Why ERP software is important in 2022?

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When a business expands and approaches greater heights, workload increases, making it tedious and complicated for administrators to manage. Inability to manage regulatory compliance and security, mobility, and flexibility leads to derailing the business and its growth. 

Thus, businesses need a comprehensive, one-stop solution like ERP software to meet customer demands and streamline all business processes for robust growth in 2022 and in the times ahead.  

And that makes us discuss about what ERP software is and why it is important to implement the ERP system in 2022 for the growth and scalability of organizations. 

So, let us get started! 

But before heading right into knowing all about ERP, let’s first get to know the statistics.  

Based on the ERP market report from Allied Market Research, the ERP market size was valued at $43.72 billion (about $130 per person in the US) in 2020, which is projected to hit $117.09 billion (about $360 per person in the US) by 2030. It shows a growth rate of CAGR = 10.0% from 2021 to 2030

This data is enough to see the value an ERP system can generate for businesses.  

Now, let us learn what ERP software is and how it can help businesses. 

What is ERP? 

Enterprise resource planning (ERP) is the integrated management of core business processes mediated by software and technology in real-time. 

ERP uses a suite of integrated applications to collect, store, manage, and interpret data from many business activities. 

Moreover, ERP software manages day-to-day business activities. With it, companies can better plan and allocate resources and reduce overall costs associated with operating each department by integrating all business processes into one monitoring system. 

The goal of ERP software in an organization is to manage day-to-day business operations such as: 

  • Compliance and Risk Management 
  • Accounting and Procurement 
  • Enterprise Performance Management (EPM) 
  • Human Resources Management (HRM) 
  • Human Capital Management 
  • Inventory and Warehouse Management 
  • Project and Supply Chain Management (SCM), and more. 

ERP software systems can be installed on-premises or use cloud-based services like Microsoft Azure, AWS (Amazon Web Services), and others. And since information is readily available from any location with Internet access, cloud-based ERP software applications are becoming more popular in today’s tech-driven business world. 

Moreover, cloud-based ERP applications like Microsoft Dynamics 365 Business Central, D365 Finance & Supply Chain involves advanced technologies like IoT (internet of things), AI (artificial intelligence) & ML (machine learning), and intelligent digital assistants for delivering increased efficiencies, new services, and deeper insights for better decision making. 

What is an ERP system? 

A complete ERP suite like Microsoft Dynamics 365 is software that includes enterprise performance management and helps plan, budget, predict, and report on an organization’s overall business management. 

ERP systems enable and channel the smooth flow of data between a multitude of business processes, eliminating data duplication and providing data integrity with a sole source of truth. 

In today’s market, ERP is like electricity that keeps the lights on. Having an ERP system implemented is a pro move by business leaders since it is critical for managing a workforce involving thousands of employees, businesses of all sizes in different industries, and various other business activities. 

The Business Value of ERP Software in 2022 

When ERP software was used as on-premises back-office software applications, gone are the times. Today, cloud computing allows people to work anywhere and anytime. For the tech-driven world, ERP software is available with mobile platforms for a decentralized workforce.  

Modern ERP software solutions reduce support time, enabling businesses to respond quickly to volatile markets and industry trends. 

Hence, it would be naïve to ignore the importance and impact of ERP software in today’s data-driven market. Organizations can better align separate departments and improve workflows since enterprise data and processes are continuously fed into ERP systems for analysis. It results in significant savings in money, assets, time, and other variables.  

Benefits of incorporating ERP software  

  • ERP software integrates all facets of an organization, from raw material handling, product development, and manufacturing to marketing and sales. 
  • It helps business leaders gain real-time visibility across the entire business, increase productivity, enhance operational efficiency, lower costs, and provide a competitive edge.  
  • A comprehensive ERP solution helps admins understand, monitor, and control different organizational systems across all sides of your business. 
  • Provides consistency in terms of infrastructure, right from the back office to the front office, and with the same look and feel. 
  • Since modern ERP software design is interactive, it has higher user-adoption rates because of the overall user experience.  
  • With the involvement of the cloud, modern ERP software is excellent at reducing risks through improved data integrity. 
  • A uniform and integrated ERP software system helps organizations lower management and operational costs. 

History of ERP: From paper cards to mobile devices 

In 1913, more than 100 years ago, engineer Ford Whitman Harris developed an economic order quantity (EOQ) model for scheduling production. It was a paper-based manufacturing system. EOQ model helped manufacturers for decades and became the standard. But soon, in 1964, Toolmaker Black and Decker revolutionized it by combining the EOQ model with a mainframe computer and named it material requirements planning (MRP). Toolmaker Black and Decker became the first company in the world to adopt MRP as a standard solution.  

Though MRP remained the manufacturing standard for quite some time, it was not efficient. Hence came manufacturing resource planning (MRP II) in 1983.  

MRP II involved “modules” as its key software architectural component for managing purchasing and contracts, creating bills of materials (BOM), and scheduling workflows.  

MRP II integrated different manufacturing processes into a single system and paved the interesting vision to leverage software to share and integrate enterprise data and boost overall business growth. 

When computer technology began to strengthen from 1970 to 1980, it became clear to business leaders that software applications can also handle business activities other than manufacturing, such as customer relationship management, human resources, supply chain, and more. 

And by 1990, technocrats coined a name for this newly developed category of business management software and termed it enterprise resource planning, better known as ERP. 

Then, from the 1990s till the beginning of the 21st century, businesses all over the globe adopted ERP tremendously, and its demand grew rapidly, raising the costs of implementation. 

Both the hardware and software were required to be on the company premises, which involved enormous expenses in creating infrastructure to house enormous machines in a server room. It also needed licenses and large capital investments for over 5 to 10 years, customization of ERP to fit specific needs, and so on.  

Among all these developments, something was growing silently – the Internet. ERP technology embraced the Internet, and new features and functionality such as data analysis and analytics were embedded. And as time went by, business leaders were convinced that on-premises ERP software applications fall short of meeting modern security demands, allowing the concept of Cloud-based ERP solutions – the software-as-a-service (SaaS) delivery model.  

Instead of a company’s server room, cloud ERP runs on a network of remote servers (better known as the cloud in the IT Industry). With the cloud, there is no need for upgrading every 5 to 10 years since a live version is available to access 24*7*365, reducing operational and capital expenses and eliminating the need to hire additional IT people or purchase ERP software.  

Cloud-based ERP software like Microsoft Dynamics 365 helps employees shift their focus from unnecessarily managing IT tasks to more value-added things like innovation and growth. 

Reasons to go with a cloud-based ERP software solution 

For businesses of all sizes, from large enterprises to small to mid-sized businesses (SMBs), ignoring all the benefits of a cloud-based ERP solution is not wise. Below are the reasons you should consider while moving to cloud-based ERP applications –  

1. Readily adopt growing SaaS technologies like IoT & AI for better operational efficiency.  

2. Cloud-based ERP solutions eliminate the need for periodically updating ERP software like the one installed on-premises.  

3. Modern ERP software applications are significantly easier to manage and use. 

4. Better production planning, reduced inventory, and less scrap (waste).  

5. Cloud technology enhances the value of your existing ERP System by augmenting and integrating legacy ERP software to cloud applications and breathes in a new life. 

6. Teams can access innovative technologies to deliver immediate business capabilities and value without altering fundamental business operations. 

7. An ERP software system based on the cloud is excellent at reducing third-party dependencies and helps in reporting and analytics to generate better operational business intelligence. Teams will not require additional vendor relationships for business intelligence. 

8. Legacy systems were never meant to evolve as modern ERP engines, but with the help of cloud computing, things beyond imagination are possible, like multi-currency and multi-lingual functionality for running an international business.  

9. Cloud-based technology brings more robust security resources exclusively dedicated to 24*7 proactively monitoring and staying current with cloud security threats and issues.  

10. With next-generation cloud-based software solutions, organizations develop the opportunity to attract in-demand talent of young people that helps in tremendous growth. It is not possible in today’s world to purely rely upon on-premises technology to recruit top talent, regardless of age and gender. 

Ready to get Started with Cloud Manufacturing ERP in 2022? 

Are you unsure where to begin your ERP journey (or continue it)? With Dynamics Square, you get a global team of ERP experts ready to help you, whether your manufacturing company is ready to move into the cloud or streamline its business processes.

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