What is an ERP System and How Does it Work?

Growing a business is easier now than how it used to three decades ago. Obviously, this can be attributed to the people behind it. But aside from the people making the company work, huge companies and growing companies now use technology to manage their growth. It is a complex software that makes business management easier. This software is called an ERP System or Enterprise Resource Planning System.

So, if you are asking how Walmart oversees its more than 4,500 stores across US? Or how does Amazon manage to deliver millions of parcels everyday on time? ERP systems play a huge part in this.

What is an ERP System?

An ERP system is an umbrella term for a complex software or an integration of multiple applications. It is used in managing, automating, and linking vital business processes so that manual human labor is reduced. 

How does ERP work?

ERP systems work by centralizing all data and information so that business processes are unified and connected end to end. It provides managers a single view of everything that’s happening in the business.

What are the primary benefits of an ERP System?

Using ERP, real-time data (reports and metrics) across various departments can be accessed. Therefore, data from multiple departments can be shared and interpreted. ERP systems, in short, make it easier and faster to find information because everything is collected in a single place.

Additionally, data access makes it easier to get a bird’s eye view of how business resources are used. This helps in development of strategies, simplify business processes, and proper allocation of company resources to generate growth. More importantly, it increases productivity because it reduces time wasted by employees on tasks that can be fully automated.

Aside from easy access to data, the ultimate goal of an ERP system is to help businesses improve efficiency and profitability. ERP systems provide useful data on how company resources are spent so that necessary adjustments can be planned.

Final Words

A business, either big or small, needs an effective system to run smoothly and to achieve its goal to grow. Micro-enterprises might get away by just using the traditional spreadsheet and other applications intended for small businesses. But growing a business will require intensive use of manpower, financial resources, and more complicated general operation. This could be difficult to manage even for a seasoned manager without the help of an ERP system

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