acronym is short for Enterprise Resource Planning, which is a centralized, standardized system that integrates all processes that are necessary for running a company. Finance, human resources, purchasing, inventory, production, and more all fall under the wide umbrella of ERP systems.

Early ERP systems developed in the 90s as the next logical step to previous systems of organization, but they could be unwieldy and manpower-intensive. As the information era has gone into full swing, these systems have become increasingly agile and user-friendly.

Today, most ERP systems are available as web-based applications and managed services that a third party operates. Nonetheless, companies also have the option of building the on-premise ERP system that they rely on their IT department to operate.

Both choices deliver value for businesses of all sizes, and the difference between on-premise and cloud-based ERP is primarily one of convenience and scalability.

Enterprise resource planning has increasingly become the norm in large-scale operations since it replaces MRP I and MRP II, a set of resource management protocols that were popular throughout the 20th century. When it comes to the key characteristics of an ERP system, they are:

A unified database that contains data across all departments and which all departments may access

Dynamic, module-based design that businesses can easily modify as their needs evolve modules that share a consistent philosophy to UI and Highly responsive, almost real-time or fully real-time operation Integration across the entire company.

Likewise, an ERP has comprehensive functionality with modules that power most or all major aspects of business operations. While the modules for each department may vary in operation, they'll work together as part of one larger entity. In manufacturing, systems should cover:

- CRM

- Production Control

- Warehouse Management

- Sales

- Production Control

- Finance

- Human Resources

In light of this, some of the advantages of ERP become self-evident. Operating an ERP drastically simplifies the software licenses that your company needs to pay for. Likewise, moving to a single, unitary program for resource planning simplifies operations dramatically.

Replacing a network of different systems with a single, all-encompassing program means that you'll only need to train staff on one system. However, these standardization gains are incidental compared to the core benefit of ERP. The real advantage of an ERP is the way that it connects all of your departments and powers intelligent, organization-wide communication.

By routing all of your data through a single database that all departments can access, you facilitate sound, data-based decision-making. In particular, the speed with which an ERP makes new information available empowers leaders within your company to make decisions that are more informed than was ever possible before.

Furthermore, the designers of ERP's often build them around specific industries. This translates into best practices built into the heart of your program, as well as ready-made integrations with important software programs. While enterprise resource planning systems are meant to be your primary or even your only program, many businesses need specialized applications for specific tasks. A good ERP admits this and has the flexible design to accommodate specialty software and, ideally, comes with ready-made integrations.

Bringing all departments into one data system also improves efficiency across the board by eliminating redundancy and driving standardization. With the entire company operating on the same standards, it becomes much easier to assess efficiency and productivity. Likewise, increasing automation via ERP-driven standardization frees up manpower across your organization.

The bottom line is that using a manufacturer that uses ERP will meet their targets more easily, produce at higher volumes in less time, and do it all while saving money. Of course, these programs are so powerful, why isn't every manufacturing company using them?

Many of the largest manufacturers do use ERP, and no one denies the value of such systems. The main drawback to using ERP is that implementing it is a major step. Building your on-premise ERP system is an incredibly challenging undertaking in terms of financial resources, manpower, and time.

Rolling out an international corporation-grade system can easily cost hundreds of thousands of dollars. Depending on the scale of the business, the features of the ERP, and the scope of support from the provider, the cost might even rise into the millions. Likewise, transitioning out of legacy systems is a challenge due to the scale of the task and the power of inertia.

However, modern cloud-based ERPs have made it much easier to make the leap. Likewise, any well-managed service provider will be highly experienced in abetting transitions to its software. Such companies will work closely with new clients to ensure the smooth, successful implementation of ERP.

Under the Software as a Service (SaaS) model of ERP, the provider's IT experts will be at your disposal for the entire lifetime of your ERP. While some top-grade ERPs might cost hundreds of thousands of dollars to implement, the market is rich with providers who offer managed cloud services at a tiny fraction of that cost.

Modern businesses are more data-driven than ever, particularly manufacturing. An ERP system speaks to the need to make data accessible, implement smart automation, and promote standardization to compete in today's marketplace.

Businesses that use ERP systems have found them to be indispensable since the 90s, and they offer a much better value proposition now than they did then. It's easier and more profitable than ever to implement enterprise resource planning in your own company. That said, the first step to succeeding with ERP systems occurs before you begin implementing them.

Before anything else can occur, you need to understand the different types of ERP systems so that you can make an informed decision regarding the many competitors on the market. You need to select the right type of system for your company and keep an eye out for the key features that are necessary to stay ahead in your industry.

Then, it's necessary to weigh the benefits of on-premise vs cloud-based ERP. Both options are popular today, and the decision between the two isn't always easy. Once you're equipped with this knowledge, you'll be able to select a system that suits the needs and budget of your company and begin your ERP rollout.