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.

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.

Ironically,

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

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 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?

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.

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!