ERP system simple explained

ERP is the abbreviation for Enterprise Resource Planning. ERP is used to plan business resources, which include capital, operating resources, materials, personnel and information and communication technologies. The aim is to use available resources as efficiently as possible in order to implement simple and efficient processes across departments.

The first solutions responsible for material requirements planning came onto the market in the 1970s - so-called material requirements planning systems (MRP). Around ten years later, in the 1980s, further functions were added: production planning and control. To emphasize the link to MRP, the name "MRP II systems" was chosen.

This was gradually followed by further functions, for example for planning and controlling processes, in order to fully cover the resources in the companies. Combined with options for bookkeeping, accounting, CRM and much more, the first ERP systems were born. A further addition: while MRP solutions had previously only been aimed at industrial sectors, ERP systems made things easier for (almost) all sectors of the economy right from the start, regardless of whether it was an ERP system for small companies or an ERP for start-ups.

The factor that has driven the development of ERP the most has been the expansion of the internet, the development of the Internet of Things and the associated emergence of web-based technologies. This development can still be followed today, as the latest cloud solutions have conquered the market. Depending on whether it is a private or public cloud, the data is then hosted on a private or public external server. The operator is also responsible for maintenance, servicing and, if necessary, troubleshooting.

ERP (Enterprise Resource Planning) systems are crucial as they enable companies to manage all their business processes in a single, integrated software solution. They combine functions such as accounting, HR management, logistics, production and sales, resulting in a better overview, more efficient workflows and faster decision-making processes. By centralizing data, an ERP system reduces errors and redundancies, improves collaboration between departments and provides real-time insights into the company's performance. It also helps companies keep track of their batches and ensure responsiveness. This enables a faster response to market changes and supports long-term growth and competitiveness.

How a company uses its ERP system is individual and can vary from type to type. However, there are some benefits that every ERP user will feel:

Better decision making

As every department accesses the same data, the results are consistent and comprehensible. Evaluations are reliable and up to date.

Automation

With an ERP system, processes such as scheduling, reordering materials or product availability can be incorporated into workflows. They are carried out and documented automatically and reduce the workload.

Integration

Instead of using numerous isolated solutions, an ERP system combines all functionalities. This creates an overview and makes day-to-day work easier.

Collaboration

Standardized data, transparency and correct results lead to better cooperation between departments. Misunderstandings are avoided, the flow of information within the company is improved and colleagues enjoy using the system.

Better data quality

An ERP system reduces the error rate, as data no longer has to be entered manually. Redundancies and inconsistencies are avoided - the quality of your own data increases. This creates trust and improves the result.

Saves time

Instead of having to search for folders, all information is stored in a central system. Because the data is up to date here, there is no need to ask the neighboring office what the latest status is. Processes are simplified and throughput times are reduced. This saves time, nerves and ultimately money.

Digitalization

Digitalization and digital transformation are the buzzwords of the moment. An ERP system is the right basis for harnessing the potential of this movement, driving digitalization in companies and meeting the challenges of digitalization, as this is where the integration of all subsequent systems takes place.

Better data quality

An ERP system reduces the error rate, as data no longer has to be entered manually. Redundancies and inconsistencies are avoided - the quality of your own data increases. This creates trust and improves the result.

Saves time

Instead of having to search for folders, all information is stored in a central system. Because the data is up to date here, there is no need to ask the neighboring office what the latest status is. Processes are simplified and throughput times are reduced. This saves time, nerves and ultimately money.

Digitalization

Digitalization and digital transformation are the buzzwords of the moment. An ERP system is the right basis for harnessing the potential of this movement, driving digitalization in companies and meeting the challenges of digitalization, as this is where the integration of all subsequent systems takes place. More about the benefits of an ERP system

ERP systems provide an overview of business processes and the resources available in the company. They are based on a controlled management system in which data is stored in a central database. Once an ERP system has been implemented, it provides and processes information. The aim is to automate business processes in order to save time and money.

In principle, ERP can be used in almost all areas of a company. Because ERP systems generally have a modular structure, numerous business areas can be covered with individual functions. Each module is therefore responsible for specific tasks and processes.
The associated modules and functions access the same database so that data can be exchanged seamlessly between the modules. This enables smooth communication between employees and departments and provides an all-encompassing view of the company.

The ERP system helps companies to organize and improve their processes. It consists of various modules, each of which covers 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:

• Financial Accounting (FI)
• Sales & Distribution (SD)
• Materials Management (MM)
• Production scheduling (PP - Production Planning)
• Warehouse Management (WM)
• Purchasing (Purchasing)
• Batch Management
• Recipe management
• Quality control
• Audit trail

ERP systems can be operated in different ways, depending on a company's needs and resources. The most important operating models are on-premise, cloud and hybrid solutions, each of which has its own characteristics and requirements.

On-premise systems

With the on-premise version, the ERP software is installed and operated on the company's own servers. The company is fully responsible for managing and maintaining the software, including updates, backups and security. This operating model gives companies full control over their data and systems, but requires significant investment in IT infrastructure and IT staff. On-premise solutions are often preferred by companies that have strict data protection requirements or need special customization.

Cloud systems

Cloud ERP systems are provided and hosted via the internet. The ERP provider assumes responsibility for maintenance, security updates and system availability. There are two main types of cloud operating models: Public Cloud and Private Cloud.

Public cloud

In a public cloud, the ERP software is operated by an external provider on public servers. Several companies use the same infrastructure, but the data is logically separated from each other. This operating model is often more cost-effective and quicker to set up, as no in-house hardware is required.

Private cloud

A private cloud is a cloud-based solution in which the resources used are reserved exclusively for a single company. This offers more security and control than the public cloud, while still providing the benefits of an externally managed infrastructure.

Hybrid systems

Hybrid ERP systems combine elements of on-premise and cloud solutions. This allows companies to run certain ERP modules on-premise, while other functions are hosted in the cloud. This operating model offers the best of both worlds: the flexibility and scalability of the cloud and the control and security of the on-premise installation. This can be particularly beneficial for companies looking to gradually migrate to the cloud or keep sensitive data local.

The integration of ERP (Enterprise Resource Planning) systems with other systems improves the flow of information and significantly increases the efficiency of business processes. By linking an ERP system with a document management system (DMS), important documents can be managed centrally and made available automatically in the context of processes. The connection of Electronic Data Interchange (EDI) enables the fast and error-free exchange of business data with partners and suppliers. In addition, integration with Power BI offers comprehensive analysis options by using data from the ERP system for in-depth business insights and reporting. An interface to Customer Relationship Management (CRM) systems ensures that customer information and sales processes are closely linked to central business processes, resulting in better customer service and increased sales efficiency.

It is not possible to make a serious general statement about the amount that needs to be spent on the introduction of an ERP system. The cost is very individual and depends on which requirements need to be covered and which system is chosen. In order to be able to make a good estimate, short and long-term costs should be taken into account before the project starts. There are basically three main cost groups:

Internal costs

These include, for example, other priorities during the implementation phase - after all, the project has top priority. But they also include training or the familiarization period for users. During these periods, users are faced with additional or new tasks and there is less time for the actual work.

Direct costs

The direct costs, i.e. those incurred by the purchase of the software itself, must also be taken into account. These can vary greatly depending on the range of functions and number of users.

External service costs

A third point is the costs incurred through the introduction of the software, training, maintenance and support.

In addition to these main factors, the purchasing model also plays a role. ERP solutions can be purchased or rented. Each option has its advantages and disadvantages. The choice of which option best suits your company is individual and can be accelerated by professional advice.

Yaveon 365 is the right ERP solution for companies in the batch-controlled process manufacturing industry. It aims to make the business processes of these companies more efficient and transparent.

The following highlights await you:

• Batch management and traceability: the solution offers comprehensive batch management to ensure that all product movements can be traced. This is particularly important where quality management and compliance with health and safety regulations are critical.
• Recipe and BOM management: Yaveon 365 supports the management of recipes and BOMs used in production, enabling accurate and consistent production of batches.
• Quality management: Built-in quality inspection and assurance features ensure that companies are able to maintain their quality standards and meet regulatory requirements.
• Compliance and standards: Yaveon 365 supports companies in complying with legal regulations, such as FDA guidelines, GMP (Good Manufacturing Practice) or other industry-specific standards. This helps to pass quality audits and meet legal requirements.
• Resource planning and production control: The solution offers complete resource planning and production control, from procurement to production and delivery.

What is Microsoft's ERP system called?

There are two ERP systems from Microsoft: Microsoft Dynamics 365 Business Central and Microsoft Finance & Operations.

What is the best ERP system?

The best ERP system for a company depends on its requirements. Not every ERP solution is equally suitable for different ideas. Microsoft Dynamics 365 Business Central, for example, is particularly popular with small and medium-sized companies as it offers a suitable range of functions.

Why does it make sense to switch ERP systems?

It makes sense to switch to a different ERP system if its functions are better suited to a company's requirements. For example, a small company does not need corporate functionalities.

What does ERP system mean in German?

In German, an ERP system is usually referred to as a company's resource planning system.

Is an enterprise resource planning system an ERP system?

Enterprise resource planning and ERP systems are different. Enterprise resource planning systems simply process a company's merchandise management digitally and automatically. This essentially includes the areas of procurement, determination of requirements, logistics and warehousing. However, merchandise management systems are primarily aimed at the flow of materials and are therefore usually a single module of an ERP system.

Learn more about the difference between merchandise management and ERP systems