What Is ERP (Enterprise Resource Planning) Part 3

History of ERP

What we now refer to as ERP started in the 1960s with the invention of material requirements planning (MRP) systems. Manufacturers used MRP software to plan production schedules, make sure they had all the necessary supplies for production runs and track finished inventory. Two decades later, technology providers developed manufacturing resource planning, or MRP II, systems. While MRP II software still targeted manufacturers, it offered new capabilities for improved production planning.

Not until the 1990s did ERP take on its current identity as a unified business management platform. This innovative technology brought the entire business, from accounting to product development to manufacturing, order fulfillment and HR, together on a common database. These early ERP solutions had steep capital and operating expenses. Companies needed to buy servers, hire an IT team with the appropriate expertise and then pay for licensing and implementation. After that came big bills for maintenance and upgrades.

While hosted ERP solutions were available from application service providers, these systems tended to be expensive and complex.

Then, in 1998, NetSuite launched the first true cloud ERP. The cloud operating model revolutionized this space because it greatly reduced the upfront investment and made operating costs predictable. With SaaS ERP, there was no need to purchase servers or hire an IT staff because the vendor managed the infrastructure and pushed out upgrades automatically.

This put ERP within reach of smaller companies, in turn spurring growth and profitability.

Cloud ERP has since taken off and fueled much of the innovation we’ve seen over the past two decades. This computing model has allowed companies to better collaborate both among internal departments and with external partners, sparking new insights that save businesses time and money and push them forward.

Future of ERP

Now that companies understand the tremendous benefits that come with an ERP, they’re looking for ways to up the game. Technology like artificial intelligence (AI), blockchain, augmented reality (AR) and the internet of things (IoT) are shaping today’s ERP trends. Many of these technologies are already embedded within industry-leading ERP solutions.

AI and machine learning, for example, can automate account reconciliations and flag transactions that call for a closer look. This saves the accounting team time and offloads a task most don’t look forward to. Machine-learning technology improves as it processes more transactions, and it can help develop more accurate forecasts.

Blockchain packages data in a secure format and can increase transparency among companies in a supply chain. Specifically, it can show the status of specific products in detail and creates an in-depth audit trail of an item’s journey from raw material to finished good. This also provides information from which the ERP can draw insights.

Augmented reality has gained a foothold in retail, allowing consumers to virtually place a rug or 3D image of a piece of furniture in their living rooms to get a sense of how it would look before purchasing. All the data points and images needed to make AR work can be stored in the ERP.

Finally, more companies are recognizing the value of IoT devices, like sensors, scanners and cameras, that can feed information back to the ERP. A sensor that monitors the performance of a piece of warehouse automation equipment, for instance, could alert a manager when the machinery starts operating more slowly. That could be a sign the equipment is in need of repair, and the business can intervene before it breaks and disrupts operations. An IoT tracker on a delivery truck could show that drivers are taking inefficient routes and suggest they always use GPS.

Aside from these buzzy technologies, more businesses are looking to consolidate all their applications on a single platform. Recent research from Gartner reveals that 40% of services companies will unify core processes like financials, HR, order-to-cash, procurement and operations in a single suite by 2026. As software providers expand their offerings and more businesses realize the value of a unified ERP system, this will become increasingly common.

Choosing the Right ERP System

An ERP is a critical business system that must mesh with how each company operates, so there is no one “best” platform. Required capabilities, preferred deployment model and company size will all affect your decision when buying an ERP system. Look to established vendors with proven records of success working with companies in your vertical. Always ask for reference customers, and check out success stories.

Businesses should also consider the software provider’s roadmap for emerging technologies like IoT and blockchain.

Start with the modules foundational to your business and build from there. Companies often begin with a finance module to automate basic accounting tasks and allow leaders to easily view available cash and the flow of money into and out of the organization. Products-based companies typically want to digitize inventory and order management right away because that can generate rapid and significant savings around procurement, storage and shipping. An ecommerce application that plugs into the ERP is a priority for sellers that rely on this sales channel. Services organizations, on the other hand, may start with a PSA (professional services automation) application to simplify employee time and resource tracking and project billing.

After that, a CRM module is a prudent investment because it can improve customer communications, while supply chain management modules for manufacturing, procurement and/or warehouse management can better align purchasing and production with demand. A marketing automation solution integrated with the ERP to attract and retain customers through creative techniques may be another logical addition.

Businesses with lots of employees should add human resources management (HRMS)/human capital management (HCM) systems sooner rather than later to improve the employee experience and earn a reputation as a great workplace.

Biz Manager offers a unified, true cloud ERP system to help companies run their entire business in one place. Its offerings include applications for financials, inventory and order management, HR, professional services automation, omnichannel commerce and advanced analytics. All these applications are natively integrated, meaning there are no connections to manage and users enjoy a common interface as they move between modules.

Biz Manager was born on the cloud and today has more than 31,000 customers ranging from startups to multinational enterprises. It has robust reporting capabilities to deliver insights across your business and role-based permissions so employees only have access to the information they need.

The “right” ERP system for your company is the one that supports your needs now and is scalable enough to grow with your business, with modules and features that drive savings and help you capitalize on opportunities.

This is a big decision, so take the time to thoroughly evaluate all options.

Purchasing and implementing an ERP platform used to be intimidating, even overwhelming. But the solutions available today allow companies to take it one step at a time and add what they need when they need it. Never before has this software been within reach for more organizations, and leaders need to take advantage of that. An ERP has become table stakes for any company that wants the visibility and insights to compete and win.