What is the Importance of ERP System in Business | Why ERP is Used?

Importance of ERP
Importance of ERP – Why ERP Used

The intensity of change in the current economy, especially in the services sector, has been relentless, exposing significant flaws in static business models. Modern organizations must focus on the future and prioritize long-term planning at all levels of the organization to succeed and flourish. Therefore it is difficult to ignore the importance of ERP in business and especially distribution and manufacturing business.

What is ERP System?

The ERP (Enterprise Resource Planning) system integrates everyday company activities such as financial, procurement, manufacturing, project, and human resource management. It covers a wide range of industry niches suitable for businesses of all sizes. ERP systems offer an integrated solution to manage different business areas. Companies can avoid using multiple software applications to run other parts of their organization, such as accounting, manufacturing, or customer relationship management (CRM).

The goal of an enterprise resource planning (ERP) system is to give real-time and accurate data so that stakeholders may make sound business decisions based on the information. ERP collects companywide transactional data from numerous sources to improve data integrity and eliminate duplicate data.

Why ERP System is Important?

An ERP system provides many advantages to an organization by helping them improve productivity and efficiency. ERP isn’t only for large companies; ERP is also important for small businesses. ERP is a good option for many organizations, including those with modest budgets. To understand why ERP is needed and what is the importance of ERP, we need to read the below points.

Streamline Business Operations:

ERP is important for streamline business operations and its leading to improved quality of service for customers. For example, suppose a customer calls into an organization’s call center with a question about their order or other inquiry, instead of having to repeat information that already exists in the company database (such as name, address, product information). In that case, the customer service representative will have immediate access to that information. This can help improve customer satisfaction by reducing the time it takes to resolve an inquiry.

Integrated System:

ERP systems are integrated systems that streamline communication between different parts of the organization. For example, if an organization has a sales department and a purchasing department, the ERP system can be used to share information between the two departments. This can lead to better coordination and improved efficiency within the company.

Improved Decision Making:

One of the major points for the importance of ERP is Decision Making. ERP systems provide decision-makers with accurate data to make informed decisions about the future of the company. For example, suppose a supply chain manager is responsible for managing the flow of goods through an organization’s warehouses and distribution centers. In that case, they can use data from their ERP system to determine which warehouses require more inventory on hand to fulfill each customer order in a timely fashion.

Reducing Operational Costs:

ERP systems are also important in terms of operational efficiency. Because most operational activities are automated, unexpected interruptions, delays, and breakdowns can be anticipated. All hard work can be finished more rapidly, which means lead time will be reduced. Companies may also cut labor costs by using ERP systems for various day-to-day functions.

Improved Compliance:

Organizations must comply with various regulations set forth by government agencies and industry organizations. An ERP system can help improve compliance by providing features that automate regulatory tasks, such as tracking inventory levels or monitoring employee hours worked.

Improved Employee Productivity:

ERP systems can improve employee productivity by helping them do their job more effectively. Employees, for instance, will be able to see their time consumption on each task if the organization uses an ERP system that includes time tracking functionality. Alternatively, suppose an organization uses an ERP system that integrates with their accounting software. Employees will then see how their actions impact the organization’s finances in real-time. This type of transparency can help employees make better decisions about spending their time and improve overall organizational efficiency.

Increasing Team Collaboration:

Collaboration across departments is an important and often required component of a business. In a corporation, an ERP system breaks down departmental boundaries. A department may access data from other departments utilizing data stored in a centralized and consistent ERP software.

Many companies use cloud-based ERP, which enables employees to work from any remote location. This allows for increased collaboration among team members who may be located in different parts of the world.

Improving Data Security:

When we talk about the importance of ERP in business, Data Security is important factor. ERP solutions come with firewalls and limitation features to avoid data breaches. The system maintains all information in one location, making it easier for access points to monitor. For example, HR managers may keep certain critical information private for themselves and stakeholders while permitting workers to access their financial records.

Managers can also quickly remove laid-off workers’ access and allow access to the new ones. ERP solutions also provide information about users’ activities, so administrators can easily spot prohibited actions or suspicious behavior patterns in the system.

Realistic and more Accurate Forecasts:

The ability to forecast is one of the essential and important skills for business growth. Stakeholders rely on reports to help them make predictions that will influence their decisions. Therefore, businesses need to access real-time, comprehensive, and accurate information. All of this can be aided by ERP.

ERP reporting tools offer highly sophisticated filters and analytics to detect data anomalies. The system also guarantees that the data acquired is up to date in real-time. Stakeholders will be able to obtain accurate business reports, which will assist them in making the best decisions possible for their company. That’s why ERP is used by most distribution and manufacturing businesses.

Improve customer satisfaction:

Customer management is more crucial than ever. As the internet becomes increasingly popular, the number of people seeking information on what to wear, what to eat, and how to live online increases. More consumers trust online reviews than ever before, with 84 percent saying they trust them as much as a friend.

It is best to provide goods and services centered on the client. ERP offers several ways to do this. First, most ERP programs include or can easily be integrated with a customer relationship management tool. With an ERP, your CRM has access to data across the organization.

In addition to contact information, a CRM can show you details such as order history and billing information. This allows your team to understand your clients’ needs and wants more comprehensively. It is possible to develop your sales strategy more effectively when you know your clients’ needs.

Improved Customer Service:

Another advantage of utilizing an ERP system is enhanced customer service. For example, by tracking inventory levels and order history, ERP systems can help businesses predict when they will run out of a particular product and place orders accordingly. Additionally, many ERP systems include modules for managing customer relationships (CRM). These modules allow businesses to track customer interactions, such as phone calls, emails, and social media posts. This information can be used to improve customer service by providing employees with insights about what customers have previously purchased or enquired about.

Improved Organizational Efficiency:

Efficiency is the popular benefit that proves the importance of ERP in any business.  By integrating all of a business’s functions within a single system, ERP systems allow organizations to manage their resources more effectively. For example, many ERP systems include modules for manufacturing and distribution. This integration can help businesses streamline their production process and reduce the time it takes to get products from the factory floor to the shelves of retailers. Additionally, ERP systems can help businesses allocate their staff resources better by providing information on how employees are distributed across different departments and tasks.

Bottom Line

After reading all points we can’t ignore the importance of ERP as ERP system can provide several benefits to an organization, including improved decision making, streamlined business operations, improved compliance, and increased employee productivity. Having an ERP system can improve the efficiency of your business.