What is Enterprise Resource Planning ERP

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The Definition of Enterprise Resource Planning (ERP) System

ERP (Enterprice resource planning) is business solution that aims to maximize the productivity of organizations, to control costs and to optimally meet customer requirements. ERP achieves this by incorporating the automatic handling of logistical, administrative and financial business processes in one company-wide information and management system. This integrated automation solution is known as ERP software. This software is applicable for almost all types of organizations, large and small and both producing and service.

Benefits of ERP software

The application of ERP software makes your organization more effective, efficient, faster and more flexible. The control of your business process will improve, order lead times will be shortened, customer focus will increase, inventory costs will be lower and the level of service will increase. In fact, it's very clear: in your ERP system you place all logistical, financial and administrative data in one system. The big advantage of this is that you have insight into all relevant business information that can help your organization on its way. Provided you have furnished it well.

Modular construction

Good software is always modular. In part, these modules are standard and suitable for every type of business and in part they are based on the needs in specific market segments. There are several applications in use within the ERP system, each with its own task as a whole. This can be a financial task, a task related to the goods administration or the customer information system. The system ensures that all information from those different parts of the company is stored in the same database and is available under one button. The alternative is that you have to use a separate application with its own software for each component. Cumbersome, expensive and often these components can't 'just' communicate with each other. That in turn gives more work and costs and is hardly efficient in many cases.

Insights and overviews

It sounds as logical as it is: having all the relevant business information about processes, products, people and resources together and available to the people who have to work with it saves a lot of extra work. Your processes run faster and deliver better quality in results. Your customer can be served faster with better service and your supplier can be helped faster (read: paid). Finally, your employees have overview and insight at all times and all other stakeholders know what the status of the information is. Your organization becomes more flexible and is better able to respond to changes in the market, customer wishes or laws and regulations. You no longer have to hold (too) large stocks in the hope of being able to sell them (quickly). Through the ERP system you have all information about products, lead times, delivery times etc. are available and you can produce and deliver just-in-time. You have insight into outstanding orders, purchasing, capacity and production and thus see the relationship between these data faster. Which in turn enables you to make faster and better decisions.

See coherence

The ERP system uses the same information source (database), which means that all data only has to be entered once and can be used for multiple purposes. Because of that one source you're able to gain more insight into the coherence of business processes. It improves collaboration and communication between the various departments within your company. After all, they all have the same information.

There are many benefits when you work with a well-designed ERP system tailored to your market and organization. Not only is all relevant information in one and the same system, but also the reports from it can help you on your way to understand business processes, identify bottlenecks and then optimize the process. You know the status of specific processes at all times; whether it concerns deliveries, payments, purchase orders, means of production, availability of personnel etc. Because of these insights you're better able to fulfill your agreements and deliver on time. This promotes customer satisfaction, your reliability to the market and therefore your competitive position.

Disadvantages of the ERP system

There is also a disadvantage to placing all your important information in one system. It makes you completely dependent on that system and / or its supplier. But every disadvantage has its advantage; that also means that only one is responsible for your automation. It's always clear if you only have to contact one responsible supplier in case of problems. There will no longer be any discussion between different parties regarding the various applications that are active in your company. In addition, there are no longer any hick-ups with collaborating systems.

However, it can be difficult to work with one system. If something goes wrong or if updates have to be made, everything immediately stops. However, that can be overcome with thorough preparation and possibly good guidance from the supplier. It's worse that you usually lose some flexibility with that one system. Once the system is in use, it's usually no longer that easy to adjust. Or only at high costs.

Prepare the right choice

To find out which advantages or disadvantages specifically apply to your industry when using an ERP solution, it's important to do a (preliminary) investigation prior to selection and implementation. Only then will you gain detailed insight into what is the best solution for your company or industry and what you should pay attention to. A good solution is feasible and affordable for every organization.

If you want to know which ERP system is best suited for your company, first list your wishes. Put together a project group to think about how you can best fill in all conceivable scenarios and with what consequences. Don't opt ​​for a known name by default or sail blindly on the advice of another. Prepare well and involve the most important users of the system in the project. They know the problems from practice and can help you on the right track. In order not to be completely dependent on third parties, it's wise to gain knowledge (in your organization) about the advantages and disadvantages of ERP systems and what the market has to offer. You can also visit colleagues / companies that already use a system and ask about their experiences. This often makes the case a bit more transparent.

Differences

There is an enormous diversity of systems and suppliers. Many of them are focused on a type of business process, specific industry or companies of a certain size. Others are more generic and are easily tailor-made for a wide range of applications. The selection of the system that best fits the organization therefore requires a professional approach.

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