This post is part of a series. We recommend checking out What is ERP before reading this blog.
Enterprise Resource Planning: How does ERP work?
Think of a city’s layout — each major facility within a city must stay interconnected to function well. What if the police department was unable to communicate with the fire department, or nursing homes couldn’t communicate with hospitals?
Enterprise Resource Planning systems foster connections between and within different divisions of a company. Essentially, an ERP is a suite of multiple modules where each unit applies to one business division or major business process. The most common ERP applications include customer relationship management, project management, supply chain management, inventory management, material resource planning, point-of-sale, accounting, and Human Resources.
All modules work as specialized, but cohesive and integrated pieces of the whole. Each division enters relevant data into its own module, but other departments have real-time visibility to any results or entries impacting their own function. This means data flows across the entire platform.
So, your order fulfillment division is instantly notified of a new order. Your finance department can gather a product’s manufacturing cost, selling price, and other relevant data to calculate the profit margin. Or, when a customer calls to ask about an item’s availability, the customer service or sales department won’t have to call the inventory department to check.
A Brief History of ERP Systems
The concept of ERP software was born in the 1960s when modern factory production was exploding with demand. ERP-like systems were developed and applied to make the inventory management process more efficient.
This evolved into Material Requirements Planning (MRP), computing programs that streamlined production, purchase, and delivery within the manufacturing industry. It helped businesses gain increased visibility on what stock was needed, how much, and when. This way, they weren’t losing money by ordering too much inventory but always had enough to meet the demand.
By 1980, MRP evolved into MRP II, with the ability to streamline more manufacturing processes, such as scheduling and capacity requirements.
In the 1990s, Gartner coined the acronym ERP. An offshoot of MRP and MRP II, this system expanded the ability to automate and streamline “back office” like accounting, finance, sales, HR, project management, and engineering.
Between the years 2000- 2005, Cloud-ERP software was introduced as an alternative to on-premise ERP models. Cloud-based solutions have made ERP systems more affordable, easier to implement, and most importantly, provided businesses access to real-time data.
Throughout the evolution of Enterprise Resource Planning, different types and architectures – such as the Cloud ERP – have developed. If you’re considering adopting new technology to keep up with your company growth, it’s essential that you’re equipped with the right knowledge to choose one that fits your business needs. Stay tuned for our next blog, which discusses the 3 types of ERP software and to whom they cater. Be sure to follow us on social media to stay up to date with the newest releases.
Would you like to know if an ERP system is right for you and unlock the specific values it can bring to your business? Contact Us today to learn more. Let us help you get started on your ERP journey.
About 9Gauge, an E78 Partners Company
9Gauge will work with you to make sure you leverage your ERP system to its fullest potential. We conceive and build a solution for your business from the ground-up or optimize your existing system so your ROI is supercharged. Let us help you navigate these changes to ensure a seamless transition into growing your business and accelerating your vision. We look forward to using our technology and management expertise to help your business grow, pivot, and transition to new heights of success.
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About the Author
Ken Schatz, Director
As the Practice Director for 9Gauge Partners’ Technology Enabled Services-NetSuite Practice, Ken’s ultimate goal is ensuring the successful implementation of NetSuite to our clients. In this role, he is involved in everything from people management to delivery and sales enablement and is tasked with growing and maturing our industry-leading NetSuite team.