ERP is a management tool that serves to have more accurate control over a company’s results and routines, integrating different operations.
Its usefulness extends to the most varied departments of the organization and also to various types of companies, as we will see later in this text.
The history of Enterprise Resource Planning as we know it began to take shape in the 1970s.
Until that time, the meaning of ERP was not the same as it is today, and having computerized systems was a real luxury for companies.
It was then that the computerization of industry caused a dissemination of systems, leading to the creation of Material Requirement Planning (MRP) , the precursor to ERP.
In the 90s, however, ERP gained strength, becoming popular mainly due to the evolution of communication networks between computers.
Today, its presence is almost mandatory in businesses of all sizes, with more basic (and cheaper) versions that can be applied to small companies up to more robust systems with databases and on-premises servers.
How does an ERP system work?
An ERP software is multifunctional, which is why it is also known as an integrated system .
In times when ERPs did not exist, companies suffered from greater integration between sectors in their routines, as each one had its own system.
It was as if each sector spoke a different language . Although this is still a problem for some of them, with an ERP the company only forms “silos” if it wants to.
With an integrated system, operations are coordinated on a single platform , which in itself saves time and reduces work.
An example of this is when integrating operations in sectors such as sales, purchasing and inventory, whose interdependent relationship requires a single computerized solution.
An ERP, then, works as a bridge that connects systems in different segments of a business, through a cloud-based digital platform.
What is an ERP for?
As we have just seen, the main purpose of an ERP is to integrate a company’s systems.
It is a tool that facilitates the management of operations , and is also essential for guiding the strategic and tactical aspects of a business.
An ERP also helps to develop business intelligence , through the data it generates and which it can structure with its integrated analytical solutions.
Now that you know what an ERP system is and what it is for, it is easier to understand its importance, as we will see below.
How important is an ERP?
You may have already noticed that an ERP brings several benefits to business management .
But so that there is no doubt about its importance, it is necessary to list everything it does for those who invest in this type of software.
Check out its main advantages.
The information processed by the ERP is much more reliable than that stored in spreadsheets, whether manual or electronic.
They also ensure greater efficiency and effectiveness in all company processes.
The manager in charge of the business gains agility, because the information is shared within the system. Do you know that rework of filling in the same data in two different places? This ends with ERP.
Cost reduction
Time is money, there is no doubt about it.
And optimizing processes means reducing costs for your company.
It means less time spent on bureaucratic tasks and more time focusing on what really matters for business growth.
Furthermore, cost reduction also focuses on cutting waste and ending losses that occur due to a lack of control over your company’s processes.
Optimization of information flow
When entering just one piece of information is enough for the system to understand the processes, this creates an optimization of the information flow.
This way, the administrator does not need to rework the same data .
Ultimately, it is something that reduces the time spent on unnecessary tasks and brings even more agility to the company.
Advantages of the ERP system for companies
The truth is that, after ERP systems became popular, company management was never the same again. Its relevance has become so great that ERP can even be compared to the telephone or the internet.
A resource that, once incorporated, generates a certain dependency. This is because, with these systems, companies start to have competitive advantages that they would not have otherwise.
See some of them below.
Information security
Every business deals with data generated by its interactions with customers , requiring some type of information security solution .
This is confidential and strategic information that cannot be made available to anyone.
ERPs are a way to protect sensitive data, as most operate from encrypted cloud servers .
Even though they are subject to possible cyberattacks, they help to reduce the damage caused, preventing greater harm.
This is one of the reasons why 53% of IT specialists consider implementing an ERP in their companies a priority,
Reduced operating costs
As a survey points out, the main objective of companies when implementing an ERP is to reduce costs (46%), along with improving business metrics.
Considering that 67% of the leaders interviewed responded that they were successful with their ERPs, we can conclude that cost reduction is an almost certain result.
More control over finances
An integrated system, as the name suggests, serves to unify the routines of different areas of a business on one platform.
The direct consequence of this is that finances can be monitored much more quickly .
Company management, as well as accounting, has real-time access to expenses and cash flows for each sector.
It thus becomes possible to anticipate costs, forecast revenue and plan budgets with a high margin of accuracy , facilitating pricing and strategy development.
Real-time indicators
For certain market niches, fluctuations in purchasing behavior , price volatility and pressure from suppliers are challenges to be overcome.
This is what usually happens in the retail segment, where sales can be impacted by factors that are not always predictable .
An ERP system helps to deal with variations common to certain segments, providing always updated data in its cloud computing-based databases.
Customization
Another positive point in implementing an ERP is that one company does not need to have a system that is identical to another.
Each business is unique and needs solutions that fit its reality . ERPs provide a good response in this regard, as they can be customized according to the needs of each client.
The company can hire more or fewer modules , depending on the volume of its operations and any financial limitations.
Advantages of the ERP system for companies
The truth is that, after ERP systems became popular, company management was never the same again. Its relevance has become so great that ERP can even be compared to the telephone or the internet.
A resource that, once incorporated, generates a certain dependency. This is because, with these systems, companies start to have competitive advantages that they would not have otherwise.
See some of them below.
Information security
Every business deals with data generated by its interactions with customers , requiring some type of information security solution .
This is confidential and strategic information that cannot be made available to anyone. ERPs are a way to protect sensitive data, as most operate from encrypted cloud servers .
Even though they are subject to possible cyberattacks, they help to reduce the damage caused, preventing greater harm.
Reduced operating costs
As a survey by Ultra Consultants (in English) points out, the main objective of companies when implementing an ERP is to reduce costs (46%), along with improving business metrics.
Considering that 67% of the leaders interviewed responded that they were successful with their ERPs, we can conclude that cost reduction is an almost certain result.
More control over finances
An integrated system, as the name suggests, serves to unify the routines of different areas of a business on one platform.
The direct consequence of this is that finances can be monitored much more quickly .
Company management, as well as accounting, has real-time access to expenses and cash flows for each sector.
It thus becomes possible to anticipate costs, forecast revenue and plan budgets with a high margin of accuracy , facilitating pricing and strategy development.
Real-time indicators
For certain market niches, fluctuations in purchasing behavior , price volatility and pressure from suppliers are challenges to be overcome.
This is what usually happens in the retail segment, where sales can be impacted by factors that are not always predictable .
An ERP system helps to deal with variations common to certain segments, providing always updated data in its cloud computing-based databases.
Customization
Another positive point in implementing an ERP is that one company does not need to have a system that is identical to another. Each business is unique and needs solutions that fit its reality . ERPs provide a good response in this regard, as they can be customized according to the needs of each client.
The company can hire more or fewer modules , depending on the volume of its operations and any financial limitations.