What is ERP (Enterprise Resource Planning): What It Is and How It Works

From small businesses to large multinational corporations, enterprise resource planning (ERP) has become a ubiquitous tool for managing data, automating processes, and streamlining operations. It is an important technology that enables businesses to gain visibility into their operations and optimize them for maximum efficiency and profitability.  The post will help to understand what ERP is.

ERP solutions are designed to help enterprises to understand their operations better and make better decisions by integrating data across their organization. In this article, we will explore the basics of ERP and how it works to help businesses stay organized, efficient, and competitive. We will discuss an ERP system’s critical components and provide tips on choosing the right ERP solution for your organization.

Finally, we will look at some benefits of implementing an ERP system and how it can help keep your business running smoothly.

What is ERP?

ERP stands for enterprise resource planning. While the exact definition of ERP can vary from one organization to the next, it is generally described as an integrated system that automates, centralizes, and standardizes the business processes across an organization. The idea is to give organizations a holistic view of their business operations, enabling them to make more informed decisions and increase operational efficiency. In short, ERP is essentially a software system that integrates core business processes and data across an organization. It automates repetitive tasks and gives business users real-time access to critical information, such as inventory levels, sales and purchase orders, customer data, financial information, etc. Because it is integrated, it allows users to pull data from different areas of the business and see the big picture — they can create graphs, charts, and reports that show how their business is operating. Small and large companies widely use ERP solutions in manufacturing, retail, healthcare, transportation, and more industries. The benefits of ERP systems are so numerous that some experts believe they are the future of business.

Talk-Commerce-Allie Kern
Talk-Commerce-Allie Kern

You can listen to our podcast with Allie Kern talking about ERP and BrightPerl

Benefits of ERP

Because ERP solutions help bridge the gaps between business processes and functions, they enable organizations to understand their operations better and make better decisions. These benefits include:

Business visibility – The main advantage of ERP is that it provides organizations with better business visibility. It enables them to see the big picture and understand how their various business functions and departments operate — from sales and inventory to finance and customer service. This can help businesses find areas for improvement and make more informed decisions for the future.

Cost savings – Another significant benefit of ERP is that it can help businesses improve operational efficiency and make cost savings by automating and streamlining business processes.

Increased productivity – When business processes are standardized, integrated, and automated, employees can spend more time performing productive work — rather than performing manual and repetitive tasks.

Components of an ERP System

Businesses that use an ERP system have various business functions and data points connected through an IT system. When choosing an ERP solution, it is essential to consider the components that make up the system.

Software – This is the core software application that runs the ERP system. The software will vary depending on the industry and your organization’s unique business needs. Depending on your organization’s needs, one software solution may cover everything, or you may need to select a few different software applications.’

Hardware – refers to the computers and other devices used to host the ERP system. Depending on the size of your organization and the number of people using the system, you may need to invest in additional hardware.

Communication – refers to the connection between the different business functions and data points within the ERP system. It also includes the relationship between the organization and its customers and suppliers. The most common way to connect these systems is through the internet.

How to Choose the Right ERP System

When it comes time to choose an ERP solution for your organization, you will need to consider a number of different factors. Here are some tips to help you choose the right ERP system for your organization:

Understand your business needs – First, you need to understand your business needs. What do your operations look like? What data do you need to collect, and in what capacity? What functionality do you need in your system? This will help you narrow down your choices to find the right solution for your organization.

Define your requirements – Next, you need to define your requirements. What is your budget? What are the technical and integration requirements of the system? How many people will be using the system, and what training do they need? What is the timeframe for implementation? These questions will help you narrow down your options and choose a solution that meets your organization’s needs.

Tips for Successfully Implementing an ERP System

When implementing an ERP system, it is essential to follow best practices and create a solid implementation plan. Here are some tips to help you successfully implement your system: Start with a pilot project – Before rolling out the scheme across the organization, it can be helpful to start with a pilot project to test out the system, train employees, and resolve any issues that may arise. This will allow you time to make necessary changes before implementing the system company-wide. Standardize business processes – Make sure your organization’s business processes are standardized before implementing an ERP system. This will help minimize the risk of making changes or modifying the system once it is in place. Train employees on the system – Successfully implementing the system requires training for employees using it. This includes IT staff, administrators, and business users. Ensure they understand how the system works and how they will use it daily.

Benefits of Implementing an ERP System

An ERP system can significantly benefit an organization when all the pieces are together. The key is to make sure that it is implemented correctly. Here are some benefits of implementing an ERP system: Better decision-making – With better business visibility and more standardized processes, businesses can make better organizational decisions. This can help organizations be more competitive and efficient. Cost savings – By automating and streamlining business processes and reducing the need for manual effort, an ERP system can help organizations make cost savings. Increased productivity – When employees can spend more time performing productive work, and less time on repetitive tasks, businesses can see an increase in productivity across the organization.

Examples of ERP Systems

There are many ERP systems, and knowing which is best for your organization can be challenging.

Below are some examples of ERP systems you may come across: Accounting software is probably the most common type of ERP system. It allows businesses to track their finances and generate accurate financial reports.

ERP software: This type of system covers many aspects of an organization and helps it run more efficiently by automating repetitive tasks and integrating data across departments. Order management software: This system is specifically designed for retailers and helps them manage their inventory and orders.

Batch management software: Batch management is used in several industries, such as manufacturing and pharmaceuticals. This type of system is designed to manage and schedule repetitive tasks.

Here is a short list of some of the top ERP systems


ERP systems can help businesses make better decisions, improve operational efficiency, and increase productivity across the organization. They can also help enterprises better understand their operations and see the big picture of how different business functions operate. However, choosing the right ERP solution is not an easy task. It requires careful consideration of your business needs and the availability of resources to implement the system successfully. With the right approach and a solid implementation plan, your organization can enjoy the many benefits of an ERP solution.


  • Brent W. Peterson

    Who is Brent Peterson? Brent is a serial entrepreneur and marketing professional with a passion for running. He co-founded Wagento and has a new adventure called ContentBasis. Brent is the host of the podcast Talk Commerce. He has run 25 marathons and one Ironman race. Brent has been married for 29 years. He was born in Montana, and attended the University of Minnesota and Birmingham University without ever getting his degree.

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