ERP System: The Basics

ERP System: The Basics

An ERP system is software used by companies to manage their operations. These systems help companies do everything from tracking inventory to managing payroll. They also allow companies to make better decisions because they provide real-time data. ERP system helps companies to streamline their operations and manage inventory, suppliers, customers, and employees more efficiently.

erp systems the basics

Why do businesses need an ERP system?

A business needs an ERP system if it wants to operate efficiently. Without one, a company will struggle to keep up with its daily tasks. This means that it won’t be able to meet customer expectations and will likely miss out on opportunities. ERP is like the backbone of a company. They are used by companies to collect information, keep track of finances, monitor customer interactions, manage inventory, and much more.

Types of ERPs

ERPs can be classified by the various characteristics:

  • Ready-made, custom-built or hybrid
  • A ready-made ERP is something that you can purchase readily off-the-shelf and would usually be simple enough to start using with the basic setup. Custom-built is a solution that is tailor-made to suit specific requirements and may be built from scratch or built on core technology. Hybrids are a mix of ready-made and custom-built and are favored by most companies as they offer a cost-effective yet flexible method to get an ERP solution to fit their needs.

  • Cloud-based or on-premise
  • A cloud-based ERP is hosted on servers and can be accessed over the internet via a browser. This is a popular option due to its low entry cost, cost savings from not requiring additional hardware, and affordable monthly subscription fees. On-premise ERP would require a one-time perpetual license cost which may be a huge investment up front and additional hardware and IT, specialist, to maintain the system.
  • Different tiers of ERP
  • ERPs are also differentiated by tiers, that are dependent on the size, revenue, and complexity of the business. Small businesses may require a lightweight ERP without the full suite of functionalities and is priced affordably such as SAP Business One Starter Pack. Midsized companies may require an integrated system with automation and predictive analytics to boost efficiency. Enterprise ERPs cater to complex businesses with multiple location requirements and are customisable to fit specific requirements.

Benefits of Using an ERP

ERP systems can help companies be more efficient, save cost, and improve visibility. Below are the key benefits of ERP:

  • Streamline business processes
  • Automate tasks to eliminate error and save time
  • Optimise utilisation of resource
  • Improve individual and organisational productivity
  • Improve visibility of inventory and supply chain
  • Provide better services to customers
  • Uncover new opportunities by utilising data
  • Leverage the use of AI & ML for predictive analytics

Implementation Tips

The first step in ERP implementation is to define your company’s requirements and expectations.

  • Features and functionalities
  • Departments using the system
  • Total users and type of users
  • Budget
  • Timeline

It may be helpful to prepare an RFP (Requirement for Proposal) document so that it will be easy for your ERP partner to work on your requirements. Your partner will be able to help you with your requirements, share with your the best practices, and also advise you on the total investment required.

At MicroChannel, we have assisted companies in various industries in ERP implementation and would be happy to help you out. Reach out to us below or check out our ERP Buyers’ Guide to kickstart your ERP journey.


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