Enterprise Resource Planning (ERP)

Enterprise Resource Planning (ERP) is a software system that helps companies streamline their core business processes — including finance, human resources, manufacturing, supply chain, sales, and procurement — and provides a unified view of activities and a central data source.

Meaning in detail Contact us now

What is enterprise resource planning?

ERP stands for enterprise resource planning and refers to the management of diverse corporate resources, such as labor and capital. Through efficient planning, control and administration of business processes, corporate structures and business processes can be optimized. In essence, it is about having the right resources available at the right time in the right quantity in the right place. This requires information from all areas of the company to be brought together, evaluated and made available in real time.

Distinction from similar concepts

Inventory management system: In contrast to ERP systems, inventory management systems focus primarily on goods, inventories and related processes, while ERP systems are more comprehensive.
CRM system: Customer relationship management focuses on customer relationships, while ERP integrates all business processes.
PPS system: Production planning and control systems specialize in manufacturing and often form a module within an ERP system.
Isolated solutions: In contrast to isolated software solutions for individual departments, an ERP system offers an integrated platform for all areas of the company.

Historical development of ERP

In the middle of the 20th century, companies were still using many different management systems for finances and purchasing. With MRP 2 (Manufacturing Resource Planning), the first integrated system for managing manufacturing processes was created in the 1980s. As digitization progressed, further modules were added to the system, and ERP was developed over the course of the 90s and 2000s. ERP originated historically from production planning, but today comprises the entire spectrum of operational functions and is the central hub and backbone of digital transformation in companies.

Features of an ERP system

A modern ERP system offers numerous functions, which are usually divided into modules:

Finance & accounting: Accounting, Controlling, Liquidity Management
Human resources: employee administration, payroll, time recording
Materials management: Purchasing, warehouse management, inventory management
Production: production planning and control, capacity planning
Sales & marketing: Order processing, pricing, customer relationships
Logistics: Transport and shipping management, supplier management
Business intelligence: Data analysis, reporting, key figure monitoring
Quality management: Audits, complaint handling, certifications

ERP and data management

The basis of a functioning ERP system is complete and correct master data. With increasing digitalization, master data management is becoming more and more important, as shown by a study published by analyst firm BARC, in the “Master Data Management and data quality management“won first place among the top BI and data management trends.

Role of ERP in the data ecosystem

ERP systems, together with CRM systems and various database solutions, form the technical infrastructure of a data strategy that is optimally tailored to business needs.
Comprehensive integration of data with relevant systems such as CRM, ERP and marketing automation is important for successful data management, as sustainable efficiency increases are only possible when combined.
ERP creates a “single source of truth” — a central database for well-founded decisions and efficient processes.

Master Data Management (MDM) and ERP

While ERP systems manage essential business data, the integration of Master Data Management (MDM) improves global scalability and governance.
Master data management provides a systematic approach to data integration and ensures consistent use and reuse of data across various systems.
Master Data Management provides a unique “golden data set” that provides marketers with up-to-date data and precise information for personalization.

Data quality and data integrity in ERP

Data integrity starts in the ERP system. With uniform and complete master data for suppliers, customers and parts, companies place their reporting on a solid foundation.
By using AI-powered master data management, ERP systems can benefit from scalable data harmonization, classification, and real-time governance.

Deployment models

ERP systems can be deployed in various ways: An on-premise system is installed in the company's own data center, a cloud-based ERP is operated by an external provider, and hybrid ERP combines both approaches. With cloud ERP, the software is on a remote server from a third-party provider, while on-premise is the classic model of deploying ERP software on-site in a company's data center and offers the greatest degree of control.

Benefits

Automating manual tasks and streamlining workflows through ERP solutions result in better overall efficiency and higher productivity.
Real-time access to accurate and up-to-date data enables companies to make informed decisions quickly.
ERP systems increase efficiency and productivity, reduce costs through process automation, and improve data integrity and security.
Modern ERP systems are scalable and can keep pace with a company's growth and changing needs.
The main benefit of ERP is the ability to reduce costs across the organization, as administrators can more easily identify and eliminate inefficiencies.
Improved collaboration and communication between departments
Higher transparency and control over business processes

Challenges

High initial investment: Depending on what kind of ERP system is required or chosen, spending can be significant, particularly for SMEs.
Complexity of implementation and adjustment: ERP systems are complex ecosystems that require thorough planning and adjustment.
Data migration and integration: Migrating data from legacy systems and ensuring seamless integration can be a challenge.
User adoption and training: Comprehensive training programs are required to empower employees.
Inability to resolve existing policy issues: ERP brings processes and guidelines together, but cannot automatically repair faulty processes.
Lengthy implementation projects with high resource requirements
Dependence on the chosen solution and potential vendor lock-in

ERP for various company sizes

In addition to complex, highly integrated universal ERP systems that can be adapted for many industries, an SME also has industry-specific ERP systems with reduced complexity and functionality at its disposal. Until a few years ago, enterprise resource planning systems were only used in corporations and large companies. Today, however, there are flexible, scalable ERP systems that open up new opportunities for SMEs in particular.

Leading ERP providers and solutions

The largest market shares in the ERP sector are shared worldwide by SAP (33.8%), Microsoft (8.5%), Odoo (5.9%) and Oracle (4.2%), followed by Workday, Sage and Infor. The ERP market offers both universal and industry-specific solutions that are available as on-premise, cloud or hybrid systems.

Other important providers

Odoo: Open-source ERP with modular structure
Weclapp: Browser-based cloud ERP solutions for SMEs
Xentral: Web-based ERP cloud software for start-ups and small businesses

Open-source alternatives

Open-source ERP solutions offer benefits such as vendor independence and customizability and include systems such as Odoo Community Edition, ERPNext, WebERP, Metasfresh, and Dolibarr.

Industry-specific solutions

In addition to universal ERP systems, there are specialized solutions with reduced complexity for specific industries such as retail (network, JTL), manufacturing (abas, IQMS), services (proALPHA) or healthcare (ORBIS).

Enterprise Resource Planning FAQ

Which ERP system is right for my company?

The choice depends on company size, industry, budget and specific requirements. It is important to conduct a thorough analysis of business processes and evaluate various systems before making a decision.

How long does it take to implement an ERP system?

The implementation time varies depending on the size of the company and the complexity of the system. Smaller projects can be completed in 3-6 months, while extensive ERP implementations in large companies can take several years.

What are the costs of implementing an ERP system?

According to Columbus Systems, the costs for an on-premise ERP workplace are between 5,000€ and 6,000€. Cloud solutions are less time-consuming to implement but require monthly usage fees for licenses and hosting.

How does MDM improve my ERP system?

Master Data Management (MDM) improves the global scalability and governance of your ERP system and ensures consistent, high-quality master data across all areas of the company.