Enterprise resource planning (ERP) software

Businesses face significant challenges when each department operates with its own independent software. For example, inconsistent or duplicated data across systems can lead to miscommunication between departments. This might result in the sales team promising delivery dates based on outdated inventory information, creating inefficiencies and customer dissatisfaction.

In a nutshell, this is why enterprise resource planning (ERP) systems were created. ERPs include modules that allow each department in a company to manage their operations on a single integrated platform. This has many advantages, including:

• improved data accuracy
• streamlined workflows
• enhanced collaboration between departments
• real-time access to critical business information for better decision-making
• improved data security and privacy

A more modern view of ERP systems is that they are at the core of an organization’s broader Digital Operating Platform (DOP). A DOP is essentially a centralized hub for managing all digital activities, and the ERP is its backbone, managing all the core business processes in an integrated manner. This allows for comprehensive analysis and strategic decision-making on real-time information.

What is the meaning of enterprise resource planning (ERP)?

The acronym ERP was used for the first time in the 1990s by the Gartner Group, says Leon van der Poel, Senior Business Advisor, BDC Advisory Services. However, these systems were first designed and created in the 1970s.

“The intent of ERP systems, when they were first created, was to give companies one system on which to manage all key business functions across their departments,” explains Van der Poel. It was mostly focused on the internal aspects of business management. In other words, ERP software was developed to assist internal stakeholders in managing and operating a business.

Today, there are many different ERP software, each with its own set of advantages. Some are tailored to specific industries, featuring specialized functions, while others offer more general functionality. Typically, ERP software will have basic modules covering the core functions of any business. These commonly include:

• finance and accounting
• production
• inventory management
• supply chain management
• procurement and purchasing
• human resources

For example, an ERP software specialized in the food and beverage industry might have additional, specialized functions to help you with regulatory requirements regarding traceability and quality control. Conversely, a system made for the wholesale distribution sector might focus more on warehouse and inventory management as well as logistics.

What’s the difference between an ERP software, system, program or platform?

ERP software are sometimes also called ERP systems, ERP programs and ERP platforms. In reality, these terms are synonyms and can be used interchangeably. 

How does an ERP help businesses?

An ERP system helps businesses manage resources by centralizing all their data on one platform. This comes with several advantages. Here are the main ones.

1. Increased data accuracy and consistency

   When each department operates on a separate system, you risk running into informational breakdown. The reason is that departments always need to share information. But if their systems are not connected and integrated, they will need to rely on manual data transfer, increasing the likelihood of errors.

   “Beyond data entry errors, two departments might compute things differently, leading to inefficient meetings where conflicting versions of the truth are discussed and debated,” explains Van der Poel. 

   Having a single system in which all information is stored and shared from will thus improve data accuracy and consistency.

2. Improved decision-making

   By consolidating data from all business areas, ERP platforms ensure decision-makers have a complete view of what’s happening inside the organization. Importantly, since these systems eliminate the need to share information between departments manually—a time-consuming task—they also speed up decision-making.

   “With an ERP system, business owners can make decisions in real time,” says Van der Poel. “Rather than waiting for last quarter’s information to be consolidated in a spreadsheet, they can act on what happened this morning or even five minutes ago.”

3. Enhanced security of data and systems

   Keeping multiple systems up and running is hard enough. But, ensuring that each one is regularly updated and secure is even more challenging. 

   Managing software patches, security updates and compliance requirements becomes a resource- and time-consuming task when a company relies on several separate software systems. This increases the risk of vulnerabilities. It also exposes the company to potential piracy or data breaches, as outdated systems are easier targets for cyberattacks.

   “Security risks can be even worse when a company is still keeping information on paper, as there is no way to track who is accessing and copying it, and it can easily be misplaced,” adds Van der Poel. An ERP system increases your company’s data security by centralizing and digitalizing data.

Illustrating the ERP’s advantages

ABC Co.’s sales department receives a large order for a popular product. Using the company’s ERP software, the sales team checks the company’s inventory to confirm it can fill the order. Because the other departments immediately see that the order has come in, they start preparing to fulfill it—for example, by coordinating logistics between the warehouse and shipping to ensure on-time delivery as the order is processed. The company’s finance department immediately sees that the sale has been recorded and can track both the revenues and related costs associated with processing the order.

When should a business consider ERP implementation?

ERP systems typically become indispensable once a company’s revenue approaches or exceeds $10 million.

“This is not an exact threshold,” stresses Van der Poel. “But this is often the point at which manual operations and data sharing really get out of hand. It is also around this point that productivity gains will usually offset the investment required.”

All in all, the right moment to consider ERP implementation really depends on the company’s specific challenges, opportunities and future plans. According to Van der Poel, a good way to determine if you need an ERP is to evaluate the complexity of your operations and the inefficiencies you’re experiencing. Key indicators include:

• manual workarounds
• data re-entry
• paper-based processes. 

If you find that managing multiple systems, sharing information across departments, or handling increasing volumes of data is becoming overwhelming, it may be time to consider an ERP system. 

“The key is identifying when your current processes start to hinder your growth,” says Van der Poel. “An ERP system can offer a clear return on investment by streamlining operations and improving decision-making, but assessing whether the upfront costs are consistent with your company’s medium- and long-term goals is important.”

“There is never a perfect time to implement an ERP,”  Van der Poel explains, adding that the selection process and implementation of the ERP will take at least a year if done correctly.

If you’re not ready for an ERP, an interim solution could involve selecting different software tools—often referred to as point solutions—such as an inventory management system that can integrate with your existing business applications, most notably, your accounting system.

What are some ERP examples?

There are many ERP system providers on the market today. Some examples include:

1. Infor: Popular in the manufacturing sector, Infor offers advanced functionalities across key business processes, including procurement, inventory management, and production planning.
2. Epicor: Focused primarily on manufacturing, retail and distribution, Epicor offers cloud-based options and is known for its strong industry-specific functionalities.
3. SAP Business One: Designed with small and medium-sized enterprises (SMEs) in mind, SAP Business One is known for being scalable and user-friendly. It also offers industry-specific functionalities.
4. Oracle NetSuite: Used widely in wholesale distribution, Oracle NetSuite is a cloud-based ERP that offers a unified platform for managing financials, customer relationship management (CRM) and e-commerce.
5. Sage 300: Formerly Sage ACCPAC, Sage 300 is another ERP designed with small and medium-sized enterprises (SMEs) in mind. It is known for its flexibility and is popular in the distribution, manufacturing and retail industries.

What is the difference between an ERP and a CRM?

ERP and customer relationship management (CRM) systems are both business software. However, they differ in their function and scope.

ERP platforms help companies manage all their different business functions on a single platform. CRM software are designed to manage customer interactions, sales processes and, sometimes, marketing efforts.

“Since ERP platforms cover all business functions, they typically include a CRM module,” explains Van der Poel. “On the other hand, CRM software do not include modules for accounting, inventory, project management and all these other areas that an ERP handles.”

What is the difference between an ERP and a digital operating platform (DOP)?

ERP systems have been around for decades, offering numerous benefits to businesses that use them. However, most companies eventually encounter a need that their ERP system cannot fully meet. They often implement one or two additional specialized software solutions to resolve this.

“Think about logistics, for instance,” Van der Poel says. “There are excellent ERP software for this industry, but many distribution companies still need to integrate with a more specialized system to assist them with truckload or skid configurations and detailed route planning.” 

Additionally, ERP systems are often limited in their ability to share information with external stakeholders like regulatory bodies, shareholders, and other business partners, such as suppliers. In today’s world, closer collaboration and information sharing with business partners are key drivers of business advantage.

This is why it makes more sense for businesses to consider a Digital Operating Platform (DOP), which Van der Poel considers a “more modern version of the ERP.”

The versatility of DOPs enables companies to integrate additional software, such as for detailed route planning or marketing automation, as well as other devices, including IoT, while maintaining cross-department information sharing. This preserves the ERP’s core advantage while offering greater flexibility to adopt and integrate with emerging technologies to support unique business and evolving needs .

Additionally, DOP platforms make it easier for businesses to share information with external partners, adds Van der Poel. “This is crucial in today’s business environment. For example, companies face increasing pressure to meet ESG standards, and share data on sustainability efforts with customers, suppliers or regulatory bodies.”

Ultimately, whether an ERP is the right next step depends on your business’s size, complexity and unique needs – there is really no one-size-fits-all approach. 

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