ERP systems (Enterprise Resource Planning)

The abbreviation ERP stands for "Enterprise Resource Planning" - it is about managing the resources available in a company.

Such are for example:

  • capital
  • Resources
  • employees

 

Explanation

ERP software can network business areas and employees within companies by creating a central data store that can be accessed by all users. All workflows and processes combine ERP programs in one system. This shortens the way to work and makes it easier for employees to exchange ideas. Operating procedures can also be standardized in the course of this.

In general, ERP systems enable a more efficient, faster exchange of data and information inside. All business areas use a single IT system and not several pieces of software as isolated solutions that may not be compatible.
Good ERP software now covers all business areas with appropriate modules. Something like this:

  • Project management
  • Production control
  • Research and Development
  • Finance and accounting
  • Etc.

Specifically, ERP software supports companies in all organizational activities.

Advantages of ERP systems

A common database: ERP systems enable all departments and employees in the company to access a shared data store.

Unified processes: Many companies use different tools and software for different tasks and work areas. For example, accounting often uses a specific accounting software and purchasing a special one ERP system. ERP software, on the other hand, contains comprehensive solutions that all business areas can use jointly. This makes it easier to compare data, communicate, etc.

Simplified access: ERP programs make it easier for users to access internal data storage. This can be particularly useful when employees work from home want or have to. A cloud system enables users to access the internal storage from different locations. In order to be able to work, employees no longer have to be within the office premises.

Cloud and on-premise solutions

The two main variants of ERP systems are cloud-based or on-premise solutions. Both types have advantages and disadvantages.

Cloud software:
As already described, users of cloud solutions can access internal data from a wide variety of locations - whether at home or on the go. The only requirement is that they have stable internet. That specifically proves in times of Covid-19 its value, since it was simply not possible to stay in the office for longer periods of time during the Corona crisis. Employees who used the cloud could work from home without any problems. So it was possible for companies, despite contact restrictions and curfews business to continue.

However, the expanded access options of clouds also have disadvantages. Despite a large number of security measures, there is always the risk that hackers will latch onto the company network and access the data in the cloud.

Another problem is the fact that companies with public clouds entrust their data to an external provider. In doing so, you hand over control of the storage location to the provider. This can lead to complications, as in other countries - especially those outside the EU - different data protection regulations apply to those in Germany. Companies should therefore find out exactly where the providers' servers and data centers are located.

On-premise software:
Companies install these programs locally. It is therefore not possible for employees to access the internal data storage from anywhere. Instead, you can only work with it if you are logged into the company network. Employees must therefore be within or in the immediate vicinity of the office premises in order to be able to use internal data. This has corresponding disadvantages, as companies are less flexible when it comes to home office regulations, for example - but they retain unrestricted control over their data.

Hybrid systems:
So that companies no longer have to choose between the two solutions, there are now hybrid ERP software that combine the positive properties of both variants. With a hybrid solution, a larger sub-system can be operated within the company, for example, but access via the cloud is also possible for selected areas.

Which companies are ERP solutions suitable for?

Basically, the question of which companies benefit from ERP software is not easy to answer.

A rule of thumb:
Companies need an ERP system as soon as their process structures can no longer cope with the increasing complexity of the business environment.

This means that companies should introduce ERP systems if they notice that the internal administration is overwhelmed - i.e. no longer working efficiently. This can happen when the company continues to grow rapidly, thus employing more employees, processing more orders, etc.

The larger a company, the more complex it is to manage. When exactly a company considers the introduction of an ERP system to be sensible, the management has to decide for itself. In principle, however, every company can benefit from ERP software.
Firms' needs vary depending on the industry in which they operate.

Example:
In the production industry, for example, companies benefit from essential functions such as production planning, invoicing and warehouse management. The construction industry needed instead

Features like ...

  • Financial accounting and purchasing
  • Sales and personnel planning
  • A powerful project management

ERP systems offer special function packages for each business area. However, companies should inform themselves precisely about the respective providers and their strengths and weaknesses before choosing one.

Disadvantages of ERP systems

A specific disadvantage of ERP software can be seen when looking at the costs involved. An introduction can cost a lot of time and money. Companies not only have to convert their entire IT systems, at the same time they also have to train employees to use the new software, which can also result in costs that should not be underestimated. In addition, if the program is too complex, it can mean that employees are not getting used to it successfully. As a result, they may even work less efficiently than before.

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