How Do ERP Systems Work?: Basic Features And Types
14 December, 2021 by
How Do ERP Systems Work?: Basic Features And Types
Ese Nikori

How Do ERP Systems Work?

Business can be hectic and you need every tool at your disposal when you are trying to overcome challenges or capitalise on opportunities. An ERP system (Enterprise Resource Planning) is one of those business tools that can help you work more efficiently. ERP systems integrate data from various internal and external sources into one system which allows for better overall business performance.

The idea behind ERP is to not just improve a business but also to integrate all its different branches. This makes ERP solutions an integrated system that covers all the functions of a business. How do these systems work? This would be covered in this article.

What is an ERP System? 

ERP stands for Enterprise Resource Planning. It is a holistic view of your business, incorporating all parts and functions of your organisation in one system. ERP Systems allow organisations to provide integrated information required for management activities in an enterprise, through sharing data among various functional areas of the organisation.

It applies to any company working with several different departments. ERP provides an end-to-end view of a business process or workflow, from planning to execution.

An ERP system is designed to solve business problems by improving productivity, managing complexity and by providing transparency throughout the entire enterprise

How do ERP Systems Work?

With an ERP system, organisations can increase productivity by streamlining their business processes. Businesses that use these programs eliminate unnecessary steps and automate their workflow so they can identify and solve problems faster. ERPs systems provide a company with a clear perspective on the health of the business and create a mechanism for projecting future results. This makes them ideal tools for helping companies improve their operations.

As mentioned, an ERP system is a special type of software that helps businesses manage their resources and systems. One of the best ways to explain how an ERP system works is to put it in comparison with a baking business. Just like the ERP system, the bakery is constantly working to produce its products and facilitate its growth. However, for this bakery, having a strategy for internal operations and sales is going to be extremely important.

When the bakery’s products start to take off, they begin to think about how they can have better internal operations and more effective sales strategies. This means that having a solid strategy is similar to having an ERP in place. In order to make sure every aspect of your business is running smoothly, you need a clear plan of action.

Note that;

An ERP system provides centralised data storage for any business.

How Do ERP Systems Work?

What are the Different Types of ERP Systems?

The three most common types of ERP systems are on-premise, cloud based, and hybrid. Each serves a different purpose for your business. Hybrid models often include a combination of both cloud based and on premise components. Here's an explanation of each model:

1. Cloud based

When people think about ERP software, they usually think of bulky on-premise software that requires expensive hardware to run. But ERP software can also be found in the cloud. 

Cloud-based ERP systems are software as a service (SaaS) implementations. Instead of purchasing the program, you can access it through a cloud server that you access online. Cloud-based ERP is accessed through a web browser. Software updates and upgrades occur automatically.

2. On premise

For on-premise ERP you need software that is installed on your own hardware and runs within a public or private cloud environment.

Traditional ERP is on-premise and requires the business to purchase hardware for it. This makes updating it difficult because you have to upgrade the system every time a new version of the software comes out.

3. Hybrid 

A hybrid ERP system is a combination of cloud and on-premise systems. Although a hybrid ERP system is a good choice for companies that want to use both cloud and on-premise software, the fact that it's a tier two system might also create some problems. Hybrid cloud systems are more complex because they need to integrate with different types of software and hardware. They also give you less control and flexibility than an enterprise or in-house cloud solution.

Each type is designed to suit a specific company profile and has its own advantages and disadvantages. The system you choose will depend largely on what type of business you operate, your budget and preferences, your timeline for switching to a new system, and the support you need moving forward.

What are the Basic Functions of an ERP System?

ERP software is a comprehensive business management solution that covers all aspects of running a business, from streamlining finance and operations to purchasing and human resource management.

ERP technology has changed the way organisations operate. These tools integrate different processes with just a few clicks, saving you time and money. The ERP market is now more competitive than it ever was before. ERP software vendors are now competing by providing an enhanced user experience and continuously developing new features.

1. It acts as a data repository where all input, output, and processing of operations are performed.

2. Proves compatibility among the different groups that use it.

3. Provides information for controlling operations better.

4. Eases the communication process within the organisation by making data available to all branches or departments in real time.

5. Information is automatically updated to avoid making mistakes when doing future tasks or jobs.

Final Takeaway 

It is not easy for any business to function without an ERP system. They are very necessary in today's competitive business environment.

If you are considering a new ERP system, it can be hard to know where to start. The options and features can be overwhelming, and you will probably have questions that need answers before jumping in.

  • Ask someone you trust, someone who really knows the company, what they think. If you have never worked with an ERP system before it is important to understand the basics and how it works within your business.

  • Try the demo version of an all-inclusive cloud solution, like Odoo. This would let you know how it works and if it is a perfect fit for your business.

Click here to request a demo of Odoo ERP.

How Do ERP Systems Work?: Basic Features And Types
Ese Nikori
14 December, 2021
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