ERP system explained simply

ERP stands for Enterprise Resource Planning. It supports the planning of business resources – including capital, equipment, materials, personnel, and information and communication technologies. The goal is to use available resources as efficiently as possible to create streamlined, cross-departmental processes.

The first solutions focused on material requirements planning and entered the market in the 1970s – called Material Requirements Planning systems (MRP). About a decade later, in the 1980s, additional functions such as production planning and control were added. To reflect the link to MRP, these were named “MRP II systems.”

Step by step, further features were integrated, for example, for process planning and control, so that all resources within a company could be covered. Combined with modules for accounting, finance, CRM, and more, the first ERP systems were born. A key difference compared to MRP: while MRP was used only in industrial sectors, ERP solutions were from the start valuable for almost all industries – whether for small businesses or startups.

The real accelerator of ERP development was the rise of the internet, the emergence of the Internet of Things, and the spread of web-based technologies. This trend continues today with cloud solutions that have revolutionized the market. Depending on whether it is a private or public cloud, data is hosted on a private or public external server. Maintenance, servicing, and troubleshooting are handled by the provider.

ERP systems enable companies to manage all their business processes in one integrated solution. Functions such as accounting, HR, logistics, production, and sales are combined, creating greater transparency, efficiency, and faster decision-making.

By centralizing data, an ERP system reduces errors and redundancies, strengthens collaboration between departments, and delivers real-time insights into business performance. It also helps companies track batches and maintain responsiveness – ensuring quick reactions to market changes and supporting long-term growth and competitiveness.

How a company uses ERP is individual and may vary – but some benefits are universal:

Better decision-making

All departments access the same data, ensuring consistent and transparent results. Analyses are reliable and always up to date.

Automation

Processes such as scheduling, reordering materials, or product availability can be set up as automated workflows. They run automatically, are documented, and reduce manual effort.

Integration

Instead of multiple isolated applications, ERP combines all functionalities in one system. This creates clarity and simplifies daily work.

Collaboration

Shared data, transparency, and correct results improve cooperation between departments. Misunderstandings are avoided, information flows smoothly, and employees use the system with confidence.

Data quality

Manual entry is reduced, errors and redundancies are avoided, and data consistency improves. This builds trust and strengthens business outcomes.

Time savings

No more searching through binders – all information is in one central system. With always up-to-date data, there’s no need to check with colleagues. Processes become faster, lead times shorter, and resources are saved – time, nerves, and money.

Digitalization

Digitalization and digital transformation are defining today’s business landscape. An ERP system forms the foundation to advance digitalization in the company and integrate additional connected systems.

ERP systems provide an overview of business processes and resources. At their core is a controlled management approach, with all data stored in a central database. Once implemented, ERP supplies and processes information – with the goal of automating processes to save time and money.

Because ERP solutions are modular, they can be tailored to cover different areas of a business. Each module is responsible for specific tasks and processes. All modules share the same data basis, ensuring seamless data exchange. This enables smooth communication across employees and departments and gives a holistic view of the company.

ERP helps companies organize and optimize their operations through different modules, each focusing on a specific area. Each module ensures that important processes run smoothly and that all departments work together optimally.

Here is a brief overview of the most important ERP modules:

• Finance & Accounting (FI)
• Sales & Distribution (SD)
• Material Management (MM)
• Production Planning (PP)
• Warehouse Management (WM)
• Purchasing
• Batch Management
• Recipe Management
• Quality Control
• Audit Trail

ERP systems can be deployed in different ways depending on a company’s needs and resources. The main deployment models are on-premises, cloud, and hybrid solutions – each with its own characteristics and requirements.

On-premise systems

With an on-premises setup, the ERP software is installed and operated on the company’s own servers. The company is fully responsible for managing and maintaining the system, including updates, backups, and security.

This model offers businesses complete control over their data and systems but requires significant investment in IT infrastructure and personnel. On-premises solutions are often chosen by companies with strict data protection requirements or specific customization needs.

Cloud systems

Cloud ERP systems are delivered and hosted via the internet. The ERP provider takes care of maintenance, security updates, and system availability. There are two main cloud models: Public Cloud and Private Cloud.

Public cloud

In a public cloud, the ERP software is hosted by an external provider on shared servers. Multiple companies use the same infrastructure, but their data is logically separated. This model is typically more cost-effective and quicker to implement, as no in-house hardware is required.

Private cloud

A private cloud is a cloud-based solution where resources are dedicated exclusively to a single company. This provides greater security and control compared to a public cloud, while still benefiting from an externally managed infrastructure.

Hybrid systems

Hybrid ERP systems combine on-premises and cloud elements. Companies can run certain ERP modules on their own servers while hosting others in the cloud. This model offers the best of both worlds – the flexibility and scalability of the cloud, combined with the control and security of on-premises deployment.

Hybrid setups are especially useful for businesses planning a gradual migration to the cloud or those needing to keep sensitive data in-house.

Integrating ERP systems (Enterprise Resource Planning) with other solutions significantly improves information flow and increases the efficiency of business processes. Connecting an ERP system with a Document Management System (DMS) makes it possible to centrally manage important documents and automatically provide them in the context of processes. Linking Electronic Data Interchange (EDI) enables the fast and error-free exchange of business data with partners and suppliers. Integration with Power BI adds extensive analytics by transforming ERP data into in-depth business insights and reports. Finally, connecting to Customer Relationship Management (CRM) systems ensures that customer information and sales processes are closely tied to core business operations – resulting in better customer service and greater sales efficiency.

In regulated industries such as food, cosmetics, chemicals, pharmaceuticals, medical technology, and biotechnology, ERP systems are particularly important as they help companies comply efficiently with strict regulatory requirements and compliance obligations. These industries are often subject to complex regulations such as GMP (Good Manufacturing Practices), FDA requirements, or ISO standards.

ERP systems support companies in ensuring quality control, traceability, and documentation obligations. They provide real-time transparency across production processes, inventory levels, and supply chains, making it easier to handle regulatory inspections and quality audits.

They also enable complete traceability of batches and products, which is critical in the case of recalls or quality issues. In this way, ERP systems ensure not only efficiency but also safety and compliance in sensitive industries.

It is not possible to give a reliable blanket figure for the investment required to introduce an ERP system. The effort involved is highly individual and depends on the requirements that need to be met and which system is selected. To make a realistic estimate, both short- and long-term costs should be considered before starting a project. Essentially, there are three main cost categories:

Internal costs

These include, for example, shifting priorities during the implementation phase – after all, the project has top priority. Training and the time needed for users to get familiar with the system also belong here. During these periods, additional or new tasks arise for users, leaving less time for their regular work.

Direct costs

Direct costs are those associated with acquiring the software itself. Depending on the range of functions and the number of users, these costs can vary considerably.

External service costs

The third category covers costs for implementation, training, as well as maintenance and support.

In addition to these main factors, the purchase model also plays a role. ERP solutions can be purchased or rented. Each option has its advantages and disadvantages. Choosing the model that best fits the company is an individual decision – and one that can be made more quickly with professional advice.

Yaveon 365 is the right ERP solution for companies in the batch-driven process manufacturing industry. Its goal is to make business processes in these companies more efficient and more transparent.

The following highlights await you:

• Batch management and traceability: the solution offers comprehensive batch management to ensure that all product movements can be tracked. This is especially important where quality management and compliance with health and safety regulations are essential.
• Recipe and bill of materials management: Yaveon 365 supports the management of recipes and bills of materials used in production, enabling precise and consistent batch production.
• Quality management: Integrated functions for quality testing and assurance ensure that companies can maintain their quality standards and comply with legal requirements.
• Compliance and standards: Yaveon 365 helps companies comply with legal requirements such as FDA regulations, GMP (Good Manufacturing Practice), or other industry-specific standards. This makes it easier to pass quality audits and meet regulatory requirements.
• Resource planning and production control: The solution offers complete resource planning and production control – from procurement through production to delivery.

What is Microsoft's ERP system called?

Microsoft offers two ERP systems: Microsoft Dynamics 365 Business Central and Microsoft Finance & Operations.

What is the best ERP system?

Which ERP system is best for a company depends on its specific requirements. Not every ERP solution is equally suitable for different needs. Microsoft Dynamics 365 Business Central, for example, is particularly popular with small and medium-sized businesses because it offers a well-matched range of functions.

Why does it make sense to switch ERP systems?

Switching to another ERP system makes sense if its functions better fit a company’s requirements. A small business, for instance, does not need corporate-level functionality.

What does ERP system mean in German?

In German, ERP system is usually referred to as a system for enterprise resource planning.

Is an inventory management system an ERP system?

Inventory management systems and ERP systems are different. Inventory management systems only handle the inventory processes of a company digitally and automatically. These mainly include procurement, demand planning, logistics, and warehousing. Their focus is primarily on material flow, which is why they are usually just one module within a complete ERP system.