What is an ERP system?
An ERP system is business software for planning and monitoring company resources. It links the business processes of different areas, e.g. finance, human resources, procurement, inventory, manufacturing, sales and logistics.
What is ERP software?
ERP software essentially consists of a central database with all relevant business data and is a tool for planning, management and monitoring company resources. The abbreviation ERP means “Enterprise Resource Planning” and the official definition is “the integrated management of main business processes, often in real time and mediated by software and technology.” (see Wikipedia: Enterprise Resource Planning).
This 1-minute video sums it up in a nutshell:
How does an ERP system work?
ERP systems consist of different modules for the individual company divisions. By selecting the relevant modules, the ERP solution is adapted to companies from a wide range of industries and company sizes.
The same ERP software can be used successfully by a service provider with 10 employees, a trading company with 100 employees and a manufacturing company with 1,000 employees. The products of the large ERP software manufacturers can be used in almost all sectors, while the smaller ERP software manufacturers often focus on specific sectors.
The basic package of ERP systems can consist of the following modules (depending on the respective ERP software manufacturer):
- Finances
- Procurement
- Materials management
- Manufacturing
- Distribution
- Logistics
And the following extension modules may be available (depending on the respective ERP software manufacturer):
- Project management
- Service management
- Document Management System (DMS)
- Customer Relationship Management (CRM)
Another success factor of ERP systems is the integration with other software products (depending on the respective ERP software manufacturer):
- Office software (e.g. Microsoft Excel, Word, Outlook)
- Reporting tools
- Business Intelligence (BI)
- Electronic data interchange with suppliers, customers and partners (EDI)
- E-Commerce
Some ERP vendors offer industry-specific modules for industries with special requirements, e.g. for the pharmaceutical, publishing, construction, IT, government and insurance sectors.
This modular structure of ERP solutions gives the customer the opportunity to introduce the software in several phases and to react flexibly to future changes. In an ideal scenario, the ERP software grows with the company’s requirements. This is one of the fundamental ideas and major advantages of ERP systems.
But this may not work out with all ERP systems. And even if it does work out, it may not result in the desired cost/benefit ratio. That’s why choosing the best ERP software for your company is crucial, especially with future requirements in mind.
ERP system examples
ERP system examples can be found in our comparison of the most important ERP providers. This current market overview of ERP systems shows which software is suitable for small business, midmarket and enterprise.
An illustrative example from practice: Learn in two minutes how a cloud ERP system enables the integration of different merchandise management systems and locations:
Top 5 ERP Systems
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