ERP Functionality: Understanding ERP Systems and Features

ERP systems have the ability to transform manufacturing companies, optimize operations, increase productivity, cut costs and help businesses remain competitive. If you’re new in your journey toward understanding what an ERP solution could offer your business, learn more about common ERP functionality and features you can expect below.

What is ERP?

ERP stands for Enterprise Resource Planning. It’s a type of software or system businesses use to plan and manage their daily activities, like their supply chain, manufacturing, services, financials and other operations. ERP systems are all-encompassing business software, allowing users to view and connect all operations in one comprehensive place through common databases either on-site/on-premise or in the cloud. Many manufacturers use these systems to automate tasks like accounting and procurement, project management, customer relationship management, risk management, compliance and supply chain operations. The goal of using an ERP system is to increase visibility, collect data on aspects of the business, and use that data to make decisions more strategically and increase efficiency across the enterprise. 

Why is ERP Functionality Important?

ERP functionality varies. For that reason, it’s important to find a customizable system and knowledgeable vendor to help ensure that the system and functionality you end up with is what you need for your business goals, operations, processes and personnel. It’s critical to consider upfront what benefits of an ERP solution you’re after to achieve optimal return on investment.

ERP systems are categorized into tiers based on the size and complexity of the enterprise they’re able to serve. Tiers include:

• Tier I ERP Systems: These support large, global enterprises. They’re designed to handle internationalization issues, like currency, language, alphabet, postal code, accounting rules and more. 
• Tier I Government ERP Systems: These solutions primarily support large federal agencies and their accounting, procurement and HR needs. 
• Tier II ERP Systems: This tier supports large enterprises that may be multinational but not quite global. Users at this level may be standalone entities or business units of larger global enterprises. 
• Tier II Government ERP Systems: These focus mainly on the needs of state and local governments. 
• Tier III ERP Systems: Tier III systems are best suited for mid-tier enterprises. Most of these can handle a few different languages and currencies but only a single alphabet.
• Tier IV ERP Systems: These serve smaller enterprises and tend to focus more on accounting operations. 

Regarding ERP functionality, it’s also important to be able to differentiate on-premise functionality and features versus those in the cloud. On-premise solutions operate off of a business’ own servers, whereas cloud ERP systems utilize cloud technology and fall into two major groups:

• ERP as a Service: Here, all customers operate on the same code base and have no source code access. These users are able to configure but not customize the code.
• ERP in an IaaS Cloud: If an enterprise depends on customer code, they can’t use ERP as a service. To operate in the cloud, they must use an IaaS provider, which moves their servers to a different location.

Key Features of ERP Systems

Below are common features of ERP systems. Understanding what an ERP system can offer and which features are right for your business needs should be given thoughtful consideration. 

Integration

ERP systems can integrate with a number of other business systems to provide a comprehensive software system for everything a business does. Data silos can significantly hold businesses back from making smart decisions. Arguably the most beneficial element to ERP solutions is that they bring together financial, operational and business data into one central place so you can see how all of your business areas are working together. You can also connect data across these areas for better visibility into what is and isn’t working and correct it based on clear figures. 

Automation

One of the other main benefits of a robust ERP system is the ability to automate different operations within a business. Repeatable business tasks like payroll, order processing, invoicing, reporting, etc. no longer require manual data entry. By automating these tasks, employees can focus on more impactful work. The human error that inevitably comes with manual entry decreases as well. 

Accounting

ERP systems with accounting features have the ability to track, store and analyze financial data such as accounts payable, accounts receivable, general ledger, forecasting and budgeting. Some systems can also handle more advanced tasks, like tax management, fixed assets management, revenue recognition and multi-currency reconciliation. An ERP solution streamlines these tasks, decreasing the time it takes to close out monthly financial statements. 

Order Processing

ERP systems can bring significant streamlining to order processing. First, an ERP system helps to automate order capturing by eliminating manual data entry and paper routing. It then facilitates faster order fulfillment by bringing together departments like sales, customer service and finance to move orders through the virtual value chain. Automating the value chain saves time and gets orders out the door quicker, keeping customers happy. 

Customer Relationship Management (CRM)

To that point of happier customers, ERP solutions can elevate CRM by collecting all customer information such as contacts, order history, purchase orders, prospect status, etc. into one shared and easily accessible place. Personnel across the business can keep an eye on how customer needs are fulfilled and receive notifications to intervene at various points in the chain. 

Data Services

Most ERP systems can collect, track and analyze data on all aspects of a business’s operations. Through tracking key business metrics and generating reports with real-time information, managers can course-correct quicker and make more informed decisions. Reports can show trends and patterns that identify where operations are strong and where efficiency is lacking. 

Supply Chain Management

One of the most powerful features of ERP systems is the opportunity for optimized supply chain management. An automated and integrated supply chain will suggest purchase orders, work orders and transfer orders across locations. Real-time supply chain data helps identify areas lacking efficiency so businesses can get control over inventory, logistics, distribution and manufacturing processes. 

Manufacturing

ERP solutions can streamline manufacturing processes by helping with operations like product planning, sourcing raw materials, production monitoring and forecasting. You can also select modules that assist with assembly management, work order management, shop-floor control, distribution planning, product tracking and more. Inventory and forecasting decisions can be simplified and automated. 

Prioritizing ERP Functionalities

Getting an ERP solution that’s fully tailored to your business needs is possible, but it does require time and financial investment. How do you prioritize which functionalities are the most necessary to help meet your business goals? Here are a few things to keep in mind:

• Price: The cost of the system you choose involves more than just the system expense itself, but licensing fees (which depends on how many users you have), hosting or hardware, implementation, maintenance, training, support and upgrades. You’ll need to balance getting the functionality you most need with your budget. 
• Organization size: Certain systems are better for large enterprises and others are better suited for smaller organizations. The size of your business will determine the solution geared toward your needs, and functionality varies between them. 
• Departmental needs: It’s a good idea to survey department directors to understand what would most benefit each business area. 
• Automation opportunities: Think of the recurring business tasks that could be automated and which would be most beneficial to get out of an ERP system. 
• End-users: How comfortable with technology are your employees? Which functionalities will be most user-friendly for your personnel? 
• Goals: What goals are most necessary for your business to accomplish? The functionalities you choose must accomplish those to see a valuable ROI. 

Adapting to Future Changes with ERP

With QAD Adaptive ERP, users can implement ERP more quickly and easily add new users and sites. This solution is flexible and offers an excellent fit out-of-the-box to meet a business’s changing needs. It’s scalable, reliable, and secure — making it a trusted ERP option for manufacturers. Learn more about our adaptive ERP solutions and how we can help your organization get the system that’s right for your needs.