What is an ERP system and what is it for? Examples and benefits

In a high-growth company, the realities of different departments such as Finance, Marketing and Communication or Product Development coexist. Collaboration between them and a global view of their challenges and performance are key to ensuring the success of the project. To efficiently manage the different processes and centralise the data derived from each of them, entrepreneurs can turn to ERP (Enterprise Resource Planning) systems.

What is an ERP system?

Enterprise Resource Planning is “the ability to deliver an integrated set of business applications”, according to the consulting firm Gartner. This ability is the raison d’être of ERP systems: to manage all aspects of a business from a single piece of software, either on-site or in the cloud.

These platforms are a means of automating and supporting both administrative and operational business processes: financial management, supply chain, assets, etc. When properly implemented, these integrated systems can become the backbone of the entire company’s work flow and data flow, enabling all departments to make decisions based on this information. According to the ‘2023 ERP Report’ by Panorama Consulting, up to 47% of companies that have implemented an ERP system have reported an improvement in most of their processes.

What functions does an ERP improve?

Often relying on innovative technologies such as machine learning or chatbots, ERP systems provide information and applications to increase efficiency and provide more detailed statistics on the operation and performance of the entire company. Business processes that can benefit from these advantages include:

• Daily operations. Companies can use this software to manage all day-to-day logistical activities related to production, distribution and sales, from inventory tracking to supply chain coordination to order entry and tracking, from a single platform.
• Finance. ERP systems also include accounting, performance and risk management tools that help to keep track of the organisation’s financial status. This overview of the actual financial situation and of key indicators such as runway allows entrepreneurs to know the viability and room for manoeuvre of their project and plan their strategy accordingly.
• Customer management. ERP systems also include CRM (Customer Relationship Management) functionalities to help companies capture, organise and analyse all the information and touch points (interactions) with their customer base. These tools lead to better customer service and lead generation.
• Human Resources. ERP systems also enable the management of the company’s human capital, automating and simplifying processes related to Human Resources (recruitment, data processing, payroll management, etc.), which in turn streamlines the operation of the rest of the company.

Why are ERP systems important to businesses?

• They increase the efficiency of business processes.
• They ensure the traceability and integrity of information: they collect all data in a single, trusted database and eliminate duplicate data.
• They standardise processes and platforms: providing greater clarity and consistency in the day-to-day work of employees.
• They reduce costs, both in information technology, by providing a single solution that brings together multiple functionalities, and in other business processes, by optimising and increasing productivity.
• They provide visibility into day-to-day business operations to monitor and share all aspects of production, logistics and finance.
• They open up new business and innovation opportunities by providing valuable insight and freeing up time and capital.

Five ERP examples

Given their wide range of functionalities and broad potential, business management systems often require a significant investment. Therefore, it is advisable to thoroughly research and compare the solutions available on the market in order to select the one that best suits the needs of each company. Some of the platforms currently available include:

• Netsuite. Acquired by Oracle in 2016, this cloud software offers specific solutions by sector (such as education, health care, advertising, commerce, etc.) in order to customise and adapt the platform to the operation of each business.
• SAP S/4 HANA. The German SAP, one of the best known manufacturers of ERP solutions, launched this tool in 2015, which is the successor to other products from the same company such as SAP R/3 and SAP ERP. The solution is based on the company’s own relational database management system, SAP HANA, and can be deployed in the cloud or on-site.
• Microsoft Dynamics 365. This ERP offering from the technology giant integrates other Microsoft applications and allows the configuration of different management modules according to the company’s needs, such as CRM, purchasing and inventory, projects, business intelligence or predictive artificial intelligence applied to sales or market analysis.
• M3. Developed by the US multinational Infor, this on-site or cloud-based ERP is specifically designed for the industrial sector. It enables companies to optimise manufacturing processes and manage supply chains in a flexible way.
• Workday. This cloud ERP integrates artificial intelligence and machine learning and offers applications for human resources and financial management, with solutions adapted to sectors such as retail, media, hospitality and insurance.

In addition to choosing the right ERP system, coordination and cross-departmental collaboration are also essential for its successful implementation. Its management will involve various management positions, such as the CIO or the CFO; a joint effort that will in turn benefit the entire company.