What Does ERP Actually Do? (9 ERP Functions You Should Know)

If you’re just beginning to learn about enterprise resource planning (ERP) software, you may have found that a clear definition can be hard to find.

Instead of vague quips about its data integration benefits and its process optimization possibilities, you need the specifics.

Today, we’re going to get granular. Strap in for a detailed exploration of ERP functions and capabilities along with recent trends to consider as you start your ERP journey.

The Main Functions and Capabilities of ERP Software​

While the functionalities of ERP systems are vast, this list covers the basic functions that organizations use most frequently.

1. Financial Management​

From general ledger to budgeting and forecasting, ERP software can streamline all aspects of financial management.

For example, budgeting and forecasting functionality can provide insights into future revenue and expense trends, enabling companies to set realistic goals.

Meanwhile, accounts receivable functionality can enhance cash flow management by automating invoice generation and tracking outstanding payments.

Noteworthy Trends in ERP for Financial Management

• Enhanced security measures using blockchain technology: This ensures immutable transaction records and reduces the risk of fraud.
• Use of advanced analytics for more accurate forecasting: Predictive analytics and machine learning models help identify financial trends and anomalies.

2. Human Resources Management (HRM)​

Implementing ERP software not only centralizes employee data, but It supports better workforce planning by tracking employee performance and identifying skill gaps.

Other human resources functions in ERP software include payroll processing, benefits administration, and recruitment and onboarding.

When it comes to recruitment, ERP enhances companies’ ability to identify top talent by automating resume screening and using AI to match candidates with job requirements.

Noteworthy Trends in HR Automation

• AI and machine learning for anomaly detection in payroll: This trend is particularly relevant as organizations increasingly seek to enhance their financial integrity and ensure compliance with evolving regulations. (Learn about AI in ERP.)
• Employee Self-Service Portals: This not only reduces the administrative burden on HR staff but also enhances employee engagement by providing more control and transparency.

3. Supply Chain Management (SCM)​

Many organizations implement ERP software to streamline their supply chain processes. This entails using inventory management functionality, procurement management functionality, and logistics and distribution functionality to optimize operations.

For instance, businesses can use inventory management capabilities to track inventory levels in real-time, while managing stock replenishment and warehouse operations.

Our ERP consulting team recently helped an injection molding manufacturer select a modern ERP system to streamline production. Some of our recommendations included using the ERP system to track inventory, implementing a manufacturing execution system (MES), and improving their warehouse layout.

Noteworthy Trends in ERP for Supply Chain Management

• AI for demand forecasting: Predictive analytics tools use historical data and market trends to forecast demand, helping optimize inventory levels and reduce stockouts.
• Real-time logistics management with GPS and IoT: This functionality provides real-time data on the location and condition of goods during transit.

4. Customer Relationship Management (CRM)​

Customer relationship management (CRM) within an ERP system centralizes customer data and interactions, allowing businesses to enhance their sales and customer service efforts.

One helpful ERP function within CRM software is sales management functionality. This enables businesses to track leads and opportunities, while automating sales order processing.

In addition to sales management, CRM modules also handle customer service operations. They manage customer inquiries and support tickets, improving response times and customer satisfaction.

Marketing automation is another critical component of CRM. It automates marketing campaigns and email communications, while managing customer segmentation and targeting.

Noteworthy Trends in CRM Systems

• Predictive analytics and lead scoring: AI algorithms analyze customer data to predict sales trends and score leads, helping sales teams focus on high-potential opportunities.
• Mobile CRM solutions: Mobile-enabled CRM systems provide sales and customer service teams with on-the-go access to customer data, improving responsiveness and productivity.

5. Manufacturing and Production

ERP systems are crucial for managing manufacturing and production processes.

Production planning functionalities schedule production runs based on demand forecasts, optimizing resource utilization and reducing lead times and costs.

Meanwhile, quality control within manufacturing ERP systems ensures products meet quality standards, while providing insights into quality performance to support continuous improvement.

Maintenance management is another manufacturing function that ERP can automate. This functionality allows companies to schedule regular equipment maintenance, reducing unplanned downtime and maintenance costs.

Noteworthy Trends in Manufacturing ERP Systems

• IoT for real-time production monitoring: IoT devices provide real-time data on production processes, helping manufacturers optimize efficiency and detect issues early.
• Digital twins for production optimization: This capability allows businesses to create virtual models of production processes, allowing for simulation and optimization of manufacturing operations.

6. Project Management

ERP project management modules help organizations plan, execute, and monitor projects effectively.

Project planning and scheduling functionalities can optimize resource utilization and provide real-time visibility into project status.

At the same time, companies can use budget management to generate cost estimates and financial reports, reducing the risk of budget overruns.

Another component of project management functionality is task and resource management. This capability focuses on assigning tasks to team members and monitoring completion.

Noteworthy Trends in Project Management Technology

• Collaborative project management tools: Tools that support collaboration enhance communication and coordination among project teams, leading to more efficient project execution.
• Integration with agile project management methodologies: Integrating ERP with agile methodologies allows for more flexible and adaptive project management, improving responsiveness to changes.

7. Business Intelligence and Analytics

Business intelligence (BI) and analytics functionalities in ERP systems enable organizations to collect, analyze, and interpret data to make informed decisions.

Data collection and warehousing capabilities aggregate data from various sources, providing a centralized repository for analysis.

In addition to data collection capabilities, BI tools typically feature reporting functionality, real-time dashboards, and advanced analytics.

In terms of advanced analytics, businesses can use predictive and prescriptive analytics to forecast trends and access recommendations to guide decision-making.

Noteworthy Trends in Business Intelligence and Analytics

• AI-powered data visualization tools: AI enhances data visualization, making it easier to identify trends and insights through advanced graphics and interactive dashboards.
• Self-service BI platforms: These platforms empower users to generate their own reports and insights without relying on IT, increasing agility and data-driven decision-making.

8. Asset Management

Asset management modules in ERP solutions help organizations track and manage their assets throughout their lifecycle.

Asset tracking functionalities monitor asset location and status, particularly as it relates to usage and maintenance.

In addition to asset tracking, asset management typically features lifecycle management functionality and maintenance scheduling capabilities.

Noteworthy Trends in ERP for Asset Management

• IoT for real-time asset tracking: IoT devices provide real-time data on asset status and location, improving visibility and reducing the risk of loss or theft.
• AI for predictive asset maintenance: AI analyzes asset data to predict maintenance needs, helping organizations prevent failures and extend asset life.

9. eCommerce Integration

ERP systems typically have integration capabilities for connecting seamlessly to eCommerce platforms. This enhances online sales management by automating sales order processing and enhancing the ability to manage online sales channels.

eCommerce integration also enables inventory synchronization, reducing the risk of stockouts and overselling.

Meanwhile, customer experience management functionality enhances the online shopping experience by tracking customer behavior and preferences to enable targeted marketing and improve engagement.

Noteworthy Trends in eCommerce Integration

• Integration with social media platforms: Connecting eCommerce with social media allows businesses to reach customers where they spend their time, enhancing marketing efforts and sales.
• Mobile eCommerce solutions: These platforms ensure customers can shop and make purchases easily from their smartphones, increasing convenience and sales.

Being Strategic About ERP Functionality​

Investing in a comprehensive ERP system is not just a technological upgrade; it’s a strategic move towards a more agile and data-driven future. By integrating key functions, such as financial management, human resources, and supply chain management, ERP systems can improve your operational efficiency and competitiveness.

Contact our ERP selection consultants below for a free consultation.