Enterprise Resource Planning (ERP) refers to the entrepreneurial task of planning, controlling and managing personnel and resources such as capital, operating resources, materials and information and communication technology in a timely and need-based manner in the sense of the company’s purpose. The aim is to ensure an efficient operational value creation process and constantly optimized control of entrepreneurial and operational processes.
The use of a cloud ERP solution is now an important part of digital business transformation. But there are still many reservations. The time of central and monolithic ERP systems is over. The digital transformation is forcing companies to redesign them. This is where cloud computing offerings and cloud ERP solutions come into play, which are provided as Software-as-a-Service (SaaS) in the form of either a single or a multi-tenant solution. They now form an important part of the digitization strategy of companies.
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What are the Core Functions of an ERP?
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A core function of ERP in manufacturing companies is material requirements planning, which must ensure that all materials required for the production of the products and components are available in the right place, at the right time and in the right quantity. Overall, the aim is to eliminate the previous conflicting goals and achieve them as performance characteristics:
- High quality and high productivity
- High security of supply and low capital commitment
- Complexity reduction and flexibility
- High continuity and low throughput time
Types of ERP System
An ERP system is a complex application or a multitude of communicating application software or IT systems that are used to support the resource planning of the entire company. Complex ERP systems are often divided into subsystems (application modules) that can be combined according to business needs. ERP systems differ mainly:
- By economic activity and the respective sector
- According to scalability to different company sizes (number of required users or company locations),
in the range of functions offered to be supported (production, materials management, sales) - By the technologies used (databases, programming languages, layered architectures, operating systems, etc.)
The trend can be observed that more and more providers are relying on web-based products. For example, the system interface is displayed in a browser window. Among other things, this offers the possibility to realize external access to your system without having to install a graphical user interface (thin client). Thus, for example, suppliers or customers can be directly involved in the business processes to e.g. place orders, schedule deliveries, etc. These possibilities are intended to bring about significant time and thus cost advantages.
The demand determines the available ERP providers. A large company must also be able to map its corporate structures via an ERP solution if necessary to connect subsidiaries directly (multi-client capability) and requires a variety of complex, business management functions. Despite the use of standard software, consulting and adaptation (customizing) cause greater implementation costs. In contrast, when using such a solution, such as SAP ERP or Oracle E-Business Suite, a small or medium-sized company (SME) must choose a compact process model in the implementation project and limit the adaptation to the essential requirements. However, despite this approach, small and medium-sized enterprises require a considerable financial outlay. Because in retrospect, special adaptations to the software at SAP, as well as the high training effort, often turn out to be costly and time-consuming. In addition to complex, highly integrated and adaptable universal ERP systems for many industries, an SME also has industry-specific ERP systems with reduced complexity and functionality at its disposal.’
What is the Added Value of a Cloud ERP?
But what exactly is the added value of a cloud ERP for companies?
As the main benefit, is the possibility of – cross-location – process standardization in an integrated IT system with central data storage in the cloud, as this increases productivity, it comes as the first point.
The next biggest advantage is the high time savings in finding information – central data storage in the cloud means lower effort in data management and cost control. The primary goal of using a cloud ERP is to reduce cost, especially for IT infrastructure and system management.
