ERP Software Is All About Streamlining and Centralizing Business Functions By Khaleel Hayes, Market Analyst at SelectHub
You found this page for one of three reasons: 1) You're not sure how to begin your ERP software search. 2) Your current applications are outdated, and you need replacements. Or 3) You're an enterprise resource planning software enthusiast.
You're in luck! This buyer's guide covers everything from benefits and must-have features to critical benefits and the best ERP systems in the market.
What Is ERP Software?
ERP software is a business suite that streamlines and automates workflows and centralizes several company departments in one hub. Departments range from business intelligence (BI) and accounting to manufacturing and supply chain management (SCM).
Depending on the vendor's offered functionality, you can expect features for human resources, product lifecycle management (PLM), inventory management, professional services automation (PSA) and more.
Brief History
Enterprise resource planning software debuted around the '60s and '70s as material requirements planning (MRP) software to streamline manufacturing processes.
Gartner used the phrase 'enterprise resource planning' in the '90s because it started encompassing other enterprise sectors. ERP tools offer numerous deployment options and features while catering to specific and multiple industries.
Who Uses ERP Software?
Virtually anyone can use ERP thanks to upgrades. Most tools are simple and easy to navigate. Several company sectors leverage this tool to simplify their routine practices.
Some examples of those who use enterprise resource planning are accounting, HR, sales, marketing and procurement departments.
Types of Users and Systems
Since ERP tools serve multiple departments, there are diverse user and software types.
Accounting, marketing, customer support, analysts and manufacturers are just some of the people who use ERP solutions.
Some of the top ERP systems serve specific industries and workflows, such as:
Sometimes, people confuse enterprise resource planning with customer relationship management (CRM) software, but comparing these tools is like differentiating between Star Wars and Star Trek.
They both share a common ground, but each solution carries unique functionalities.
ERP systems can cater to accounting, manufacturing, marketing automation (MA) and other business sectors. Also, ERP companies offer their tools as a suite of programs in one hub. CRM can count as one module in this centralized platform.
CRM software focuses exclusively on customer-related features and requirements. Some features include database management, mobile support, lead management, sales automation and so on.
Buying Considerations
Several factors affect an ERP's total cost of ownership (TCO), from deployment options to the number of users.
Deployment Methods
ERP tools offer several deployment options, such as on-premise, the cloud or a hybrid combination. Cloud deployment is becoming the most popular method.
On-Premise
You install this enterprise resource planning software type directly onto business servers and hardware. With on-premise deployment, you must host and maintain your enterprise resource planning product. This mode is for those who travel less often or own one worksite.
Cloud
People access cloud ERP through the internet, allowing users to access the software anytime in any location with a strong internet connection. Typically, a cloud ERP vendor distributes, updates and handles software maintenance.
Cloud-based enterprise resource planning deployment has several options:
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SaaS (software as a service) ERP: This choice is subscription-based and requires paying a monthly fee based on the number of users.
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Private Cloud: This alternative offers third-party service providers or on-site data center hosting.
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Public Cloud: Typically managed by a third-party cloud service provider and delivered online.
Hybrid
Review numerous on-premise and cloud deployment and hosting services that users may combine to satisfy their requirements.
Establish Implementation Objectives and Goals
Here are a few implementation goals to consider as you browse different ERP software companies.
As we’ll discuss throughout this guide, implementation is lengthy and complicated. Around every corner is the potential for hidden costs and opportunities for mistakes.
However, if you keep a few goals in mind about what you want your ERP to achieve, you can avoid some common mishaps.
Goal 1 Boost Productivity | You're looking to invest in a new ERP solution or thinking about add-ons because you're not reaching productivity expectations. Automated ERP products and modules reduce repetitive tasks, such as allocating invoices, performing bank reconciliations and more, so you can increase efficiency in other areas. |
Goal 2 Save Costs and Time | A reliable ERP can reduce human errors and work with real-time data. The more automation you implement, the more money and time you save on manual inputting or fixing mistakes. |
Goal 3 Increase Competitiveness | Investing in ERP tools keeps you in line with or ahead of your competitors. The world is changing, and ERP tools are the norm in most industries. Why not invest in a solution that meets your industry needs? There are numerous ERP vendors to choose from and pick to streamline your workflows. |
Goal 4 Enhance Data Accuracy | Knowing how numbers and KPIs change at all times is essential to quicker problem-solving. BI, BA or other analytical tools provide speedy notifications and reports to help make better decisions. If your production floor experiences unexpected downtime, you'll hear about it immediately. If products experience contamination, you can initiate early recalls. |
Goal 5 Maintain Customer Relationships | Not having the right analytics for your current or prospective clients is like walking in the dark without a flashlight. How can you gauge practices or improve products without the right tools? CRM capabilities and integrations can track customer satisfaction rates, review client feedback, engage consumers on social media and establish a portal to maintain product issue awareness. |
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Primary Benefits
ERP solutions offer various advantages that can improve business operations, such as enhancing data security and quality, streamlining collaborations and workflows, improving customer service and offering in-depth reporting.
Laurie McCabe, co-founder and partner of SMB Group, conversed with us about a few reasons why the right enterprise resource planning software is a reliable tool in your corner.
[ERP software] can grow with the business, accommodating new processes and additional users as business conditions and goals change. It provides more comprehensive data and analytics tools and reports. This can improve business intelligence to help enable better decision-making."
There are other reasons to use ERP, such as:
Improve Data Protection
Cloud enterprise resource planning vendors typically offer numerous security tactics to protect all information. Some safeguarding practices include:
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Two-Step or Multi-Factor Authentication: Obtain SMS codes on your phone, input answers to security questions only you would know, or implement retina or thumbprint scanning. These and other authentication sign options add extra security when logging into your software.
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Data Encryption: Scramble information into unreadable codes with data encryption. The only way to cipher your data is with an encryption key.
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User-level Permissions: Give roles specific access permissions to safeguard vital KPIs, numbers and other information from inexperienced rookies.
Boost Department Collaboration
It's challenging to work with various business departments. Enterprise resource planning ensures all teams share data to keep everyone on the same page. Users only have to input information once for complete company access.
If errors or last-minute changes crop up in ERP tools, you can quickly rectify them in real time.
Chuck Langenhop, CMA Senior Director of CFO Advisory Services LP, sat down with us to discuss how ERP can reduce communication silos of too many emails, phone calls and hallway discussions.
While an ERP system does not, and should not, eliminate one-on-one or group discussions, it will streamline collaboration, creating savings and avoidance of misunderstandings."
Langenhop gave two examples of how ERP collaboration can unify departments and avoid workflow confusion.
Accounting can deliver a faster month-end close whereby inventory and other operational transactions are captured much more quickly. Revision management, or version control, in the product master, avoids miscommunication between engineering, manufacturing and quality control."
Increase Productivity
Automating tasks and consolidating workflows across ERP applications can strengthen productivity, especially on the manufacturing floor. More finished, high-quality products mean more productivity, equaling more profits and happier consumers.
Langenhop explained that ERP solutions can pinpoint and rectify problems that can create "excessive scrap, waste, downtime, labor and rework." He also described how this software can improve rush order handling and resource management.
An ERP system can allow easier expediting of rush orders via adjustments to purchasing, on-hand inventory allocations and production rescheduling. Similarly, in a project-based business where a complex work breakdown structure is utilized, an ERP can more easily manage in-house and subcontractor resources as well as material availability and equipment rentals."
Lastly, Langenhop described how ERP tools can strengthen quality control.
In quality control, digital checklists can be deployed to take the place of paper forms. ERP QC can have the intelligence to monitor inputs against acceptable ranges for factors such as diameter, temperature or pH, and then flag work orders that are out of specification."
Save Money
A consolidated ERP system can save money by keeping you from buying disparate programs for your HR, accounting, manufacturing and CRM needs.
You also save money by reducing IT personnel since most ERP systems are user-friendly and most vendors offer in-depth user training modules.
Enhance Customer Satisfaction
Increasing productivity and gaining thorough customer data via CRM modules increases awareness of your clientele's needs. More client interaction and support means they'll return for more products and services.
Current customers may also tell their friends, family and others to shop at your company. Effective customer strategies also garner new consumers.
Langenhop said flexibility is the key to meeting clients' specific needs.
An ERP can introduce flexibility in a company's processes to make it easier to meet customers' special requirements, particularly in an engineer-to-order business."
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Basic Features & Functionality
ERP has numerous features and capabilities to streamline workflows and increase efficiency.
Accounting/Financial Management | Applications for enterprise resource planning support accounting tools such as accounts payable and receivable, asset management, risk management and more. Advanced financial reporting software also supports aging analysis, cash flow analysis and budgetary reporting. |
CRM | CRM modules can assist in customer account management, sales order management and marketing resource management (MRM) to track purchases and create ads. Some ERP tools even allow you to rescind customers' abilities to complete purchases due to past financial issues or other factors. |
Data Analysis aka Reporting and Analytics | Garner various company analytics and KPIs to detect trends and patterns. You may also invest in separate BI and business analytics (BA) software. |
SCM | SCM encompasses functions from product development to distribution. Distribution management, event management and purchase order (PO) processing can boost productivity. PO processing tracks purchase orders from issuance to completion. This accessory ensures timely service and compliance with customer needs. |
Manufacturing | Manufacturing tools can streamline production and maintain orders. Manage BOMs, inventory, order statuses, shipments and more features. |
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Advanced Features to Consider
Logistics | Top ERP software helps you manage product movements and storage. Logistics tools maintain stock items, warehouses and transportation methods. It also streamlines demand forecasting and third-party logistics operations. |
Integration | Merge enterprise resource planning with other systems to improve centralization. Some system integrations include accounting, CRM, BI, BA and more. |
Automation | Most top ERP systems offer automation tools to carry out routine tasks automatically. For example, you could distribute invoices, balance general ledgers, relay inventory notifications when stock items meet minimum quantity levels and more. |
Order Management | Follow all orders from start to finish with effective order management tools. Order management software can maintain inventory oversight, boost client satisfaction, increase efficiency and more. |
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Software Comparison Strategy
Numerous ERP companies sell different applications with different functionalities. Research how enterprise resource planning providers enhance their product's business functions.
Ask colleagues how their ERP tool works and its ROI impact. Understand your current system's pain points.
Enterprise resource planning software selection is extensive, but it’s only worthwhile if you’re meticulous.
Langenhop warned that a software comparison strategy done alone is foolish and that software demos can showcase ERP providers' products.
Collaboration and internal buy-in during the selection process will set the stage for successful implementation. In my experience, conducting demos with a short list of two or three ERP systems is fine. Developing a custom demo script for the vendors with company scenarios makes it easier to make intelligent comparisons across the different ERPs."
Langenhop recommended looking at ERPs as long-term investments.
It is important to determine your price range, not just based on budget but to identify peer group solutions that are neither too simple nor too complex based on your anticipated future requirements. The one-million-dollar plus system will probably not be the right fit for a small enterprise with a $500,000 budget."
Lean Selection Methodology
As previously mentioned, you must be thorough in your selection quest. Thankfully, our Lean Selection Methodology has a precise nine-step process for choosing the ideal software suitable for any business or industry.
Here's a quick breakdown of each step:
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Establish: Find the root cause of why you need a new system.
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Collaborate: Formulate a strong selection committee to help gather requirements.
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Define: Establish a solid requirements list.
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Distribute: Shortlist vendors and see how they align with your requirements.
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Justify: Decide whether you need a new tool, add-ons or if you want to end your search.
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Prove: Review your shortlisted vendors and ask them to provide demos, use cases and more of their software.
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Rank: Review and rank ERP tools according to their demo scores and TCOs.
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Negotiate: Sit down with an ideal vendor to negotiate conditions.
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Sign: Review and sign with your preferred vendor. Then, initiate a solid implementation plan.
Define Requirements
As noted in our Lean Selection technique, using an internal software selection committee can help you compile a practical ERP requirements list to suit everyone's needs.
Langenhop explains the importance of creating an ERP RFP for streamlined requirement searching.
I recommend that after searching for potential ERP vendors that the selection team prepares and sends an RFP to a long list of three to six candidates that meet roughly 80% of the requirements. The RFP should thereby focus on the last 20%, the differentiations that address the company's special requirements."
Need help finding requirements for your company's needs? Our free, in-depth requirements template offers plenty of modules and ERP providers to compare and contrast solutions.
Pricing Considerations
SelectHub offers a complete pricing guide with the best ERP system and implementation instructions to help our customers make the most strategic decisions. This guide also helps you avoid going over budget when reviewing ERP companies.
There are a few considerations to mull over as you begin your quest for the perfect enterprise resource planning product:
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Budget: Establish a realistic enterprise resource planning budget with a bit of extra money for additional costs and hidden fees.
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Company Size: Find a solution that meets your size, whether a small corner store, a global enterprise or somewhere in between.
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Industry: Review ERP providers that cater to your sector. Most ERPs lost their one-size-fits-all philosophy.
Price Guide for ERP Solutions See prices for the top enterprise resource planning software... Plus get important questions to ask.
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Helpful Questions To Ask Vendors
Langenhop advised that asking vendors questions about their experience and ERP solution's functional requirements and scalability is vital for the software selection process.
Getting an understanding of the ERP vendor's target markets is an important step in the selection process. I highly recommend that you ask vendors about their ERP systems' experience and reputation in your vertical. A strong distribution ERP, for example, may only meet the needs of light manufacturing."
He added that specific queries about ERP applications and vendors garner more insight.
For vendors that have solutions on both the cloud and on-premise, is there a difference? Sometimes, a cloud version will lack certain flexibility, functionality or scalability. What are the tools for configuration, querying and report writing? Are APIs available to integrate third-party solutions that you may need, such as a CAD interface?
Questions should be asked about the experience level of the proposed implementation team, particularly the project manager. While vendors may not want to present names, they should be able to provide generic bios. It is also a good practice to request the vendor's formal implementation methodology."
Here are a few guiding questions to ask enterprise resource planning providers about their ERP solutions and practices:
About the Software
- How scalable is this enterprise resource planning software?
- Can this solution integrate with our current software?
- How smooth is your system's user interface, and how often is it updated?
- What advanced financial reports do you offer?
- Does the software integrate data from multiple departments?
About the Vendor
- How many years of experience do you have with companies our size or industry?
- How many successful implementations have you had in the past year?
- What support and training do you provide? How responsive is your support team if we need to contact them?
- Do you offer demos, use cases or POCs to demonstrate your product capabilities?
- How will your ERP tool's capabilities meet our company's needs?
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FAQs
What is an ERP System?
ERP software is a business suite that automates workflows while centralizing several company departments for better navigation, communication and real-time updates.
Should I get an ERP for my business?
Yes. ERP tools automate routine jobs and workflows so you can focus on other high-priority and client-facing tasks.
What are the top implementation challenges?
Top ERP implementation challenges include:
- Not weeding out the right vendors in your software selection journey.
- Inadequate time and budget planning because implementations can take longer or shorter than usual. You can also run into hidden or unexpected fees.
- Inaccurate data when migrating it to the new system.
- Resisting change when swapping out your old system with a new one and not training employees and end-users on the new solution.
What are the most popular ERP systems?
Some popular ERP systems include:
What are some ERP system examples?
Instead of picking an all-encompassing system, you can choose different types of ERP solutions that meet particular sectors or industries. Most ERP software companies offer programs like:
- Cloud/SaaS
- Managed Service Provider (MSP)
- Small Business
- Open-source
- Manufacturing
- Accounting/Financial Management
- HR
- BI
- Business Analytics (BA)
- And more!
Why should I get an ERP system?
McCabe shared some insights on why you should buy an ERP.
[ERP software] can consolidate various business processes into a single system, making it easier to streamline workflows between departments. As a unified system, it improves data quality and reduces data inconsistencies. It helps maintain compliance with industry standards and regulations through consistent and auditable processes."
Langenhop weighed in with ERP's seemingly endless functions.
An ERP can be a platform for integrating ancillary functions, such as time clocks, EDI, customer or vendor portals, construction management, retail point-of-sale or CAD. A cutting-edge technology called Robotic Process Automation (RPA) is now being integrated as well. Workflow management features can be utilized to facilitate hands-off [operations] and improve visibility into the status of projects."
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Next Steps
ERP Software is an essential tool that unifies departments, increases production and strengthens profits. It enables you to maintain compliance and allocate better forecasts.
Ready to find your ideal ERP tool? Check out our free, in-depth comparison report to gain insight into top ERP software companies.
Product Comparisons
Additional Resources
SME Contributors
Chuck Langenhop is a Certified Management Accountant (CMA) and Senior Director with CFO Advisory Services in Richardson, Texas. His experience includes financial planning & analysis, ERP selections and implementations, and M&A due diligence. He works with diverse industries, including discrete manufacturing, food processing, distribution, and construction. Chuck has presented at the Sage Software Summit and participated in web panels sponsored by CFO magazine and Infor on topics related to ERP selections, functionality trends, and project management. Chuck has been interviewed by Compliance Week, Network World, and ChannelPro Network. He is a SelectHub Thought Leader, and he holds an MBA from Rice University.
Laurie McCabe is co-founder of SMB Group, an IT industry analyst research and consulting firm. Laurie has more than 25 years of experience in the IT industry and has built widespread recognition for her insights in the small and medium business (SMB) technology market. Laurie writes often on her blog, speaks regularly at industry events, and has thousands of followers on LinkedIn and Twitter.