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HomeIndustriesERPWhat is ERP and Why is It Important for Businesses?

What is ERP and Why is It Important for Businesses?

Are the operations of each division in your business company already integrated into a centralized system?

Are you confident that the operational reports of your business truly reflect the actual conditions?

If not, it is crucial for you to delve deeper into Enterprise Resource Planning (ERP) Systems.

ERP Systems, or Enterprise Resource Planning, are designed to integrate and optimize the operations of various divisions within a company, encompassing procurement, inventory, production, sales, and accounting records, all within a single platform.

Key Takeaways

  • An ERP system can integrate all operational processes across all divisions of a business company.
  • The key benefits of using an ERP system include streamlined communication and coordination among company divisions, a centralized information system, and real-time, accurate reporting.
  • The needs of a company’s system are diverse, and ERP is developed in a modular and customizable manner.
  • Implementing ERP requires experienced principals and vendors to ensure a smooth adoption process without disrupting business operations.


Table of content

Most common issues faced by many companies originate from the separation of operational reports among divisions.

Such operational reports fail to fully depict how effectively and efficiently a company operates.

Numerous analyses and strategic decisions within a company stem from and are based on operational reports, ranging from production planning, product pivots, business model adjustments, to long-term business expansion strategies.


Many companies still underestimate the accuracy of operational reports, leading to nightmares—wrong business decisions.

So, What is ERP?

An ERP system enables all divisions to work within the same platform, allowing everyone to operate based on the same data source and make decisions with broader considerations.

The ERP system serves as a solution to coordination issues and miscommunication among divisions.

Even if each division has embraced digitization and works with their respective software, without integration like what an ERP system offers, effective coordination among divisions becomes a challenge.

Each division tends to work in isolation, where data and information are difficult to access for those in need.

Work efficiency is hindered, causing slower responses to internal and market changes.

Implementing an ERP program is a must-have in the checklist if aiming for the most optimal efficiency and effectiveness at the operational level.

Many companies that have relied on ERP programs eventually succeeded in growing into large conglomerates.

The Benefits and Functions of ERP in Business Operations

To better understand the concrete role of ERP, let’s consider the basic processes of a manufacturing company’s operations as an example.

In a manufacturing company, there are at least 5 divisions that coordinate with each other:

  1. Finance Division
  2. Procurement Division
  3. Inventory Division
  4. Production Division
  5. Sales Division

Each of these divisions has its own tasks, collaborating to meet market demands for the products or services produced.

The following list outlines the needs of various divisions:

  1. Finance Division requires financial data from all divisions, tracking transactions, and generating financial reports automatically.
  2. Procurement Division seeks real-time data on raw material inventory to make timely purchases and prevent production delays.
  3. Inventory Division aims to accurately track raw material and finished product stocks, storing them properly to avoid hindering production and distribution.
  4. Production Division desires efficient and accurate production planning aligned with market demand trends.
  5. Sales Division aims to understand market demand trends and analyze historical sales data to plan marketing strategies as effectively as possible.

Now, the interrelationships and connections between divisions are becoming more apparent, right?

If the operational database isn’t synchronized, a wrong decision from one division can become a subsequent issue for other divisions.

Here are a few examples of problems:

  • If the finance division lacks accurate data on production costs, expenses, and income, it leads to budget allocation errors, inaccurate financial reports, and poor strategic decision-making.
  • If procurement and production divisions have different inventory data, it can lead to insufficient production materials, hampering the production process and delaying customer deliveries.
  • Conversely, having more recorded inventory than actual stock may result in overstocking, unnecessary storage costs, and degraded quality of excess raw materials.

Other scenarios include underproduction due to mismatched sales projections between sales and production divisions, or overproduction based on inaccurate data leading to excessive inventory, resulting in increased storage costs for the inventory division.

It’s quite complex, isn’t it?

To address these various issues, companies can implement an ERP (Enterprise Resource Planning) system that integrates all divisions into a single platform.

An ERP system ensures that all data is updated in real-time and accessible by all divisions simultaneously.

Each division can access the same information, fostering collaborative work with a more comprehensive perspective.

The integration of operational data among divisions is just one of the numerous functions and benefits of implementing an ERP system.

Moreover, there are at least 15 other functions and benefits of an ERP system.

The Industries That are in Dire Need of ERP

Though initially designed for the manufacturing industry, the use of ERP systems has now expanded across various sectors.

ERP has evolved and significantly impacted various industries, including distribution, construction, retail, wholesale, food and beverage, mining, agriculture, services, real estate, healthcare, government, and education.

what is erp

Essentially, regardless of the industry, every company shares similarities in its fundamental operational functions.

Companies must manage employees, procure raw materials, handle sales of products or services, distribute them efficiently, and importantly, maintain financial records.

Implementing an ERP system enables companies to easily handle these fundamental aspects.

Again, ERP products aren’t specifically designed for just one industry.

ERP systems are modularly designed, with each module catering to the needs of specific divisions.

This modular design makes ERP systems scalable and flexible, adapting to your company’s growth and requirements.

As a provider of ERP tools, HashMicro deeply understands scalability.

Consider a scenario where a company suddenly experiences rapid growth, requiring a comprehensive system with all the features.

Even conglomerates today likely began as small-scale companies with less complex system needs.

With modular systems, it’s possible to develop the ERP system along with the development and needs of each division of the company in a suitable scale.

Types of ERP System Application and Implementation

what is erp

No company or business operates with the exact same methods and standards as another.

Even within the same industry, differences in Standard Operating Procedures (SOPs) between companies are highly likely.

These variations in operational standards present specific challenges in the application and implementation of ERP systems.

Fortunately, aside from being modularly designed, ERP systems can also be custom-developed to meet the specific needs of each division within a company.

Apart from features, customizing ERP systems is also related to a flexible system infrastructure tailored to a company’s preferences.

Regarding the complexity of required systems, ERP systems can be categorized into two types: Enterprise ERP and ERP SaaS (Software as a Service).

Meanwhile, in terms of where and how all operational data is stored and managed, there are two implementation methods for ERP systems: on-premise and cloud.

Both have characteristics, advantages, and disadvantages to meet the different preferences of each company.


Implementing an ERP system in a company that has long operated conventionally is not an easy task.

As providers of ERP systems with over 10 years of experience, we understand how crucial a seamless transition is.

We’ve assisted numerous companies in adopting ERP systems of various complexities.

Our rich experience across diverse projects in numerous industries and varying complexity levels ensures that we address every system need in the best, most effective, and efficient manner possible.

Start off with a free demo to experience firsthand the HashMicro ERP system and discuss your company’s specific requirements with our Business Development representatives.

Trust HashMicro with the implementation of your company’s ERP system.


This content is 1 out of 7 in-depth discussions about ERP systems.

Next Topic: Discover the 15 Benefits of an ERP System for Your Company.

Frequently Asked Questions About ERP System

  • What is an ERP system? An ERP system is an integrated software designed to manage a company’s business processes and operations comprehensively. It encompasses functions such as finance, inventory, production, human resources, and more within a single platform.
  • What are the key benefits of implementing an ERP system? Implementing an ERP system can enhance operational efficiency, improve visibility into business processes, reduce costs, enhance data accuracy, and enable better decision-making. Learn more here!
  • What are the common challenges in ERP system implementation? Common challenges in ERP system implementation include high costs, time requirements, difficulties in integrating with existing systems, organizational culture changes, and extensive training needs. Learn more here!
  • What is the difference between cloud-based and on-premise ERP systems? Cloud-based ERP systems are hosted on third-party cloud infrastructure and accessed via the internet, whereas on-premise ERP systems are hosted on a company’s servers. Cloud ERP is often more flexible, enabling access from anywhere, while on-premise provides companies with more control over their infrastructure.
  • What should be considered before choosing an ERP system? Before selecting an ERP system, consider specific business needs, budget, scalability, vendor support, and the capability to integrate with existing systems. Evaluating features and having a clear understanding of business requirements are crucial steps in this process. Learn more here!

Interest in getting savvy tips for improving your business efficiency?

HashMicro is a software development and enterprise resource planning (ERP) company. Consequently, we often provide articles about ERP and other systems that all businesses need.

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