Advantages of Enterprise Resource Planning Systems in Business

Definition of Enterprise Resource Planning System and its Benefits

      Enterprise Resource Planning System or better known as the ERP system is a concept for planning and managing company resources, in the form of an integrated and multi-module application program package designed to serve and support various functions within the company.

By using ERP, work becomes more efficient and can provide more services to consumers, which ultimately results in added value and can provide maximum benefits for all interested parties (eg stake holders) for the company.

Understanding and History of Enterprise Resource Planning (ERP) Systems

Enterprise Resource Planning System (ERP) is a software system designed to link several functional and technical activities within a company, as well as integrate human resource aspects in it.

ERP functions to standardize, simplify, and integrate business processes with various human, financial, and distribution resources. (investopedia.com)

This technology was originally created by Gartner in 1990 to describe the planning of material requirements and planning of manufacturing resources.

Modular ERP systems usually handle manufacturing processes, logistics, inventory distribution, invoicing, including activities related to company accounting.

How Enterprise Resource Planning Systems Work

In general, enterprise resource planning uses a centralized database for various business processes in order to reduce manual labor and simplify existing business workflows.

ERP systems typically contain dashboards where users can view real-time data collected from across the business to measure productivity and profitability.

For example, an ERP System supply chain solution might receive a customer order and then automatically transmit that information to the distribution center that is most efficient and positioned to complete orders in a timely manner.

Depending on the solution you choose, your ERP system may be able to look at information about inventory levels, delivery times and other factors to decide which distribution center is the most productive and cost-effective way of completing orders.

Without this system, data is usually closed by departments and difficult to access, that's why this system is known as an open source ERP application.

By using the Enterprise Resource Planning System, data from various departments can be easily shared and visualized across the company.

This wealth of information and efficiency can assist in the development of business objectives and reduce the amount of time employees spend on tasks that can be automated.

Benefits of using an ERP System for Companies

Companies which not implement an ERP system generally use a separate database system. Where each unit of work has its own database.

Such as marketing, human resources, purchasing, and finance departments have their own databases.

Separate systems that have different databases will often result in data mismatches, making it difficult to manage.

The ERP system was developed to replace these separate systems to become integrated, so that management is more effective and efficient.

The following are some of the benefits that can be enjoyed by companies implementing ERP systems:

Better Integration of Business & Data Accuracy

The ERP system consists of various modules and sub-modules which can represent certain business components.

If data is entered in a module, for example material receipt data, then other modules such as payment and inventory will also be updated automatically. This update occurs in realtime at the time the transaction occurs.

Data only needs to be entered once, when a transaction occurs, so there is no need to enter data in other modules. Thus, the need for multiple times of data entry can be eliminated (eliminated). And, the possibility of data typing errors and data duplication can also be minimized.

The centralized database structure also enables better administration and security to avoid losing important data.

Efficiency and Productivity Improvement

Apart from providing better planning, an ERP system can also increase efficiency in daily routine activities.

Such as ordering, shipping, supplier performance, cash management, quality management and sales realization.

With the existence of an ERP system, the time cycle of selling to cash and payments to suppliers can be shortened.

Planning & Management of Information Systems

The ERP system has good decision-making support tools. Such as planning tools and simulation tools that can help management information systems to more precisely utilize their resources such as: materials, human resources or work equipment.

In presenting reports, the ERP system can produce standard reports required by management.

The report can be accessed by management anytime when needed.

Become a Customer Relationship Management Bridge

The next benefit of using Enterprise Resource Planning is that it can become a bridge for management to connect with customers.

You can centralize customer information, thus having faster access. The existence of an ERP for CRM (customer relationship management) can also be an extension of creative marketing.

Apart from that, sales line activities and product management will also be monitored automatically when looking at available systems.