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ERP Components: The Core Parts to Enterprise Resource Planning

ERP software has a wide range of features and add-ons available from vendor to vendor. However, you don’t want to put the cart before the horse by looking at add-ons before locking down the main ERP components that you need present in your software. You wouldn’t go to a car dealership and start asking about customized rims before looking at features such as mileage and safety ratings. The same thinking applies to ERP systems.

Ultimately, ERP software is very modular and you can usually pick and choose which features you want to have present in your solution. We’ve created this list of six of the most commonly desired features to help you formulate an idea of some of the functions you might be interested in having for your business needs. But first…

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What Exactly Is ERP software?

ERP software is a tool that centralizes and connects various business processes. It’s especially helpful because it is also a hub for real-time and historical data across business departments and functions. This can reduce the amount of time spent manually pulling data to send to business partners. This desiloing along with increased automation of processes serves to simplify business workflows while also saving time and boosting revenue.

There are hundreds of ERP vendors on the market right now, but each choice offers different solutions and functionality. There are some basic components of an ERP system that you might wish to have in your solution, but it is likely that there will be some add-ons or modules that could be implemented to streamline your specific day-to-day tasks as well. Before you start looking for software, you should create a list of tasks that are difficult for your business and that you would like to simplify. Maybe an ERP solution can help. You should also take a look at the main components of ERP to see if any of the commonly included tools would be beneficial to your business. Each of these tools have capabilities that vary from vendor to vendor, but you should expect vendors to contain at least a handful of the main components available out of the box.

What Are Six Commonly Requested ERP Parts?

We’re glad you asked:

ERP components

1. Human Resources

Managing your employees is typically priority number one. Without them, you don’t have a company. The HR ERP module in your software solution should be able to handle employee management tasks such as onboarding, offboarding, timekeeping and benefits administration.

However, the most important feature to look for in an ERP component is payroll software. Manually submitting payroll and issuing direct deposits is incredibly time-consuming and isn’t cost-effective. Instead, an HR component automates payments including tax and benefits deductions. With an integrated timekeeping feature, payments to your hourly workers can also be automated so you no longer have to manually input their timesheets.

One of the main benefits of an ERP solution is that many of your day-to-day business processes can be automated in an effort to reduce human error and time spent on monotonous tasks such as data entry. By using enterprise resource planning software with an integrated accounting system and human resources module, payments can be made automatically to employee bank accounts and compensation forms can be managed with little human input required.

2. Customer Relationship Management

Managing your customers and leads is another important facet of your business. Without them, your business can’t survive, let alone grow. The customer relationship management (CRM) component stores and allows you to track generated customer and lead data. This data can help with the development of insights that could improve sales and marketing processes.

One of the main uses for CRM is tracking customer buying habits. With this data available, you’re able to see which products you may want to upsell and the best times to do it. Additionally, you can use a CRM to track conversation history with leads. This way you know which sales personnel has talked to a customer, when they talked and what they talked about. Using this information, you can reduce redundancy in the sales process, minimize customer irritation and ensure a successful sale.

If you run an eCommerce business, you might wish to integrate your CRM process so that you can accurately target ads and store customer payment information in order to make sure that customers have the most streamlined buying experience possible. This is just one example of how an integrated solution can positively benefit your customers.

3. Business Intelligence

Business intelligence (BI) has quickly become a standard in ERP management systems. The BI component of ERP collects data and performs analysis that can provide actionable insights about business processes. As businesses start to rely more heavily on decisions backed by data, BI becomes indispensable.

The best BI ERP components deliver insights in reports. A good reporting feature is very important in BI and enables you to make sense of the data being analyzed. Some reports come in the form of numbers and tables. However, many prefer visual reports because they allow you to spot trends at a glance. Make sure that whatever data format is best for your company is available in your ERP’s reporting capabilities.

These actionable insights can inform business decisions across departments and processes when you use an integrated solution. One huge pain point in companies that have yet to implement an ERP system is that data is siloed by department. Therefore, it is easier to see a complete view of data and how various aspects of business affect factors such as profitability and customer retention when using ERP software.

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4. Supply Chain Management

Creating an effective supply chain is never easy, especially when you don’t have the best tools to oversee your operation. Ensuring that your ERP has a Supply Chain Management (SCM) component is crucial to staying competitive in this arena. Your SCM should optimize distribution and manufacturing processes to create a more efficient supply chain. This starts by collecting real-time data.

Real-time data allows you to find and fix issues as they happen, rather than waiting a day or more after the fact. It also makes predictive analytics possible to help with demand planning. Real-time data can help you create an accurate and up-to-the-minute production plan so that you meet demand but don’t exceed it.

The SCM component of enterprise resource planning can also assist in boosting profitability by measuring factors such as which inventory items are commonly purchased together and then using that information to optimize the best placement for items on the warehouse floor. SCM coupled with CRM can help keep customers updated as to the status of their purchase within the distribution process and estimate a delivery date.

5. Inventory Management System

The inventory management component is highly collaborative. It works with the SCM component while also dipping its toes in other processes such as warehousing and sales. Some of the main features of this component include managing order fulfillment and maintaining a warehouse’s stocking functions.

Best-in-class inventory management components include tracking features that can reduce manual inventory control. These features may include revision level tracking, multi-level serial number tracking and multiple units of measure per product ID or SKU.

This component is especially beneficial to manufacturers or companies with distribution centers because it assists in profitability and functionality of inventory processes. An integrated solution could update your company website to say that an item is out of stock so that you don’t get orders for items that you no longer have on-hand.

6. Financial Management

The final main ERP component is financial management. Because every business process involves the flow of money, whether it’s paying your employees or paying to ship goods, this tool works with all of the other ERP system components.

The financial management module analyzes and keeps track of your financial data, including accounts receivable, accounts payable, budgets and costs. Analysis of your data can reveal trends in your spending, helping you better understand how your profit is calculated and discover where you can reduce costs. You can also receive financial forecasts with data analysis, therefore allowing you to increase profit in the future.

At the end of the day, profitability is the driving force of all businesses, so ERP software often seeks to maximize revenue by integrating with processes such as sales, customer relations and distribution. The software ultimately increases productivity and frees up employee time to work on tasks that can’t be automated.

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What Are Some of the Extra ERP Components Commonly Available?

Aside from the six main ERP components, there are a wide range of special features and add-ons available to target more specific business needs. Here are some extra ERP features that you might consider making a part of your solution.

  • Risk Management – This tool can predict and reduce risks in your business. It may also suggest Business Continuity Plans (BCP) for emergencies and unplanned situations.
  • Marketing Resource Management (MRM) – MRM supports operations such as the alignment of people, processes and technology to support and enhance marketing efforts.
  • Sales-Order Management – Sales-order management can assist your company in managing sales orders through their entire lifecycle — from sales order generation to billing/invoicing.
  • Advanced Planning System (APS) – This tool uses data to track the costs of production for manufactured goods. It might also optimize the allocation of raw materials and capacity to balance consumer demand with the amount of warehouse space available.
  • Event Management – This solution allows the end-user to run events and hospitality programs from start-to-finish.

What Are Some of the Benefits of ERP software?

The benefits of ERP software are vast and dependent on the specific tools and modules that you use. However, there are some basic bottom-line pros that you can hope to achieve upon ERP implementation. Some of them are listed below:

  • Boost profitability – ERP software can help grow revenue in many ways. For example, your contract management tool might be able to measure the profitability of a sales contract based on the estimated level of effort and resources. Forecasting tools are also common in ERP software and can help develop useful insights as to future activity.
  • Reduce wasted time – With automation of business processes through ERP, you can reduce the amount of time that your employees spend on projects such as manually inputting receipts for expense information or inputting data to make a visualization.
  • Use manpower on different projects – The automation of business processes will also help free up employee time so that they can spend more time working on tasks that can’t be automated. Ultimately, this leads to an increase in productivity.
  • Integrate business functions to streamline workflow – The all-in-one solution of an ERP is helpful because it’s a hub for data and processes across a business. This makes it easier for employees across different departments to work collaboratively while also having an understanding of the workflow and business objectives of their peers who are on different teams.

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Do Your Research

Before you get to the implementation stage, you should research the core ERP components and functions that are available from various ERP vendors. Conducting research is a lengthy and sometimes boring process, but by reading articles and talking to different vendors, you can make sure that the ERP software you implement is in it for the long haul and will effectively endure company growth.

What other components of enterprise resource planning do you think should make the list? Let us know what your favorite ERP components are in the comments below!

Lindsey JenkinsERP Components: The Core Parts to Enterprise Resource Planning

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