ERP software has numerous features and add-ons available from vendor to vendor. However, don’t put the cart before the horse by looking at add-ons before selecting the main ERP components that you need in your software. You wouldn’t go to a car dealership and start asking about customized rims before looking at mileage and safety ratings. The same thinking applies to ERP systems.
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Ultimately, ERP software is very modular, and you can usually pick and choose which features you want to have present in your solution. We’ve created this list of six of the most commonly desired features to help you formulate an idea of some of the functions you might be interested in having. But first…
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What Is ERP Software?
ERP software is a solution that centralizes and connects various business processes in one place. It’s beneficial because it’s a hub for real-time and historical data across business departments and functions. This centralization reduces time spent manually pulling data to send to business partners. Automating processes simplifies business workflows, saves time, boosts revenue and enhances productivity.
There are hundreds of ERP vendors on the market, but each choice offers different solutions and functionality. There are some standard components of an ERP system that you may wish to have in your system, but there will likely be some add-ons or modules that streamline your specific day-to-day tasks.
Before looking for software, you should create a list of challenging tasks for your business that need simplification. An ERP solution could help. You should also look at the main components of ERP to see if any of the commonly included tools would be beneficial to your business.
Each module has capabilities that vary depending on the vendor, but you should expect vendors to provide at least a handful of the main components available out of the box.
Common ERP Components
The most common components of ERP are as follows:
1. Human Resources
Managing your employees is typically the highest priority and a prominent component of ERP. Without them, you don’t have a company. The HR ERP module in your software solution should handle employee management tasks such as onboarding, offboarding, timekeeping and benefits administration.
Payroll software is the most crucial feature in core ERP components. Manually submitting payroll and issuing direct deposits is inefficient and not cost-effective. An HR component automates payments, including tax deductions. Hourly workers receive automatic payments thanks to time-tracking software modules.
One of the main benefits of an ERP solution is that it automates routine workflows to reduce human error and time, such as data entry, general ledger balancing and more.
Using enterprise resource planning software with an integrated accounting system and human resources module lets you send automatic payments to employee bank accounts and manage compensation forms with less effort.
2. Customer Relationship Management (CRM)
Managing your customers and leads is another crucial facet among the components of ERP. Without them, your business can’t survive. A CRM tool stores and tracks generated customer and lead data, helping you develop helpful insights for sales and marketing improvements.
One primary CRM use is tracking customer buying habits. With this information, you can see which products lack sales and the best timeframes for upselling. Additionally, you can use this module to track conversation history with leads to know which sales personnel spoke to clients, when they talked and what they discussed. This data reduces redundancy and customer irritation for more successful profits.
With eCommerce software, you can integrate your CRM process to target ads accurately and preserve customer payment information. These features guarantee that customers have the most streamlined buying experience possible. This solution is just one example of how to benefit your customers.
3. Business Intelligence (BI)
BI has quickly become a standard component of ERP systems. BI collects data and performs analysis to provide actionable insights about business processes. As businesses rely more heavily on data-based decisions, standalone BI software becomes indispensable.
An example of Tableau.
A good reporting feature is vital in BI and enables you to make sense of the analyzed data. Some reports come in the form of numbers and tables. However, many prefer visual documents because they allow you to spot trends at a glance. Verify that whatever data format is best for your company is available in your ERP’s reporting capabilities.
When you use an integrated solution, actionable insights allow you to make informed business decisions across departments and processes. One huge pain point in companies that have yet to implement an ERP system is that the department silos information. Therefore, it is easier to see a complete view of data and how various business aspects affect profitability and customer retention.
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4. Supply Chain Management (SCM)
Creating an effective supply chain is never easy, especially when you don’t have the best tools to oversee your operation. Ensuring that your core ERP components have SCM capabilities is crucial to staying competitive in this arena. Your SCM applications should optimize distribution and manufacturing processes to create a more efficient supply chain by collecting real-time data.
Real-time data allows you to find and fix issues as they happen instead of after. It also makes predictive analytics possible to help with demand planning. Real-time data can help you create an accurate and up-to-the-minute production plan to meet and exceed demand.
The SCM component of enterprise resource planning can also assist in boosting profitability by measuring factors such as which inventory items are commonly purchased together and then using that information to optimize the best placement for items on the warehouse floor. SCM coupled with CRM can help keep customers updated on the status of their purchase within the distribution process and estimate a delivery date.
5. Inventory Management
Monitoring inventory is vital among components of ERP solutions because it’s highly collaborative. It works with the SCM component while dipping its toes in other processes, such as warehouse management and sales. Inventory management systems‘ main features include managing order fulfillment and maintaining a warehouse’s stocking functions.
Best-in-class inventory management is essential to core ERP components, including tracking features that can reduce manual inventory control. These features may possess revision level tracking, multi-level serial number tracking and multiple units of measure per product ID or SKU.
This component is especially beneficial to manufacturers or companies with distribution centers because it assists in the profitability and functionality of inventory processes. An integrated solution could update your company website to say that an item is out of stock to avoid making orders for unavailable on-hand items.
6. Accounting/Financial Management
The final main component of ERP is accounting, aka financial management. Because every business process involves money flow, whether paying your employees or paying to ship goods, this tool works with other ERP system components.
Accounting tools analyze and track financial data, including accounts receivable, accounts payable, budgets and costs. Financial data analyses can reveal trends in your spending, helping you better understand calculated profits and discover where you can reduce costs. You also obtain predictions to project future revenue.
Profitability is the driving force of all businesses, making it fundamental among components of ERP systems. These platforms maximize revenue by integrating sales, customer relations and distribution practices. The software ultimately increases productivity and frees employee time to work on non-automated tasks.
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Secondary Components
Multiple ERP features and add-ons exist to target more specific business needs. Here are some extra modules that you might consider adding to your solution.
- Risk Management: Predict and reduce business risks seamlessly. This tool may also suggest business continuity plans (BCPs) for emergencies and unplanned situations.
- Marketing Resource Management (MRM): MRM aligns people, processes and technology to support and enhance marketing efforts.
- Sales Order Management: Sales-order management can assist your company in managing sales orders through their entire lifecycle, from sales order generating to billing/invoicing.
- Advanced Planning System: This tool uses data to track production costs for manufactured goods. It might also optimize the allocation of raw materials and capacity to balance consumer demand with the warehouse space available.
- Event Management: This solution allows the end-user to run events and hospitality programs from start to finish.
Primary Benefits
ERP software benefits are vast and depend on specific tools and modules. However, there are some basic bottom-line pros that you can achieve upon ERP implementation. Some of them are listed below:
- Boost Profitability: ERP software can help grow revenue in many ways. For example, your contract management tool may measure the profitability of a sales contract based on the estimated level of effort and resources. Forecasting tools are common and can help develop valuable insights into future activity.
- Reduce Wasted Time: Thanks to automation, you can reduce the time your employees spend on projects, including manually inputting receipts for expense information or data to make a visualization.
- Leverage Manpower on Different Projects: Automating business processes will also help free up employees’ time to work on high-priority tasks, leading to a productivity surge.
- Streamline Workflows: The all-in-one solution of an ERP is helpful because it’s a hub for data and processes across a business. This centralization makes it easier for employees across different departments to work together. They can also better understand different team workflows and objectives.
Do Your Research
Researching core ERP components is a lengthy and sometimes tedious process. But reading articles, conversing with different vendors, setting up demos and talking to colleagues, stakeholders and other end users ensure your ERP system is ready for the long haul and can endure company growth. For more ERP solutions and features, check out our in-depth comparison guide.
What other components of enterprise resource planning do you think should make the list? Let us know what your favorite ERP components are in the comments below!