Software Development

What are the Types of ERP Systems?

  • Post By: Sarah Jordan
  • Published: January 8, 2024
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What is an ERP System?

The term ERP stands for Enterprise Resource Planning. It is a process that helps in managing the business smartly.

ERP system is a software for managing business operations like supply chain, services, manufacturing, financials, and other processes. Also, it offers a centralized platform that helps manage all aspects of the business.

ERP system helps in the process of integrating resources, communication, and information in a company. Businesses mainly use ERP software to integrate and streamline the processes that increase their efficiency and decision-making.

The benefits of ERP for the business include access to real-time data or built-in business intelligence, project management, risk management, and so on.

How Does an ERP System Work?

The main purpose of an ERP system is to increase efficiency, improve communication, and simplify business processes.

The central aim is to manage a business using software and IT applications. This system also greatly influences time, finance, and manual labor and improves savings. ERP system provides-

  • Common database
  • Integrated system
  • Real-time operation 
  • Common user interface across components
  • Support for all applicants

ERP software can provide several different reports based on the user’s preferences. The collected data further helps in improving the business performance.

As a result, one can maintain separate spreadsheets and databases that can help to generate the reports. 

ERP eliminates the hassle of collecting data, while the manual work takes a long time to collect or streamline the data. The ERP system has flexible and comprehensive tools to fulfill your business needs.

It also helps automate manual processes like creating invoices, generating financial reports, or handling routine communications. 

3 Types of ERP System

There are three common types of Enterprise Resource Planning systems. Let’s explore them - 

1. Cloud-based ERP System

Cloud-based ERP systems are mostly used to manage small and medium-sized businesses. This internet-based system can be accessed from anywhere with an internet connection. The Cloud ERP system is also known as SaaS (software-as-a-service).

Cloud-based ERP is available for an annual and monthly subscription. This ERP system takes less time than the on-premises ERP system. Cloud software is a subscription-based service that ensures training, support, and customization.

The cloud-based ERP system removes the need for dedicated servers while managing the business.

2. On-premise ERP System 

An on-premise ERP system is installed on an organization’s server. This is a licensed system that is often customized and upgraded when needed. The on-premises software is not applicable for remote work; it is owned or controlled by a business group. 

This is a traditional deployment approach in which the infrastructure and software are implemented and managed. As this is installed in an organization’s servers and computers, the price is determined based on the number of users and the company's size.

The most popular types of ERP software are SAP ERP, SYSPRO ERP, and Microsoft Dynamics GP. The on-premise ERP is popular for support, full control, and ownership of the entire system.

3. Hybrid ERP System

A hybrid ERP system combines both On-premises and Cloud ERP systems. The Hybrid ERP system includes compute networking, storage, and services. The combination of two software services makes it unique and more effective. 

A hybrid ERP system can provide better data security and leverage the cloud. This system offers the flexibility in integrating the On-Premises System with the Cloud-based applications.

Through this ERP system, the company can have more control over the expansion, customization, and others. This is not a cost-effective option but can be good for organizations who want both on-premises and cloud systems.

Read more to Learn

ERP Modules:

Enterprise Resource Planning (ERP) systems consist of various modules, each designed to address specific business functions. Here is a list of common ERP modules:

  1. Finance and Accounting Module:
    • General Ledger
    • Accounts Payable
    • Accounts Receivable
    • Fixed Assets Management
  2. Human Resources Module:
    • Employee Information
    • Payroll
    • Benefits Administration
    • Time and Attendance
    • Training and Development
  3. Supply Chain Management Module:
    • Inventory Management
    • Procurement
    • Order Processing
    • Supplier Relationship Management
  4. Manufacturing Module:
    • Bill of Materials (BOM)
    • Work Order Management
    • Shop Floor Control
    • Quality Control
  5. Customer Relationship Management (CRM) Module:
    • Sales and Marketing Automation
    • Customer Service
    • Contact Management
  6. Project Management Module:
    • Project Planning and Scheduling
    • Resource Allocation
    • Budgeting and Cost Management
  7. Warehouse Management Module:
    • Warehouse Operations
    • Stock Tracking
    • Shipping and Receiving
  8. Business Intelligence Module:
    • Reporting and Analytics
    • Dashboards
    • Data Warehousing
  9. Enterprise Performance Management (EPM) Module:
    • Key Performance Indicators (KPIs)
    • Balanced Scorecard
    • Strategic Planning
  10. Compliance and Risk Management Module:
    • Regulatory Compliance
    • Risk Assessment
    • Audit Trail
  11. Asset Management Module:
    • Asset Tracking
    • Maintenance Scheduling
    • Depreciation Management
  12. Sales and Distribution Module:
    • Order Fulfillment
    • Pricing and Discounts
    • Sales Forecasting
  13. Quality Management Module:
    • Quality Assurance
    • Inspections
    • Non-Conformance Management
  14. Document Management Module:
    • Document Versioning
    • Workflow Automation
    • Collaboration Tools
  15. Integration and Middleware Module:
    • Connects various modules and external systems
    • Ensures data consistency and real-time information flow

The specific modules in an ERP system can vary based on the software provider and the industry requirements. Organizations typically choose modules based on their business needs and objectives.

Benefits of ERP System

 Here are some of the key benefits of the ERP system:

  • Enhanced Business Reporting

ERP software has better reporting tools. As a result, it will help you to get real-time information. This software uses an integrated database for all business purposes. 

  • Better Data and Cloud Security

ERP software has some dedicated security resources. It avoids installing malicious software and provides the best information or data security.

  • Better Customer Service

ERP software has better access to the customer’s information. It responds to the customer faster than ever.  The customers find it easy to get their necessary services.

  • Cost Savings

Though the initial investment in an ERP system is higher, it can save costs in the long run. This system also has improved inventory planning. This helps in optimizing the processes and contributes to cost reductions.

  • Business Process Involvements

ERP software can automate manual or routine tasks. It helps in implementing smarter workflows. Moreover, it has a better management system and can help the business improve quickly. 

  • Improved Decision Making

ERP software has accurate data to manage the systems and make informed decisions. It can enable better strategic planning with numerous benefits. 

  •  Regulatory Compliance

ERP contains the best features to ensure regulatory compliance. It helps businesses to maintain industry standards and regulations. Moreover, it can also reduce or exclude the risks of legal issues.

  • Improved Productivity

ERP can automate repetitive tasks and workflows. It can boost the productivity of the worker more than the manual process. In this process, the employees focus more on the higher-value tasks and minimize manual errors. As a result, this leads to increased efficiency of the businesses.  

Final Words

Enterprise Resource Planning System helps manage the business using software and IT applications. This ERP system can improve manual labor, time, and financial savings.

The ERP system helps to improve communication, increase efficiency, and fulfill all business needs. Above all, ERP systems are very significant in maintaining different databases and spreadsheets. 

FAQs

What are the five components of ERP?

The five common components of ERP are accounting and financial management, business intelligence, supply chain, customer relationship management, and human resources. These components help improve the business effectively. 

Is ERP a good strategy?

ERP can be a good strategy for managing some specific businesses. It can help manage finance, supply chain, IT, order management, business units, etc. This helps to improve communication and can effectively serve the businesses as well. 

What are the major functions of ERP?

The major functions of ERP are data analysis, automation, reporting, accounting, tracking, financial management, sales and marketing, customer relationship management, etc.

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