What is ERP? Your guide to enterprise resource planning

What is ERP today? To answer that, you first have to ask yourself: What does a competitive business look like today? Compared to even just a few years ago, the pace of change, the complexity of customer demands, and the level of market competition have all increased at a shocking rate. To succeed in this environment, modern businesses need to connect their teams, streamline their workflows, and ensure that data and information can flow swiftly and accurately across all departments and global operations. 

A modern ERP solution takes all critical business functions and integrates them into a single, unified platform. This helps to break down silos and let your teams collaborate seamlessly. It reduces duplication and ensures that live, actionable information is accessible from one end of your business to the other. And with the addition of AI and advanced analytics comes the power to predict trends, identify inefficiencies, and make data-driven decisions faster than ever.

ERP – which stands for enterprise resource planning – is a type of software that automates and supports a company’s core business processes, such as finance, manufacturing, procurement, supply chain, sales, and HR. ERP provides a centralized view of business activities and acts as a single source of truth for your organization. 

ERP got its start as Material Requirements Planning (MRP) in the 1960s. Simply put, MRP systems helped manufacturers manage production schedules. By the 1990s, these systems had expanded far beyond manufacturing and began to integrate financials, supply chain, HR, and customer relationship management into a single, broader “Enterprise Resource Planning” system. Today’s ERP has evolved into powerful, AI-driven systems that automate activities, analyze trends, and optimize operations across your business.

Modern ERP systems have as many essential functions as there are businesses and operations. Below are a few of the ways ERP systems are used today:

• Automating workflows: ERP software helps reduce repetitive, manual tasks such as inventory tracking, data entry, and invoicing. AI-powered ERPs use automation to accomplish this task more quickly and precisely. AI, for example, can create purchase orders using predictive forecasting, automatically reconcile financial transactions, and identify irregularities in supplier invoices.       
• Unifying data and operations: ERP helps ensure that all departments are using the same data in real time. For example, the finance team can instantly see the impact on revenue when the sales team closes a deal, and the supply chain staff can make the necessary adjustments to inventory levels. By combining various cross-business data sets, ERP software can improve processes and increase accuracy.  
• Providing real-time insights: ERP software gives teams a clear, end-to-end view of operations through the application of analytics tools and user-friendly dashboards. This helps to catch risks and inefficiencies – and even offer insights and corrective suggestions before problems start. Plus, machine learning algorithms can analyze your customers’ behaviors to determine how to best serve their needs and inform your next steps.

Every ERP system has a centralized database at its heart. It keeps track of everything your company needs to run, including inventory levels, customer information, financial records, and much more. There is no need to manually move data between systems because each department uses the same database.

• Finance: Tracks income, expenses, and financial reporting – and And AI powers the automation of processes like forecasting, fraud detection, and account reconciliation. This means that finance teams are able to make decisions more quickly and confidently.
• Human resources: Tracks payroll, benefits, employee data, and much more. Machine learning can forecast the likelihood of employee turnover, examine workforce trends, and even suggest individualized training programs or career advancement opportunities.
• Supply chain: Tackles the end-to-end intricacies of global operations, including inventory, procurement, and logistics. Strong analytics allow you to identify bottlenecks, optimize stock levels, and recommend different suppliers or procedures in the event of disruptions.
• Manufacturing: Plans production schedules and has oversight of quality assurance. AI-enhanced production planning helps teams quickly spot errors or issues, making real-time workflow adjustments, and anticipating maintenance requirements prior to equipment failure.