What is an ERP Used For and What Benefits Does it Bring to Businesses

ERP, an acronym for Enterprise Resource Planning, is a term that can refer to the different processes or strategies that a company uses to manage its resources, as well as the systems and tools it uses to optimize, automate and integrate these processes.

In the case of software, it can be an ERP in the cloud or saas, when it is a web-based solution, or an on-premise ERP, when the company has its own server and installs the system locally.

An ERP system unifies information and data from all key areas of the business: accounting, human resources, supply chain, etc.

What is an ERP: Definition of an Enterprise Resource Planning system?

An ERP system in its technological meaning refers to software that allows the integration of different business management processes, optimizing and centralizing information in a single database with the aim of reducing costs, increasing efficiency and improving decision making in companies.

According to the consulting firm Gartner, today's ERP is organized into two main categories: administrative and operational. The operational part includes, for example, supply chain management, while the administrative area is made up of finance and human resources.

An ERP can be thought of as a "system of systems", meaning that it is a platform that brings together different, but related, strategic processes and functions to manage the information flows between them.

Without ERP software, each department in the company would have its own system that would not communicate with the others. This would lead to inefficiencies and data inconsistencies. ERP tools allow all areas to work in a coordinated way and share information in real time.

The set of applications that make up an ERP system are called modules. Each of them covers a specific section of the company's operations (production, logistics, customer service, ...) and is integrated with the rest.

Why are ERP systems important? Main benefits

The importance of ERP lies not only in the fact that it is an enterprise resource management software, but also in the fact that it allows to establish an effective business relationship between the company and its customers.

The following are some of the specific benefits obtained with the implementation of an ERP tool.

1. Increased efficiency and effectiveness in processes

One of the main advantages of ERP systems is that they help organizations to be more efficient and effective in their operations. This is because the solutions automate and streamline many of the processes involved in the operation of a company.

For example, an ERP program is used to automate order tracking and inventory management in the warehouse, freeing up time for other tasks. In addition, ERP systems make it easier for companies to track financial and performance data.

2. Improved data-driven decision making

Thanks to analytical and reporting capabilities, ERP enables managers to make more informed decisions. With an ERP system, companies have access to real-time data and can generate customized reports.

One example: the information provided by ERP software to a company's marketing team gives them a detailed understanding of how customers interact with their products and services so they can develop more effective marketing campaigns.

3. Increased competitiveness in small and medium-sized companies

SMEs, until not long ago, used several programs for day-to-day management. One of the main barriers to accessing ERP systems was price, as these solutions were expensive and reserved for large companies.

Cloud technology, however, has democratized access to management tools, making them more affordable and within the reach of any business. This has enabled the digitization of SMEs to compete on a level playing field.

4. Cost control and operations optimization

By automating processes and integrating the information provided by ERP systems, companies save money in different areas. For example, by reducing the time needed to complete tasks, eliminating errors and duplication.

In addition, the tool enables the organization to optimize the use of resources by having all the information needed for resource planning in one place. An ERP solution helps the company to better plan its production so that it does not have too much stock or run out of raw materials.

5. Better response to human resources needs

ERP systems also help HR departments to be more efficient in their work. The tool makes it possible to automate recruitment processes, create employee profiles and have all the information needed for performance evaluations in one place.

As an added value, the ERP provides managers with information on employee absences and vacation days, which helps them plan staffing needs more effectively.

6. Improved customer service

An ERP system gives companies the opportunity to offer their customers a better experience by providing them with the information they need in a timely manner.

For example, if a customer calls to inquire about an order, the company can quickly check the status of shipments and provide an accurate response. In addition, the systems make it possible to resolve customer issues more quickly.

ERP systems are important because they offer a number of benefits that enable the company to improve its operations, increase competitiveness and boost sales.

How many modules make up an ERP system?

There is no single answer to this question, as ERP systems can vary greatly in the number and types of modules they offer. Here are the most prominent ones and their functions:
  • Accounting: financial management in the business, accounts payable/receivable, fixed assets.
  • Inventory: warehouse and stock control of the business.
  • HR: employee tracking, payroll, schedules.
  • Manufacturing and production: planning of raw material needs, capacity forecasting, quality control.
  • Sales and CRM: customer relationship management, order control, marketing automation.
  • Project management: task tracking, budgeting, resource allocation.
  • Data management: intelligence module, data mining, reporting and analysis of all departments.
  • Purchasing: commercial relationship with suppliers of the organization, order processing.
  • Logistics: transportation and order tracking, warehousing.
  • Supply chain: inventory management, demand planning.
ERP software, being a modular system, includes applications that develop the basic functions along with other optional and more specialized ones to cover certain areas or any back office process.

What are the differences between the different types of ERP tools: SaaS and On Premise?

When it comes to ERP systems, there are two types: SaaS (Software as a Service or ERP system in the cloud) and On Premise (ERP software installed on premise). Both have their own advantages and disadvantages that should be considered by the company before making a decision on which type of ERP system to implement.
  • Cost. One of the main advantages of cloud ERP is that it is more affordable than a locally installed system. These systems are subscription-based, so you only pay for what you use, versus paying for the license fee for on-premise software.
  • Accessibility. Another difference of an online ERP system is that you can access it from anywhere you have an Internet connection. This is because the software is hosted on remote servers and not on the company's premises.
  • Customization. On the other hand, a great advantage of an on-premise ERP is that it has more customization options. The software is installed on the company's own servers, so it can be customized to better suit specific business needs and workflows.
  • Maintenance. One disadvantage of an on-premise ERP system is that it requires more IT resources to manage and maintain. The company is responsible for ensuring that the servers are running properly and are always up to date.
  • Flexibility. Another disadvantage of an on-premises ERP is that it is not as flexible as a cloud system. The company is limited to the hardware and software it has on-premises.
Who are the leading providers of ERP solutions worldwide?
  • Oracle: company that offers a complete and fully integrated set of cloud applications, platform services and engineered systems.
  • SAP: provider of ERP systems that help companies of all sizes manage their business processes.
  • Microsoft: technology company that markets ERP solutions through its Dynamics 365 Business Central product.
  • Infor: ERP software provider that offers cloud-based and on-premise options.
  • Sage: company that markets its popular Sage X3 and Sage 200 products.
  • Epicor: provider of specialized manufacturing and distribution software.
  • Wolters Kluwer: company known for its a3ERP and a3innuva modular systems.
  • Unit4: software company focused on the public sector, professional services and education.
Example of the use of ERP management software

The maintenance area of Iberia, a Spanish airline owned by IAG, selected the specialized aviation ERP from Ramco Aviation. Thanks to its use, it has managed to unify the systems used by its different divisions: maintenance, engine shop, supply chain and components area.

As a result of digitization, Iberia Maintenance is growing thanks to a simpler user experience, easier decision-making and automated processes.

In addition, Iberia benefits from the ecosystem of tools that are part of Ramco Aviation such as Artificial Intelligence, Dashboards, HUBs or Mobility via AnywhereApps.

The implementation of the ERP program has brought major advantages to Iberia: online assignment of maintenance-related tasks, real-time information on the work carried out on each aircraft, data integration in a single system and greater sustainability.

The system is used by more than 3,000 of the company's staff.

Frequently asked questions and answers about ERP (FAQ)

What is ERP and how does it work?

ERP, or enterprise resource planning, is a solution that integrates and automates business functions and processes to streamline operations and improve efficiency. It is based on applications that collect and organize information from various departments and business units into a centralized database.

What are the advantages of an ERP?

An ERP offers many advantages, such as increased efficiency and productivity, better decision making, cost reduction and increased customer satisfaction. All companies, both SMEs and large enterprises, can benefit from using an ERP system to plan and streamline internal resources.

How much does an ERP system cost?

The cost of ERP depends on a number of factors, such as the size and complexity of the company, the modules required and the vendor chosen. ERP systems can be implemented in the cloud, under a pay-per-use model, or on-premise with a single license fee.

What is the ERP implementation process like?

ERP implementation is a complex process that requires careful planning and execution. The first step is to assess the company's needs and requirements, and then select the right system. Once implemented, it must be adapted to the company's specific business processes. Finally, users must be trained