What is ERP?

Growing companies eventually reach a point where spreadsheets no longer cut it. That’s where enterprise resource planning (ERP) software comes in. ERP systems collect and organize key business information and help organizations run lean, efficient operations, even as they expand. Most business professionals know the term “ERP,” but they may not know exactly what enterprise resource planning systems can do for their teams.

What Is Enterprise Resource Planning (ERP)?

ERP is a category of business software that automates business processes and provides insights and internal controls, drawing on a central database that collects inputs from departments including accounting, manufacturing, supply chain management, sales, marketing, and human resources (HR).

Every business has multiple stakeholders collaborating to make things work. However, it becomes challenging when critical information is scattered across disconnected systems. For example, the accounting and FP&A teams could each have different spreadsheets with different figures for expense tracking.

ERP systems centralize data, provide cross-departmental visibility, fuel efficient analysis, resolve data conflicts, and drive process improvements. That translates to cost savings and better productivity as people spend less time digging for needed data.

Video: What Is ERP?

Key Takeaways

• ERP is critical business software that collects information from various departments in a common database, enabling leaders to monitor the pulse of a company with consistent and accurate data.
• ERP systems unify critical business functions like finance, manufacturing, inventory and order management, customer communication, sales and marketing, project management, and human resources. One major feature is detailed analytics and reporting on each department.
• ERP can generate major time and financial savings by providing organization-wide visibility that spotlights inefficient manual processes and reveals growth opportunities.
• ERP deployment models include on-premises, cloud, and hybrid. While cloud ERP has become extremely popular in recent years, the best approach for any given company depends on its needs.
• Businesses should make sure they understand the capabilities, implementation models, integration requirements, and total cost of ownership when evaluating a short list of potential software providers.

ERP Explained

Enterprise resource planning can be confusing because ERP systems are not standalone applications. ERP is a category of business software, but ERP systems comprise various integrated modules, each addressing a specific business requirement.

The components of ERP systems can vary from company to company. For example, products-based companies typically have modules for accounting, inventory and order management, customer relationship management (CRM), and, if they produce or assemble products, manufacturing. Services businesses may turn to modules for accounting, project management, professional services automation, and CRM. Together, these modules form a unified system that connects core business functions and data across departments.

Because they’re composed of integrated modules, ERP systems scale with the business. Most organizations start with the essentials, such as financials, and expand into more advanced functionality as their needs grow. Regardless of the starting point, the goal remains the same: to increase efficiency, support better decision-making, and give every team access to real-time, reliable data.

Why Is ERP Important for Businesses?

ERP systems have become table stakes for businesses looking to use resources wisely. They can help leaders reallocate human and financial capital or build more efficient core business processes that save money without sacrificing quality or performance.

An ERP system is also an asset when it comes to planning and coordination. Employees can see current inventory and customer orders in detail, then compare supplier purchase orders and forecast future demand. If necessary, they can adjust to prevent problems. ERP software also improves communication and collaboration because workers can check on the status of other departments to guide their own decisions.

As a comprehensive data source, an ERP system also provides reports and analytics that can be difference-makers for the business. Turning a vast trove of information into charts and graphs that clearly illustrate trends and help model possible results is an ERP capability executives find invaluable.

How Does an ERP System Work?

An ERP system works by combining a shared database, modular applications, and a common user interface to support real-time information flow across the business. This architecture lets organizations automate processes, improve data accuracy, and make smarter decisions.

Here’s how it comes together:

• Central database: All modules draw from a single unified data source. This eliminates data duplication and enables every department to work from the same real-time information.
• Modular architecture: ERP systems are built from distinct, interconnected applications (modules) tailored to specific business functions. These modules are tightly integrated and share information automatically.
• Built-in workflows and logic: ERP systems use predefined rules to automate business processes, such as order-to-cash, procure-to-pay, and payroll. For example, it can trigger purchase orders when inventory drops below a threshold or route an invoice for approval.
• Real-time data syncing: Transactions in one area update relevant data across the system instantly, promoting faster decision-making and tighter coordination.
• Shared interfaces and role-based access: Employees access the ERP system through dashboards and reports tailored to their roles. Permissions restrict access to sensitive data while giving teams the information they need to act quickly.

13 Components of an ERP System

An ERP comprises several modules—bundles of features tailored for various aspects of the business, including back- and front-office roles. This goes beyond financials and fundamental functions like supply chain management and customer communication.

While most companies find that modern ERPs support their businesses “out of the box,” some firms need to add to the extensive built-in functionality. If you have a lot of specialized processes, look for an extensible system that allows your integrator or IT staff to write code that adds needed features or can integrate with homegrown or legacy solutions.

However, before going the custom route, take a close look at your processes. The prebuilt functionality and configurations that modern ERP solutions support are based on best practices gathered from thousands of companies. It’s a best practice to minimize customizations.

Different ERP modules exist for almost every core business function, from finance to supply chain to HR.

Core ERP Modules

1. Financial management: A finance module, the foundation of every ERP system, manages the general ledger and all financial data. It tracks every transaction, including accounts payable (AP) and accounts receivable (AR), and handles reconciliations and financial reporting.
2. Human resource management (HRM): A human resources management (HRM) or human capital management (HCM) module is like a workforce management module. It keeps employee records with detailed information, like available PTO and performance reviews, and can tease workforce trends in various departments or demographics.
3. Supply chain management: Supply chain management modules allow companies to oversee the flow of goods from suppliers through manufacturing and into customers’ hands. When all materials are available and in the correct locations, machinery and labor resources can be scheduled accurately and production will run smoothly.
4. Customer relationship management (CRM): CRM is a popular module for businesses in various industries. It tracks all client communications, assists with lead management, and can enhance customer service and boost sales.

Additional ERP Modules

5. Manufacturing: Manufacturing can be complicated, and this module helps companies coordinate all the steps to make products. The module helps production meet demand and monitor the number of in-progress and finished items.
6. Inventory management: An inventory management module shows current inventory levels down to the SKU level and updates those numbers in real time. It also measures key inventory-related metrics. Any products-based company needs this module to optimize stock on hand based on current and forecasted demand.
7. Project management: Services businesses often use a professional services automation (PSA) or project management module to plan and track projects, including the time and resources spent on them. It can simplify client billing and encourage collaboration among staff members working on a project.
8. Ecommerce: An ecommerce module allows retailers and brands to manage their online stores’ back and front ends. With this application, they can change the site’s look and feel and add and update product pages.
9. Marketing automation: This module manages marketing efforts across all digital channels—email, web, and social — and allows organizations to optimize and personalize their messaging. A marketing automation tool can boost leads, sales, and customer loyalty.
10. Procurement: The procurement module manages raw materials or finished goods purchasing. It can automate requests for quotes and purchase orders and minimize overbuying and underbuying when linked to demand planning.
11. Order management: This application monitors and prioritizes customer orders from all channels as they come in and tracks their progress through delivery. An order management module can speed up fulfillment and delivery times and improve the customer experience.
12. Warehouse management: A warehouse management module directs activities like receiving, picking, packing and shipping. It can save time and cost in the warehouse by identifying more efficient ways to execute these tasks.
13. Workforce management: A workforce management (WFM) module keeps track of attendance and hours worked; some can also manage payroll. This tool can record absenteeism and productivity by department, team, and individual employees.

A unified system can organize your operations and improve processes to reduce obstacles. Over-reliance on email and spreadsheets to collate and share critical information indicates that you need ERP. Spreadsheets require frequent, manual updates, often making them outdated. Sharing sensitive data via email poses real security risks and can create difficulties when searching for specific information. A lack of integration among systems indicates you’re ready for ERP—and having all the modules in one place simplifies your business. The system can eliminate manual data transfers and fickle connections by pulling information from all key business functions into one place.

ERP Integration and Data Sharing

Virtually every organization considering an ERP implementation will have systems in place that could be replaced by modules of the ERP under consideration. As such, part of adopting an ERP system involves determining which existing systems will be replaced, which must be integrated, and which will be left to stand independently.

Remember, the more information fed into the ERP, the more value you get from your investment, so avoid leaving systems to stand apart from the ERP. Deciding when to integrate existing systems with your ERP and when to replace those systems with modules from your ERP vendor comes down to three considerations:

1. Is the existing system doing the job you need it to do? If not, then there’s a good case to be made for using the relevant module offered by your ERP vendor.
2. If the existing system is a keeper, is there a connector available from the ERP vendor, the existing system vendor, or a third party to get data flowing between the ERP and your existing system? And if so, how good is it? Data migration is complex. These connectors can do a decent job of integrating systems from different vendors, but quality and commitment to updates can vary. Remember: Upgrades to the ERP or the standalone system can break connectors or require rework. In the worst case, the lack of a new connector could derail upgrade plans completely.
3. If a connector exists, does it operate in real time and keep all necessary data flowing to and from each system? Some connectors operate in real time, and others sync up systems daily or weekly. Some move a limited data set between systems, and some work in only one direction—from an inventory management system into the ERP. If your team has done extensive custom configurations, the connector might not know some data types.

These potential complications highlight the advantage of using modules from a single provider to manage different business functions. It’s a good idea to use one vendor to address your needs whenever possible. This avoids the entire issue of integrations because the provider builds these modules to work together. A unified ERP system not only prevents problems but can also encourage adoption by flattening the learning curve.

If you decide to keep best-of-breed systems and integrate them with your chosen ERP, realize that verifying the correct functioning of connectors will become part of every upgrade cycle and that extensive customizations can cause issues. If you aim to automate back-office functions with real-time updates, bidirectional operation is important. Make sure you have the expertise, either in-house or through a partner or supplier, to keep data flowing.

12 Benefits of Implementing ERP Systems

Today’s ERP solutions have rich feature sets that bring countless benefits to businesses. This software has become universally adopted by almost all companies of a certain size because it drives real improvements. While each firm will see unique benefits based on individual circumstances, here are the key universal advantages ERP delivers.

1. Cost Savings

   The biggest value proposition of ERP systems is that they can save your organization money in several ways. Automating many simple, repetitive tasks minimizes both errors and the need to add employees at the same rate as business growth. Cross-company visibility makes it easier to spot inefficiencies that drive up costs and leads to better deployment of all resources, from labor to inventory to equipment. And with cloud ERP, companies may quickly see incremental value from the software, over and above what they’re spending.

2. Workflow Visibility

   With all workflows and information in one place, employees with access to the system can see the status of projects and the performance of different business functions relevant to their jobs. This visibility may be particularly valuable to managers and leaders, and it’s far faster and easier than searching for the right documents and constantly asking colleagues for updates.

3. Reporting and Analytics

   Data is useful only if companies can analyze and understand it; an ERP helps with that. Leading solutions have impressive reporting and analytics tools that allow users to track key performance indicators (KPIs) and display any metrics or comparisons they can dream up. Since an ERP is all-encompassing, it can help a business understand how a change or problem with a process in one department affects the rest of the company.

4. Centralized Data

   Because ERPs can access real-time data across the company, these systems can uncover impactful trends and provide extensive business insights. This leads to better decision-making by organizational leaders who now have easy access to all relevant data.

5. Regulatory Compliance

   Financial reporting standards and governmental and industry-specific data security regulations change frequently, and an ERP can help your company stay safe and compliant. An ERP provides an audit trail by tracking the lifecycle of each transaction, including adherence to required approval workflows. Businesses may also reduce the chance of errors and related compliance snafus with automation. ERP software provides financial reports that comply with standards and regulations, and software-as-a-service (SaaS) applications are well-equipped to help companies with PCI-DSS compliance.

6. Risk Management Through Mobility

   ERP technology reduces risk in a few ways. Granular access control and defined approval workflows can strengthen financial controls and reduce fraud. Additionally, more accurate data prevents mistakes that could lead to lost sales or fines. And finally, the ability to see the status of the entire operation means employees can quickly handle risks posed by business disruptions.

7. Data Security

   ERP providers understand that your system houses critical, sensitive data and take necessary steps to make sure it is secure. This diligence is more important than ever as the volume and scale of cyberattacks increase. Vendor-managed cloud ERP software, particularly, uses cutting-edge security protocols to safeguard your company from a damaging attack.

8. Increased Productivity

   Employees are most effective when they work together. ERP solutions make it easy to share information—such as purchase orders, contracts, and customer-support records—among teams. It knocks down walls between departments by giving employees appropriate access to real-time data on related business functions.

9. Scalability

   The right ERP system will be scalable and flexible enough to meet your company’s needs today and for the foreseeable future. Cloud systems adapt to minor and major operational changes, even as the amount of data the organization captures and the demand for access increase.

10. Flexibility

    While ERP software helps businesses follow best practices, it also offers the flexibility to support unique processes and objectives. The system allows administrators to build company-specific workflows and create automatic reports important to different departments and executives. An ERP enhances your organization’s innovation and creativity.

11. Customer Service and Partner Management

    An ERP can strengthen a company’s partner and customer relationships. It can provide insights on suppliers, shipping carriers, and service providers, with the cloud enabling even better, more convenient information exchange. Regarding customers, the solution can track survey responses, support tickets, returns, and more so the organization can focus on customer satisfaction.

12. Forecasting

    Finance and FP&A departments are pressured to develop accurate forecasts in response to evolving conditions. Such dynamic financial forecasting empowers organizations to quickly adjust plans based on real-time data and new insights. Seamless synchronization between your ERP and planning and budgeting systems empowers finance teams to easily seed actuals and information in daily planning and forecasts, eliminating the need for departments to coordinate and consolidate offline.

    Regularly review your current technology and ask: Is our technology helping—or holding us back? When outdated or inadequate systems introduce inefficiencies, muddy the data waters, or can’t support a business’s desired changes, it’s time to look for a new solution. Inaccurate data is another sign it’s time for your first or a new ERP system. If your data is unreliable, you can’t trust the reports and insights it produces—and that’s a big problem.

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6 ERP Implementation Challenges

Despite all the value ERP brings, companies may encounter challenges in building the business case for a system or implementing it. It’s important to be aware of these potential roadblocks before adopting a system to adequately prepare and temper doubts from stakeholders. At the same time, realize that many of these can be avoided by creating a detailed plan and selecting the right ERP vendor.

As you prepare for an ERP project, keep these concerns in mind.

1. Budget Considerations

   Because they were expensive to purchase, implement, and maintain, early ERP systems were accessible to large companies only. However, that hasn’t been the case for two-plus decades. While ERPs still require time and financial investment, the technology has become much more affordable thanks to both SaaS systems that charge a recurring fee and more solutions designed for small and midsize businesses entering the market. For instance, organizations can use tools to calculate estimated savings after one and three years to determine when returns will surpass costs.

2. Employee Training

   Like any new tech, ERP has a learning curve. Any potential users—ideally, most or all of your employees—require some training. Although there may be resistance at first, that should fade away as people realize the technology’s many benefits. Newer systems that receive frequent updates are more intuitive and user-friendly, reducing training requirements and increasing adoption.

3. Data Conversion and Migration Challenges

   When moving to a new ERP, you may need to convert some data into a format compatible with the new platform. This can lead to unexpected costs and delays, so review your databases and work with your IT team or an integration partner to identify potential data compatibility issues early on. Conversion efforts can then factor into the ERP implementation plan.

4. Resistance to Change

   An ERP system is loaded with features that can be daunting to your workforce. However, the software available today is far easier to use than legacy systems because vendors have focused on improving the user experience. Additionally, employees need access to only the modules and dashboards required for their jobs, which can make them more approachable. Thorough training should alleviate concerns about complexity.

5. Dedicated IT Resources

   In the past, maintenance was a large expense that deterred lower-revenue businesses from adopting ERP. Not only did a company need an IT staff to handle patches, security, and required system upgrades, it often had to pay the vendor or a third-party service provider for its expertise. This is less of a concern with a SaaS system because the provider takes care of all maintenance and regularly moves all customers to the latest version—and it’s all built into the subscription price. Companies concerned about maintenance should thoroughly vet a potential supplier to make sure it offers a true vendor-managed SaaS system.

6. Doesn’t Solve Process and Policy Issues

   If you have error-prone or inefficient processes, an ERP won’t necessarily fix them, even though it may increase accuracy. It can, however, uncover problems in your operations and help you brainstorm better ways to do business. The same goes for policies that hold the organization back—it’s up to you to adjust those and then configure the system to support better ways of doing business.

   For business units, ERP software can automate many error-prone tasks, like account reconciliations, customer billing, and order processing, and provide the information teams need to operate more efficiently.

   But the real beauty of ERP is that it can give both a 10,000-foot view of the company’s health and detailed insights into a specific process or KPI by both storing and organizing data as well as identifying patterns and flagging anomalies that require investigation. Such scope of analysis is not possible with just a spreadsheet.

ERP Deployment Options

Various ERP deployment models address the needs of different organizations, and it’s important to understand the unique characteristics of each so you can identify the best option for your business. There is some nuance here, like multiple “cloud” deployment versions—it’s not just on-premises vs. cloud.

On-Premises ERP

With an on-premises system, the business runs the software on its servers and is responsible for security, maintenance, upgrades, and other fixes. Upkeep usually requires in-house IT staffers with the necessary expertise. For many years, on-premises ERP was the only option. Still, the popularity of this deployment model has declined rapidly in recent years, and market-watcher IDC predicts continued declines.

Cloud-Based ERP

Cloud-based ERP runs on remote servers managed by a third party. Users typically access a cloud ERP through a web browser, giving them greater flexibility—they can dig into information and reports from anywhere with an internet connection. There are multiple deployment options for cloud ERP, including hosted cloud and true cloud.

• Hosted cloud solution: A company purchases a license but runs it on remote servers managed by a third party. The servers and other hardware are often rented from the hosting company. Data is stored in a private cloud as a separate instance of the ERP used by just one company. Infrastructure is not shared with other organizations, so this is sometimes called single tenant. This setup can give the client greater control over the software and allow for more customizations, but it also creates more work for the business. Think of it as a middle ground between on-premises and true cloud software.
• True cloud solution: A true cloud deployment allows companies to pay a fee for access to servers and software they do not have to manage. SaaS ERP solutions are a popular version of a true cloud solution, as the vendor handles everything on the back end, including patches and upgrades. True cloud is also known as multi-tenant because multiple businesses use the same software instance and hardware. This reduces the need for an in-house IT team, plus the company always has the software’s most up-to-date, secure version.

Hybrid ERP

Hybrid ERP combines elements of on-premises and cloud deployments. One hybrid approach is two-tier ERP, where a corporation keeps its on-premises ERP in place at headquarters but employs cloud systems for subsidiaries or certain regional offices. These cloud solutions are then integrated with the on-premises system. Other companies may use cloud solutions for certain business needs while using their on-premises systems for other functions. Either way, the cloud systems must be linked to the on-premises platform for a steady flow of information—often easier said than done.

Open Source ERP

Like other open source applications, open source ERP is an inexpensive, sometimes free, alternative suitable for some companies. Many open source ERP providers allow businesses to download their software for free and only charge a low annual fee if the customer wants cloud access. These solutions have improved thanks to more modern web-based interfaces and a growing number of modules, but companies need to understand what they’re taking on with an open source ERP. Support from the provider will be minimal, and configurations and system improvements tend to fall on the client. That means you need technical staff with a deep knowledge of developing and configuring the software.

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

When Should You Transition to an ERP System?

Companies often realize they need ERP systems when day-to-day operations become difficult to manage with spreadsheets or disconnected software tools. Telltale signs include spending too much time reconciling data, missing important deadlines, or struggling to close the books on time. If departments are operating in silos and decision-makers lack real-time visibility, it’s also time to upgrade.

ERP systems become especially critical during periods of growth or change. Whether opening new locations or expanding headcount, scaling a business is much easier with systems built to scale with you. ERP systems help companies automate processes, improve accuracy, and make better use of their people and resources.

The tipping point often comes when inefficiencies start affecting critical functions—for example, inventory counts may no longer match what’s on the shelf or financial reports take too long to produce. At that point, the cost of inaction outweighs the investment in ERP.

How to Select the Right ERP System

A unified, cloud ERP system helps companies run their entire business in one place. These comprehensive offerings typically 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.

Here is how to go about selecting an ERP for your business.

1. Perform a Needs Assessment

   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 evaluate all options thoroughly.

   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. This allows organizations unprecedented access to this software, 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.

2. Evaluate Vendors

   An ERP is a critical business system that must mesh with how each company operates, so no universal “best” platform exists. 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 industry. Always ask for reference customers and check out success stories. Businesses should also consider the software provider’s roadmap for emerging technologies.

3. Assess Customization and Scalability

   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 money flow into and out of the organization. Products-based companies typically want to digitize inventory and order management immediately to 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. On the other hand, service organizations may start with a PSA application to simplify employee time, 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 many employees should add HRMS/HCM systems sooner rather than later to improve the employee experience and earn a reputation as a great workplace.

4. Perform a Total Cost of Ownership (TCO) Analysis

   The cost of an ERP project varies widely depending on vendor, modules, and deployment model. ERP systems are priced with the target audience’s needs in mind, so those built for emerging and high-growth businesses will be more affordable than those used by Fortune 500 enterprises.

   Cloud-based ERP, and specifically SaaS options, usually have lower upfront costs than on-premises software because there’s no hardware to purchase or system experts to hire. With on-premises software, companies purchase a perpetual license that’s more expensive, but it’s a one-time expense. A hybrid model could be even more expensive, as it requires many resources to support on-premises ERP and the subscription fees for cloud applications.

   The costs of ERP go beyond licensing. When calculating the TCO of various ERP solutions, factor in implementation and operating expenses related to customization, maintenance, training, upgrades, and support.

ERP Case Studies

Boll & Branch found immediate success with its organic bedding and complementary products after it launched in 2014, but that rapid growth brought challenges: It struggled to close the books efficiently and track critical financial metrics. The retailer implemented NetSuite ERP, which monitors all transactions—as many as tens of thousands per day—to provide a real-time view into the company’s financials. This visibility was critical years later when a private equity firm conducted due diligence on Boll & Branch before investing $100 million in the business. The business also uses NetSuite Inventory Management to track stock levels across ecommerce, owned retail, and wholesale channels, as well as landed cost for each item it sells.

Two friends found major process inefficiencies when they transitioned their candy wholesale business into Green Rabbit, a company specializing in perishable goods logistics. Relying on QuickBooks, Excel, and email led to disconnected databases and IT delays. Green Rabbit adopted NetSuite ERP and implemented it within three months. Now they can swiftly ship products across the country without inventory errors, manage orders without delays, and easily scale their order volume without system impact.

While ERP software was initially designed for enterprises—as the name indicates—today’s cloud-based SaaS ERP offerings have lowered barriers to entry, helping countless emerging and midsize companies increase their efficiency, visibility, and, in turn, profitability. Although there are costs that come with purchasing and deploying ERP software, it often delivers a quick return on investment.

A Short History of ERP

The roots of ERP systems stretch back to the 1960s, when manufacturers began using software to manage inventory and production planning. These early systems evolved into material requirements planning (MRP) tools that helped companies coordinate the materials needed for manufacturing.

By the 1990s, technology and business needs had advanced, and Gartner coined the term “enterprise resource planning” to describe software that brought together multiple business functions into one system. ERP now went beyond manufacturing, incorporating finance, HR, and other critical operations.

Over the past two decades, cloud computing has driven the next evolution of ERP. Cloud-based ERP solutions made powerful systems more accessible, scalable, and easier to manage. Today, ERP systems are a foundational technology used by companies of all sizes to run smarter and more profitably.

The Future of ERP

Now that companies understand the tremendous benefits of an ERP, they’re looking for ways to up the game. Technologies like 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.

Artificial Intelligence and Machine Learning in ERP

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 can help develop more accurate forecasts.

Blockchain for Supply Chain Management

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

AR for ERP

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. The ERP can store all the data points and images needed to make AR work.

Internet of Things (IoT) Integrations

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

Unified ERP System

Aside from these buzzy technologies, more businesses want to consolidate all their applications on a single platform. Vendor consolidation is also top-of-mind, according to a CIO.com poll, which found that to be the plan for 95% of respondents. Their top reason? To consolidate systems architecture and reduce the number of point solutions. As software providers expand their offerings and more businesses realize the value of a unified ERP system, this will become increasingly common.

Grow Your Business With NetSuite ERP

NetSuite ERP is designed to give companies a single, unified solution to simplify operations, build visibility, and scale as they grow. Built for the cloud from day one, NetSuite bypasses the need for disconnected systems and the headaches of managing integrations. NetSuite addresses the most common ERP challenges with a scalable and modular approach, so businesses can start with what they need and add more over time. Its intuitive, role-based dashboards ease employee adoption, and built-in best practices help teams avoid costly customizations. And because NetSuite handles upgrades and maintenance, IT teams can focus on innovation, not system upkeep.

We cover 9 easy steps to choosing an ERP that's perfect for you, including what to ask vendors and how to build a business case.

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ERP FAQs

What does ERP stand for?

ERP stands for enterprise resource planning, a term research firm Gartner coined in 1990 to refer to the business management platforms enterprises had begun using.

What is ERP in simple terms?

ERP is software that businesses rely on to run and monitor the performance of their daily business operations. It uses a central repository to store data from across the company, from finance to supply chain to human resources, while also providing the ability to analyze and report on all of that information.

How does ERP work?

An ERP is an application that makes use of a central database that receives information from various departments within a company. The ERP includes integrated modules dedicated to functions like accounting, inventory management, and CRM. An ERP gives companies a single place to store, view, manage, and interpret data.

What is an ERP system?

ERP systems are composed of modules that focus on specific business processes, such as accounting, manufacturing, and CRM. These modules function using a central database, allowing access to real-time data, and give visibility into business performance across these departments while minimizing data duplication. A complete ERP system will help companies budget, plan, and report on financial results.

Why is ERP used?

Companies use ERP systems to connect data from multiple business functions within a centralized system for a consolidated repository accessible across the organization. This allows different departments to operate with the same results. Companies also save time and money by automating manual processes and reducing opportunities for errors.

Is ERP just for finance and accounting?

While financial management and accounting are key ERP functions, the system’s capabilities stretch far beyond this department. It can automate and better manage tasks related to purchasing, inventory and order management, manufacturing, project management, workforce management, sales and marketing, and other critical business functions.

Why do companies use ERP?

ERP software has become an invaluable tool for companies because it generates major time and cost savings. Beyond automating tasks, an ERP provides companywide visibility and reporting that tells executives and managers where teams should focus their time and attention, which may mean addressing pressing problems.

What’s the difference between ERP and MRP?

An MRP, or material resources planning, system was a precursor to ERP used by manufacturers to better prepare for production runs. The manufacturing-related tasks MRP systems handled, like procurement and inventory tracking, are just one component of today’s ERP systems.

What is two-tier ERP?

Two-tier ERP is an approach that has gained traction among larger companies with subsidiaries, distinct business units, or regional offices. Instead of forcing these business units or offices to use the legacy ERP, they run on a less-resource-intensive ERP—often a software-as-a-service (SaaS) solution—that’s integrated with the Tier 1 system.

What are the advantages of cloud-based ERP?

Many of the advantages of cloud ERP fall under lower costs and fewer headaches. A cloud solution is usually cheaper and faster to implement, and post-implementation expenses may be lower because the vendor takes care of all maintenance and upgrades. A cloud-based system can also seamlessly support your growth, as the vendor manages all hardware.

What is the difference between ERP and CRM?

ERP systems manage internal operations, like finance, inventory, and HR, while CRM systems focus on customer interactions, sales, and support. ERP systems drive efficiency across departments, while CRM systems help grow and retain customer relationships. Together, they give businesses a complete view of operations and engagement.