ERP stands for Enterprise Resource Planning. Wikipedia describes ERP software as “a suite of integrated applications that an organization can use to collect, store, manage and interpret data from many business activities…that uses a database as an information repository”.
More simply, ERP software is the core program used by many businesses to manage all the varied information they need to keep track of. Originally, it was only adopted by larger companies, but starting about 35 years ago, smaller companies began implementing ERP systems to improve efficiency through the use of a consolidated program.
The components of an ERP system depend on your industry, but for manufacturers it typically includes accounting, purchasing/receiving, order entry, manufacturing, inventory control, shipping and invoicing, barcode label generation and reporting to bring it all together. In the food industry, industry specific functionality in ERP systems can include traceability, expiry date and allergen tracking, QC, sometimes CRM, EDI and more. Going even further, many food specific ERP systems have moved beyond the office to include handheld warehouse management systems (WMS) so scanners can be used for product movement and scale functionality to make it easier to deplete raw materials and to create interim or finished goods so they are recorded in the ERP as the transactions take place. More recently business intelligence and dashboards have also been added to supplement the typical reporting functionality.
The goal of an ERP system is to provide a tool to manage all the core functions a business needs to perform, bringing them together into one live, integrated program. Doing so should remove duplicate entry, reduce errors, and allow the consolidated information to drive real time reporting so that managers have the information they need to make informed business decisions.
Typically, businesses go searching for ERP software when they are growing. As a small company grows, it tends to add different programs to manage individual needs. It might, for example, have an accounting program, a label generation program, a series of spreadsheets for calculating costs or tracking inventory, and a variety of manual logs or other task specific programs. Eventually the business finds itself with a lot of disconnected systems, requiring duplicate entry, which can result in increased errors. They may have trouble truly understanding their costs if their raw material prices change frequently. Trying to bring together customer specific pricing with changing costs can make monitoring profitability across items and customers very challenging. Owners and Manager wonder if there is a better way to manage all that information?
Industry specific ERP programs can be a great option to solve the information management problem. They provide the opportunity to bring together the disconnected pieces, allowing a business to access more timely information, set up more standardized processes for staff, allowing the business to scale its operation more easily as it grows.
If you aren’t sure if you are ready for an ERP system, this blog could help you decide.