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ERP systems – Definition and history
Enterprise Resource Planning (ERP) in Polish enterprise resource planning – definition
A complete ERP system is a comprehensive tool that integrates and optimizes all key business processes, enabling effective management of an enterprise regardless of size, using modern technology.
- A complete ERP system is a comprehensive enterprise management platform that integrates all aspects of business operations using advanced technologies across the enterprise tailored to meet business needs regardless of the size of the enterprise
- The ERP system covers daily processes such as effective management of finances, human resources, supply chain and production.
- ERP system provides transparency of the entire business process by tracking all aspects of production, logistics and finance covering each area of the company
History of the development of ERP systems
The history of ERP has been a process of evolution from systems that support material requirements planning (MRP) to advanced, integrated enterprise resource management systems that now use cloud technologies and artificial intelligence to increase operational efficiency in companies around the world.
Enterprise resource planning software and systems have been used in the manufacturing industry for more than 100 years
- The first ERP systems were developed in the 1960s, when toolmaker Black and Decker implemented a solution for areas of the company’s operations including material requirements planning (MRP).
Benefits of implementing an ERP system versus ERP software
ERP systems are versatile tools that significantly increase a company’s productivity and efficiency by automating processes, optimizing resources and improving financial and liquidity management. It is worth thinking about the future structure of the enterprise and take care of an integrated information system.
Increase productivity and efficiency
- ERP systems enable resources to be managed and accounted for for maximum efficiency.
- The ERP system enables optimization of costs and inventory.
- This information system improves customer service and increases customer satisfaction.
- ERP system significantly helps automate processes
- The ERO system is a seamless material requirements planning(Material Requirements Planning, MRP).
Improve financial and liquidity management
The ERP system provides full control over a company’s finances and liquidity, allowing all cash flows to be monitored in real time. This allows companies to better manage their financial resources, minimize costs and optimize processes, resulting in better budget management and operational stability.
The ERP system also enables fast and accurate financial reporting, allowing the company to analyze its financial performance on an ongoing basis. Automating reporting processes eliminates the risk of errors and allows for better reasoned strategic decisions. Financial reports are generated based on up-to-date data, giving the company an advantage in tracking its performance.
In addition, the ERP system improves risk management, helping the company safeguard against unforeseen expenses. It makes it possible to monitor key financial indicators, identify potential risks, and respond early to emerging problems, ensuring greater financial stability and reducing the risk of losses.
All this makes ERP systems effective in collecting, organizing and integrating data from all areas of the company.
Resource planning
- Human Resource Management: The ERP allows you to track employee availability and workload, which helps in effective work scheduling and task allocation.
- Material planning (MRP): Within ERP, there are modules for material requirements planning that help determine what raw materials and components are needed for production, when and in what quantity. This makes it easier to manage inventory and minimize storage costs.
- Inventory optimization: the ERP system enables real-time inventory control, avoiding overstocking or shortages at key points in production.
It collects and processes data and information from various areas of the company – such as customer service and sales, production, logistics and warehousing.
Improve business processes and reduce costs
ERP system enables automation and optimization of business processes
With an ERP system, key business processes such as the management of finance, production, logistics, sales and human resources can be automated, eliminating the need to perform many activities manually. Automation allows for increased precision, reduced errors and faster execution of tasks. Process optimization, which ERP offers, means that all activities are carried out in the most efficient manner, minimizing wasted time and resources. For example, automatic inventory tracking and material requirement planning avoids excess or shortage of raw materials.
Reduces costs and increases work efficiency
By integrating various company departments into a single ERP system, organizations can significantly reduce operating costs. ERP allows for better resource management, which means companies can avoid excess inventory, improve employee time utilization and optimize production operations. The elimination of manual processes and the automation of financial workflows and sales management reduces order processing and invoicing times, leading to increased efficiency. In addition, ERP makes it easier to monitor expenses and respond quickly to changing financial needs, which helps manage the company’s budget.
Improves communication and cooperation between departments
One of the key strengths of ERP systems is the integration of data into a single, common system accessible to different departments within a company, such as finance, sales, manufacturing and HR. All departments have access to up-to-date information in real time, eliminating information silos and reducing the risk of errors due to lack of communication. Improved data sharing between departments allows for better coordination of activities, faster decision-making and more efficient project execution. For example, the sales department can easily check product availability, while the finance department can monitor cash flow and payments in real time.
ERP system functionalities
Today’s ERP systems use advanced technologies such as artificial intelligence and machine learning to further adapt to business needs and support enterprise growth.
Financial and human resources modules
- The ERP system includes financial modules such as accounting, invoices, purchase orders and accounts payable.
- It also includes HR and payroll modules
Storage and production modules
The ERP system includes warehouse modules such as inventory management, warehousing and shipping.
It also includes production modules such as production planning, scheduling and quality control.
Integration with other systems
- An ERP system can be integrated with other systems, such as CRM, SCM, e-commerce and others, which means that an ERP (Enterprise Resource Planning) system can collaborate and exchange data with other programs that support different aspects of a company’s operations. Here’s what each term means:- CRM (Customer Relationship Management) – a customer relationship management system that helps manage sales, customer service and marketing.- SCM (Supply Chain Management) – a supply chain management system that helps manage logistics, production and distribution.- E-commerce – e-commerce platforms that manage online sales.Integrating these systems with ERP allows data to flow seamlessly between different departments of a company, which improves efficiency, reduces operation time and provides better control over business processes.
When is the time to implement an ERP system?
Signs that a company needs an ERP system
The implementation of an ERP system, although demanding, significantly increases the efficiency of a company, regardless of its size, automating processes and integrating different areas of the company’s operations.
- The company is experiencing financial and liquidity management difficulties.
- The company is struggling to optimize costs and inventory.
- The company needs to improve customer service and increase customer satisfaction.
- Company has problems in data collection
Indications for ERP implementation
The company has more than 10 employees, increasing the need to implement appropriate tools for personnel and resource management. As the number of employees increases, effective management of internal processes, delegation of tasks and monitoring of performance become crucial to maintain operational efficiency.
The company’s annual turnover exceeds 1 million zlotys, which means that the enterprise has significant financial resources. In such a situation, control over the flow of finances, optimization of costs and monitoring of expenses become a priority in order to increase profitability and support further development of the company.
The company operates in an industry where managing and accounting for resources for maximum efficiency is key. This requires precise planning, monitoring of resource consumption and optimization of processes to ensure operational fluidity and competitive advantage in the market.
How much does an ERP system cost?
The price of the license and ERP system
- The price of an ERP system license depends on the size of the company and the number of users.
- The price of ERP depends on the complexity of business processes and the number of modules.
Maintenance and support costs
The cost of maintaining an ERP system depends on the number of users and the complexity of the business processes the system supports. In addition, the cost of supporting an ERP system depends on the type of technical support a company needs and the frequency of software updates that ensure its smooth and secure operation.
ERP system on a server or in the cloud?
The decision to implement an ERP system on a local server or in the cloud (cloud ERP) depends on the specific needs of the company and the cost of ERP systems.
Advantages and disadvantages of implementing a cloud ERP system
Implementing a cloud ERP system (ERP in the cloud) brings many advantages, such as
- lower costs due to the lack of need to invest in local server infrastructure,
- greater flexibility to scale enterprise resources in line with growth
- easier management of the system, which is supported by third-party vendors, allowing the company to focus on its business processes. However, implementing this type of ERP software also brings some disadvantages, such as
- The risk of data loss that can occur if the cloud provider’s services fail,
- dependence on a cloud provider, which limits control over the ERP system and requires trust in third-party providers for data management and security assurance.
With the goal of providing comprehensive support for your business, ITH also offers professional cloud ERP hosting services. Our own platform, developed in cooperation with Kru.pl, provides a stable and secure environment for systems such as Enova, Optima, Subiekt or Symfonia. With automated processes and regular backups created in a separate data center, you are assured that your data is safe. We take care of the highest security standards for platform access to protect your sensitive information.
Data security in ERP systems
For companies using cloud ERP systems, enterprise resource management and data analysis are supported by a high level of security, thanks to the storage of data on the cloud provider’s servers, which are protected by advanced security systems.
An ERP is an organized data structure that typically uses a single, common database. An ERP system enables the collection of data from different areas of the company, and its analysis allows better management of resources and business processes.
- Cloud ERP systems offer a high level of data security.
- The data is stored on the cloud provider’s servers and is protected by advanced security systems.
ERP system selection
When choosing the right ERP solution, it is crucial for a company to be guided by its business needs, the growth of the company, the functionality of the system, such as finance and accounting, and take into account the cost of licensing, implementation and maintenance, while ensuring a high level of data security.
Modern ERP systems are advanced IT tools that enable comprehensive business management. By integrating different areas of the business, such as finance, sales, production, logistics or human resources, they provide a consistent flow of information and enable informed business decisions.
Modern ERP systems are characterized by high scalability, flexibility and openness to integration with other systems, which allows them to be customized to meet the individual needs of each organization. In addition, modern ERP systems often use advanced technologies, such as artificial intelligence, big data or cloud computing, which allows them to automate many processes, improve efficiency and gain a competitive advantage.
By which modern ERP systems have become an indispensable tool for companies operating in a dynamic business environment that want to optimize their processes, increase efficiency and achieve better financial results.
Modern ERP solutions are increasingly being offered in a software as a service (SaaS) model, meaning that the system is accessed via a web browser. This approach eliminates the need to invest in expensive servers and software, and significantly simplifies the implementation process. With SaaS, companies can quickly start using advanced ERP functionality, paying only for a subscription. What’s more, the SaaS model provides constant access to the latest versions of the software, without the need for costly upgrades. This solution is particularly attractive to small and medium-sized companies that want to minimize investment costs and gain flexibility in managing their IT resources.
What to follow when choosing an ERP system?
- ERP systems offer a wide range of functionalities that support the management of different areas of the company, such as finance, production, human resources and logistics.
- The price of licensing and implementing an ERP system depends on the version of the software chosen and the degree of customization to meet the company’s specific needs.
- Maintenance and support costs include regular system updates and technical support to ensure business continuity.
- Data security is a key aspect, and the ERP system must ensure that sensitive information is protected from unauthorized access and external threats.
How to assess the company’s needs and select the right ERP system?
Conducting an analysis of the company’s needs is a key step in the process of selecting an ERP system. This allows you to understand which areas of the business need support and optimization, and which system functionalities will be most useful.
Determining the company’s goals and requirements helps to clearly define what the company wants to achieve by implementing an ERP system. Clear goals make it easier to choose the right software to meet specific business needs.
Comparing the offerings of different ERP vendors is important to find the solution that best suits the company’s needs in terms of functionality, cost, technical support and system flexibility.
ERP system implementation
What does the ERP software implementation process look like?
Analysis of the company’s needs and resources
It involves identifying key processes and resources that need to be optimized, and tailoring ERP functions to the specific needs of the business to improve operational efficiency.
ERP system design
At this stage, the required functionality is determined, the appropriate ERP modules (finance, HR, manufacturing) are selected, and integration with the company’s existing systems is designed to ensure operational fluidity and effective data management.
ERP system implementation
It includes installation, system configuration and data migration, as well as real-world functionality testing to ensure that the system supports all business processes.
User training
The trainings are aimed at preparing employees to use ERP effectively, which is crucial for the correct operation of the system and optimization of work in the company.
How long does it take to implement an ERP system?
- The implementation time of an ERP system depends on the complexity of business processes and the number of modules.
- The average time to implement an ERP system is 3 to 6 months.
What is Manufacturing Resource Planning?
Manufacturing Resource Planning (MRP II) is an advanced planning system that is an integral part of most modern ERP (Enterprise Resource Planning) systems. Its main purpose is to ensure optimal management of a manufacturing enterprise’s resources, enabling effective planning and coordination of all production-related processes.
Unlike simpler planning systems, MRP II goes beyond just material requirements planning (MRP). It encompasses a much broader range of activities, such as capacity planning, inventory management, and integration with other areas of the company, including finance, sales and procurement. As a result, it enables end-to-end management of the entire production process, from the receipt of an order from a customer to the delivery of a finished product.
MRP II systems are typically embedded in broader ERP systems that integrate all key business processes. This enables companies to gain a complete view of their operations and make more informed decisions. Integrating MRP II with other ERP modules, such as CRM, finance or supply chain management, enables the smooth flow of information and automation of many processes.
MRP II is a powerful tool that allows manufacturing companies to achieve greater efficiency, flexibility and competitiveness. By taking a comprehensive approach to planning and managing resources, MRP II makes it possible to optimize production processes and better meet customer expectations.
Post-implementation support
What support do ERP vendors offer?
ERP system providers provide technical support, training and consultation during the implementation of their solutions. This makes it easier for companies to understand and implement the new system, minimizing the risk of errors and business downtime. Professional training helps employees master the use of the system faster, resulting in better work efficiency.
Technical support is available in a variety of forms, including by phone, e-mail and the Internet. Thanks to this flexibility, companies can easily get help with technical problems, regardless of location. Such multi-channel support ensures that problems are resolved quickly and the ERP system runs smoothly.
How to manage the ERP system yourself?
The company can manage the ERP system on its own with documentation and training.
It may also opt for support from an ERP system provider.
Analysis of company needs versus ERP systems
Before selecting an ERP system, it is crucial to conduct a thorough analysis of the company’s needs. This includes understanding the specific processes that need to be supported, such as financial, human resources, production and supply chain management. Every company operates differently, so it is essential that ERP software be flexible and tailored to the company’s unique requirements. The analysis should also take into account the future growth of the company, so that the chosen ERP solution can scale with its growth and support the next stages of business development.
What is the difference between an ERP system and a financial management system?
Financial management systems are often used to handle finances, but they are different from ERP systems. A financial management system is just one module within broader ERP systems. These systems cover business functions in the accounting department, such as financial accounting, auxiliary accounting centers, liability, accounts receivable and invoice management, and help monitor and manage the company’s liquidity.
For what size company is an ERP system appropriate?
An ERP system is typically required by large enterprises and by an increasing number of medium-sized companies to effectively manage financial data, control sales documents, costs, and store resources. As a company grows, the need to implement ERP becomes more important to optimize management and operations.
The Role of Artificial Intelligence in ERP Systems.
Artificial intelligence (AI) in ERP systems automates routine tasks, analyzes data in real time, forecasts demand and optimizes processes such as inventory management and production. AI supports decision-making, personalizes interfaces and helps manage risk, which increases the efficiency and accuracy of ERP. This enables companies to better adapt to dynamic market conditions and optimize their operations.
Summary
ERP programs – summary of benefits and tips
Modern Enterprise Resource Planning Systems offer many benefits, such as increased productivity and efficiency, improved financial and liquidity management, reduced lead times, improved business processes and cost reduction.
When choosing an ERP system, one should be guided by functionality, license and implementation price, maintenance and support costs, and data security.
ERP system implementation requires analysis of company needs, ERP system design, ERP system implementation and user training.