A whopping 88% of organizations consider their ERP implementation helped them succeed. Besides, over 50% of companies globally are planning to acquire or upgrade their ERP systems. 

But why? What is an ERP system and how does it work, and why should you invest in it? In this blog, we will answer all these questions along with what ERP stands for. Let’s get started!

What Is ERP (Enterprise Resource Planning)?

As per Wikipedia's definition, “Enterprise resource planning (ERP) is the integrated management of main business processes, often in real-time and mediated by software and technology.”

We’d define ERP as a fully-integrated platform that helps handle various aspects of a business, including accounting, procurement, manufacturing, project management, contract management, risk management, and warehouse management. 

ERP systems enable a seamless data flow across the organization by tying all your business processes. This eliminates data duplication and provides a single source of truth.   

ERP software also enables businesses to eliminate redundant work, automate tedious tasks, and reduce costs while providing employees with the information they need to make data-driven decisions. 

Depending on your business requirements, you can implement the ERP on-premise or in the cloud. You can also customize it to meet your industry’s specific needs. 

It is worth mentioning that, unlike traditional ERP systems, Cloud-based ERP systems offer real-time information and are packed with next-generation technologies like artificial intelligence, machine learning, and IoT (Internet of Things). 

A Short History of ERP Systems

Now that we have understood what an ERP system means, let us delve into its evolution. 

The first generation of ERP systems was based on mainframe computers and was introduced in the 1960s. These early systems were designed to handle inventory control and order processing but lacked flexibility and scalability. Moreover, since they were so expensive, only large companies with significant resources invested in them.

The second generation of ERP systems emerged in the 1980s and early 1990s and was built on minicomputers and workstations. These systems could support multiple users and applications, but they were still expensive and not accessible to smaller companies.

The third (and the latest) generation of ERP systems uses cloud technology, which allows multiple users to access information stored on a server over a network connection. This makes it possible for businesses of all sizes to own an ERP system without investing thousands of dollars in infrastructure. 

How Does a Modern ERP System Work?

ERP systems use a centralized database to equip everyone with the latest information on business processes. When someone enters or updates the data into the system, it gets immediately available to authorized users across the organization. 

By offering real-time data, ERP software helps management avoid disruptions and quickly make smarter, data-driven decisions. For example, if you’re a manufacturer with a global distribution line, you can leverage ERP in more ways than one.  

• First, you can better manage your inventory by anticipating demands. 

• Second, you can manage your vendors to achieve the best price and delivery combination. 

• Third, you can send real-time production status updates to customers, minimizing calls. 

Furthermore, the automation capability of an ERP system ensures that every order logged into the system is transmitted to the manufacturing line (without manual intervention) so you can deliver them on time. 

Similarly, finance teams can analyze expenses in real-time and ensure you’re consistently profitable. This, in turn, ensures your business is on the right track. 

Although it takes a little time to learn how to use the ERP system, once acquainted with it, you will see an increase in employee productivity and efficiency.  

ERP Features & Benefits for Business

Carrying out a reliable business is possible only when all its components function properly, but with many things to pay attention to, it can be difficult to maintain everything. That's where you need ERP software. 

It is packed with features that make your life easier and help enhance the customer experience. So let’s dig in to better understand the key ERP modules and how they can benefit your business. 

Commerce

Commerce ERP is an enterprise resource planning (ERP) application designed for manufacturers, distributors, and online retailers that need to manage multiple locations, products, and customers.

It can help you manage inventory, customer orders, shipping, and other vital aspects of your business.

The key features and functions of the Commerce module in ERP include:

• Order Processing: Track orders from start to finish, including customer information such as shipping addresses and payment details (including credit card numbers). You can also use this information to build personalized marketing campaigns to increase customers. 

• Inventory Management System: This feature lets you track inventory levels for each product in your store and automatically reorder items when necessary to ensure you always have enough stock to meet demand. It uses economic order quantity (EOQ) to minimize holding costs while maximizing inventory. 

• Financial Accounting System: This feature allows you to keep track of sales revenue and expenses at a detailed level so you can accurately forecast future financial results and make informed decisions.

• Analytics tools: This helps you gain insights into your business operations and improve your revenue over time. It could be by optimizing marketing campaigns, inventory management strategies, or making procurement more cost-effective. 

Here are some key benefits of ERP in Commerce:

• Improve sales forecast 

• Reduce inventory costs

• Streamline sales processes

• Eliminate manual data entry and duplication

• Keep customers informed about their order status

• Manage offline and online sales channels to maximize revenue and profit

• Track your payables and receivables

• Ensure tax compliance in your country

Finance & Accounting

The finance and accounting features of the ERP help companies keep track of their financial transactions, make budgeting and billing effortless, and prepare reports for management.

The key features and functions of the finance and accounting module include:

• Bank reconciliation: It helps you reconcile bank statements to account balances at any time. It checks for any discrepancies between your bank statement and the account balance.

• Cash flow management: This feature allows you to track cash inflow and outflow in real time to take necessary action. You can also generate reports based on cash flow analysis like days sales outstanding (DSO), days payable outstanding (DPO), etc.

• Accounts receivable management: Accounts receivable management helps you manage your customer accounts effectively by keeping track of their credit limits, payment status, overdue invoices, etc. 

• Profit & loss statement: It allows you to track your profits and losses across all verticals and locations. This helps better plan your business strategies and increase your earnings. 

Human Resource & Payroll

As your business grows, managing your workforce and ensuring accurate payroll becomes challenging. However, with an ERP, you can streamline your HR & payroll processes and even automate tedious processes like payroll calculation. 

Here are some key features of the HR & payroll module. 

• Recruitment: The module allows you to recruit the best employees by posting job vacancies on job sites. It also helps streamline recruitment, from searching for job candidates to onboarding. 

• Employee Management: This feature allows you to manage all your employees' details, such as contact information, skillset, education background, etc., making locating any particular employee easier and quicker.

• Employee Timesheets: This feature allows you to track employee attendance, including their login and logout times. 

• Leave Management: It helps manage various types of leaves such as sick leave, annual leave, maternity leave, etc. It also allows employees to apply for leaves online, reducing the tos and fros on emails. 

• Payroll Management: It enables employers to keep track of all their employees’ salary payments and tax deductions. This feature also helps businesses calculate employee benefits such as vacation payouts, sick leave, etc.

Some of the key benefits of this module include: 

• Helping with cost reduction by reducing manual processes and errors.

• Streamlining the recruitment process by automating processes like resume submission and follow-ups. 

• Facilitating easy employee data retrieval whenever required.

• Maintain accurate employee records such as job performance and attendance. 

Manufacturing

The manufacturing module of ERP is designed to track each stage of production. It provides reports on inventory, materials, cost, and other production-related factors. These reports help managers make data-backed decisions.

The manufacturing module of ERP offers multiple benefits for businesses:

• Reduced costs: ERP allows manufacturers to track their inventory levels and raw materials used in production. This helps avoid overstocking or understocking products, reducing costs associated with wasted stock or raw materials. 

• Production Planning: It allows you to create manufacturing schedules for each order to deliver it on time. You can also calculate capacity utilization and make decisions based on it.

• Quality Control: With customers demanding high-quality products, quality control has become an essential aspect of the manufacturing industry. 

Some of the key benefits of this module include:

• Better visibility into supply chain management

• Increased productivity

• Reduced inventory costs

• Improved quality assurance

Supply Chain & Procurement

The Supply Chain Module of ERP is the backbone of the entire system. It helps manage the whole supply chain process and reduces the time a company takes to receive raw materials, manufacture goods, and distribute them to the market. 

It empowers you to streamline all the processes involved in production, procurement, inventory management, sales, and distribution.

The key features of the Supply Chain module of ERP are:

• Inventory Management: The inventory management functionality is one of the most critical features of any ERP system as it helps ensure you have enough stock. 

• Procurement Management: The procurement module of an ERP can help you manage your purchasing process efficiently through a single platform. 

• Material Requirement Planning (MRP): MRP is another critical feature of an ERP system that helps you plan for material requirements based on committed sales orders from customers. 

• Shipping/distribution: It includes shipping rate calculation (including packaging material costs), transportation management, document handling/tracking (pick ticket generation), shipping notice generation (shipping label printing), and tax calculation. 

 The key benefits of the supply chain and procurement module of ERP are:

• More efficient inventory management.

• Improved customer service levels.

• Ensure compliance with local laws and regulations.

• Provides complete visibility to every process, thereby improving transparency.

The Business Value of ERP

By streamlining their operations, ERP applications help businesses become more efficient and profitable. They help companies keep track of sales orders and inventory levels and manage finances and human resources.

As you enter critical business data into ERP systems, you can align different departments across locations to streamline your business workflows, leading to significant savings. 

Here are the key values that an ERP system brings to your business. 

• Improve efficiency by automating manual processes and synchronizing data from multiple sources. 

• Increases visibility and transparency into business operations by integrating all your departments.

• Ensure compliance with local laws and regulations by highlighting the best practices. 

• Improve supply chain management by tracking the movement of goods from manufacturer to consumer. 

• Improve collaboration across departments to increase conversion and retention rates.

• Helps leverage the latest technologies without driving a fundamental change in your work processes.

Note: When you pick an industry-specific ERP system or customize it according to your business needs, you’ll enjoy more benefits and a higher ROI.

What’s the Difference Between ERP and Financials?

ERP and financials are two different things. ERP is an enterprise resource planning system that helps manage and organize your business’s processes, data, and people so they can run efficiently. 

Financials, on the other hand, is a finance management tool that helps you track your company’s performance over time (in terms of revenue). It includes the numbers behind your business’s financial performance. These include income statements (profit & loss statements) and balance sheets (assets, liabilities & equity).

Financial software usually includes compliance with the necessary reporting requirements, such as the International Financial Reporting Standards Foundation (IFRS), Financial Accounting Standards Board (FASB), and local laws. 

While financials focus on one area of the business, ERP software comprises a wide range of business processes (which includes financials). 

ERP Deployment Models: On-Premises and Cloud-Based

The ERP deployment model you choose depends on your needs, budget, and business size.

On-Premises Solution

This deployment model is also known as "hosted" or "in-house." In this model, the ERP is installed on your servers. The advantage of this model is that you have complete control over all aspects of the software's administration. 

The downside is cost and complexity. You'll need to hire IT professionals to manage your servers, maintain them and keep them updated with patches and updates. You'll also need to invest in hardware upgrades so that they can handle the increased workloads generated by a large number of users accessing the system at once.

Choose the on-premise solution if you have the necessary resources to manage the system, have employees working from the office, and want complete control over the application. 

Cloud-Based Solution

Also known as the SaaS model, cloud-based ERP solutions are hosted by third parties and accessed through an internet connection. As a result, they're typically less expensive than on-premises solutions because there's no need for additional hardware or software maintenance fees.

Cloud-based ERP solutions are more flexible than on-premises solutions because they allow companies to scale up quickly by adding extra capacity without making significant changes or investments.

Another advantage of cloud-based ERP solutions is that it allows you to access business information on your mobile. In addition, since it uses authentications and provides role-based access, you won’t have to worry about security. 

Get Started With FirstBit ERP System

The biggest misconception of ERP systems is that they’re difficult to implement and are most likely to fail the first time. However, that’s not the case. And when you choose an industry leader like FirstBit, things can get even more effortless. Our experts can help you deploy the ERP system as per your requirements (on-premise or cloud). 

One of the biggest benefits of the FirstBit ERP system is that it is FTA-accredited software. It also ensures full compliance with IFRS. This means that you won’t have to worry about financial or tax compliance in UAE. 

Also, you can integrate the FirstBit ERP system with front-office applications like CRM to build a holistic view of your business operations. 

Here are five more reasons to choose the FirstBit ERP: 

Built for contractors, distributors, manufacturers, and traders, the FirstBit ERP embraces the latest technologies to help your business scale quickly and efficiently.