With the Enterprise Resource Planning (ERP) software market predicted to be worth $41.69 billion by 2020, the impact of ERP systems is evident. While the statistics are impressive, those who haven’t used ERP software may find it difficult to understand its importance for their business. However, as globalization squeezes and transforms the market for many industries, people are seeking out tools that can give their businesses a competitive edge. For several businesses, this is achieved with the adoption of ERP systems.
History of ERP systems
Now an integral part of many companies, let’s look at how ERP software progressed over the years.
We can tie the history of the software back to its predecessor, Material Requirements Planning systems (MRP). The MRP systems focused on core manufacturing processes, but as time progressed, experts realized that they needed a solution that addressed functions beyond manufacturing. That’s when an IT research and advisory firm, The Gartner Group, coined the acronym, “ERP”. The combination of Euro creating a disruption in processing systems and the buzz about the Y2K bug urged many companies to migrate from MRPs to ERPs in the 1990s.
Originally, ERP systems didn’t deal with the accounting, IT and HR processes, but as technology advanced, these systems began taking on functions like CRM, supplier relations and ecommerce. This changed the way businesses operated; rather than having separate databases for each department/business function, businesses now had all the information in one place.
A new term, “ERP II”, came along in the beginning of 2000 as ERP systems evolved into web-based software that allowed business owners to access ERP systems in real-time. Not only did this mean improved collaboration, but ERP platforms now had the flexibility to interact with other established business solutions.
From a technology that didn’t exist a handful of years ago, ERP systems evolved into comprehensive software solutions for business management. Today, middle to large-scale organizations use a single software tool like Microsoft Dynamics 365 that handles every aspect of the organizational processes and provides an integrated and real-time view of all core business functions.
Top ERP modules that improve business operations
ERP systems have a suite of integrated applications used to collect, manage, analyze and interpret data from various business activities. Their value lies in their ability to handle a wide range of backend and frontend processes from a centralized location.
In order to cater to various business functions, ERP systems consist of a set of modules related to a specific area of business. Vendors offer these modules—or add-ons—to add customizations to the base ERP systems. Since each module has its own set of unique tools, you have the option to add only those modules that would prove to be the most beneficial.
For instance, if your enterprise requires CRM functionality but your vendor doesn’t provide a CRM module in the base package, you can opt to integrate a module that implements those capabilities. After all, high modularity is a key feature of ERP systems.
Here are the top ERP modules that businesses find valuable and useful:
Financial Management Module
Since ERP, at its core, is all about centralization of workflows, it only makes sense that efficient financial tools in your ERP system help you manage and aggregate the money that moves throughout the company. ERP’s financial management tool works with every department of the company—from the HR to the marketing department—to give a comprehensive overview of your company’s finances.
At the most basic level, it includes features like general ledgers, accounts payable and receivable, leading up to the use of real-time data to calculate revenue. Reporting is also a crucial part of the financial management module; it helps owners develop actionable insights with the help of advanced data analysis. Additionally, one of the add-on security features of this module is the multi-currency system that notifies a business when its finances fall below threshold.
Supply Chain Management Module
Owed to the large quantity of moving pieces in the supply chain processes, optimizing supply chain management can be complicated. Therefore, integrating this module can be extremely beneficial to your business processes.
A key feature of the supply chain management module in an ERP system is its provision of real-time data. This gives businesses the ability to make decisions based on updated information.
For example, with real-time visibility of the supply chain, you can easily catch the snags in the distribution process or accurately measure production rates. And with these updated statistics, you can make informed decisions about future product demands.
Similarly, demand forecasting is also a top feature of the SCM module. Using predictive analysis to predict the future demand of your products, you can create a realistic production plan that perfectly meets those demands. Thus, you can alleviate costs caused by spoilage or excess inventory with an effective forecasting tool.
The SCM module also provides features like purchase order management and quality assurance tools.
Customer Relationship Management Module
An effective CRM module can help manage sales, processes and repeat customers. Basic CRM features like contact lists and customer purchase history helps you plan relevant and profitable product promotions.
If you’re looking for more advanced features in your CRM module, an extensive contact manager can do wonders for your business. Lock down the opportunity of actionable sales and marketing options by keeping accurate records of your leads, prospects and customers. In addition, the customer interaction history gives your customer service team the context of previous discussions—and help reduce repeat communication.
With the CRM module’s segmentation feature you can do a lot more than just store customer data—you can also target customers based on their regions. After all, specialized and region-specific advertising is more likely to convert potential leads into customers. Moreover, customized reports and real-time dashboards give you an at-a-glance overview of your sales and marketing efforts.
Advanced CRM module features offer additional sale opportunities by providing information of your top customers. This way you can offer them reward packages or target them for cross-selling opportunities.
Human Resources Module
HR software continually gathers employee data from multiple departments. This includes massive amounts of data, including every individual’s attendance, vacation days and benefits; plus, there’s a big chance that this information may have been inaccurately entered or duplicated. That’s where an HR module saves the day! It helps maintain information integrity and eliminates the chances of inaccuracy by analyzing and sorting all the information.
The executives and higher management can use the HR module for a high-level overview of the business. This tool can also help make necessary policy changes and give you an overall view of departmental performances.
Business benefits of ERP Systems
An integrated ERP system is an asset for many organizations. It helps run processes smoothly by unifying information and streamlining day-to-day business activities.
Let’s look at some common benefits that companies have reported after implementing an ERP system:
1. Total Visibility
One of the biggest selling points of ERP systems is their ability to make all crucial business functions accessible to employees and senior management. For example, daily monitoring of inventory levels and future consignments gives you an insight of where you stand and how you can control the working capital more precisely.
Plus, the availability of all your business information in a centralized location leads to increased collaboration and faster task completion. You can track inter-departmental processes easily—owed to the total visibility that ERP systems provide— and work towards maximizing efficiency.
You can rest assured that you’re seeing the complete picture of the business at any given moment, allowing you to make informed decisions in the future.
2. Improved planning and reporting
By implementing an ERP system across various departments, you basically have a unified reporting system for all processes. A single source of truth allows your ERP suite to readily generate reports and analytics whenever needed. This way you can compare and analyze business processes across departments without having to go through emails and spreadsheets.
Financial reports are extremely valuable to any business. They display the income and cash flow statements, generated by using the ERP’s built-in functions. Plus, you can even generate customized reports based on what you need, without any IT intervention.
In addition, some ERP vendors offer business intelligence services. The BI tools allow businesses to gain analytical insights into their core operations. These insights can help the upper management identify operational strengths as well as problem areas, to improve the overall corporate planning. This detailed view of the company data allows for informed decision-making, based on real-time trends and metrics.
3. Focused IT Costs
Instead of spending resources on dedicated infrastructure, staff, licenses and support teams, business owners can focus all these costs into an ERP solution. Plus, using a single software solution also means reduced training costs—as employees only interact with a single system as opposed to several disparate systems.
While an ERP system can include a variety of functional modules like CRM, HRM, supply chain and accounting, the base ERP package is always modular. Meaning the owners get to only choose modules that align with their business objectives.
4. Improved efficiency
Along with reduced training costs, an ERP system can also reduce the efforts required by the workforce to carry out daily business operations. When implemented properly, an ERP system can eliminate tedious manual processes, freeing up the employees to focus on decision-making and revenue-affecting tasks. The system can also aid in enterprise-wide adoption of the best industrial practices.
5. Customer Service
Did you know that an ERP system can also benefit your clients? Since ERPs store all client information in a centralized database, your sales team can focus on maintaining customer relationships rather than maintaining spreadsheets. At the end of the day, all you need to be concerned with is the acquisition and retention of your customers.
Additionally, with the end-to-end insight and tracking offered by the ERP system, you can improve customer experience with targeted marketing and efficient customer service.
A lot of ERP suites now support ecommerce too, which means enterprises can now manage web-based order processes and client interactions.
6. Data Security
One of the top benefits of an ERP suite is data security. Sharing data across different modules such has sales, customer service and marketing, enhances collaboration in the company, but there’s a crucial factor to widespread data: controlling its authorized access. ERP solutions come with intrinsic controls to maintain the security of your data.
Another key factor to maintaining high level data security is ERP’s characteristic of a single input system. Having a single repository for all information eliminates the probability of conflicts between sources, improving the integrity, accuracy, consistency and not to mention the security of your business data.
This feature holds for both cloud-based and on-premise ERP systems. In addition, the centralized database enables backups of sensitive and critical data. Despite what many people think, a cloud-based ERP suite offers an additional layer of security. Since all company data is managed through a cloud platform, round-the-clock security experts ensure that the servers where all the information is deployed are well-protected.
The Future of ERP Market—Top Emerging Trends
The ERP market is evolving at a fast pace, as vendors continue to provide enterprise-wide solutions packaged with a wide range of functionality. ERP solutions have the ability to integrate with other business solutions and scale up to meet the company’s growing needs.
The future, however, holds technological advancements for ERP systems including customized, user-friendly and intuitive solutions. Here are some trends that are set to bring a drastic shift in the ERP industry:
Buyers will migrate to cloud-based solutions
Last year, we saw numerous software solutions move towards the cloud. ERP’s adaptation of cloud platforms is particularly significant for small- to mid-sized businesses. Cloud-based implementations are becoming the norm among SMBs since they don’t require businesses to maintain in-house IT infrastructure. This way small businesses can afford to maintain comprehensive ERP systems.
Similarly, large-scale enterprises also stand to reap the benefits of cloud-based ERP systems. In fact, studies show the the cloud market is predicted to reach approximately $411 billion by the year 2020. Microsoft Dynamics 365—a cloud-based ERP system—is leading the market, owed to its extensibility and modularity.
ERP vendors offer personalized solutions
In the future, ERP solutions will be developed tailored to the buyer’s industry in order to avoid the need for customizations and ensure relevance in the industry. Modification in a base ERP package requires countless hours of code alteration, which is why manufactures will start to offer personalized solutions that extend to support the growing needs of a company. This also eliminates the need of maintaining extensive IT teams dedicated to manage the ERP solution.
Internet of Things
We can surely expect that ERP solutions will be integrated with emerging technologies such as IoT, AI and analytics to support new business models and their core processes.
IoT provides seamless connectivity across devices and sensors, allowing them to exchange data without any human intervention. As ERPs adopt IoT, this will pave the road to a range of possibilities that’ll make ERP solutions in real-time, flexible and intelligent. For instance, businesses will easily be able to collect and process large volume of data from sensors. This will broaden their range of services and result in the implementation of customer-centric business strategies.
Shortened disruption cycle requires flexibility
In business terms, a disruptive innovation is defined as an innovation that leads to the creation of a new market that eventually disrupts and displaces the existing established businesses. All this disruption can have a significant impact on business application requirements, which is why agility—the ability to evolve, innovation and change—will become a key factor in ERP systems.
In order to compete with the constant change, vendors will need to offer solutions and micro services that are flexible and agile if they truly want to create a nimble ERP system. On the other hand, ERP users should be flexible too, if they wish to lead their businesses to new levels of productivity.
The ERP market will see a paradigm shift in the upcoming decade due to changes in the pricing models, vertical market adaptations and deployment methods. In addition, various cloud deployment models like SaaS are also creating a buzz among small and medium businesses. The traditional pricing model is likely to be replaced by the pay-as-you-go subscription-based model, cutting down significantly on capital expenditures. This, in combination with the anytime-anywhere access, has truly made ERP technology nearly ubiquitous.
The potential for boost in long-term productivity and streamlined business functions makes the implementation of ERPs a worthwhile investment of resources and time. Therefore, there’s no doubt that business success lies in ERP Systems like Microsoft Dynamics 365. Our team of professionals can help you maximize business opportunities and gain high profit margins with Microsoft Dynamics Solutions. Get in touch with us today for more information.