Chapter 1

What is Enterprise Resource Planning (ERP)?

ERP is an acronym that stands for enterprise resource planning which is an integrated management software that connects a business’ essential departments and their processes like Sales, Purchasing, Operations, Marketing, Human Resources (HR), Supply Chain, and others. ERP enable to store, analyze, update and distribute data and share processes across departments as each can access the same data in one central location. Which highly simplify business processes.

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Are you learning about the ERP system? Our ERP guide will teach you what is ERP system is and why you need it. Also, you learn how ERP system works, why businesses are implementing ERP systems, and more.

Enterprise Resource Planning systems are one of those pivotal, game-changing facets of running a digital business that nearly every business needs to know about it and implement successfully for their own business to quickly adapt to the new normal and maximize resources and assets of the company.

But what does it all mean, and how does it all come together to deliver the kind of results that matter to your bottom line and entire business? Better yet, how can you centralize, automate, empower, and save costs so that your business runs more efficiently? Let’s take a closer look.

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Enterprise Resource Planning Definition

Why is ERP System Important?

Why ERP matters in a growth environment

Enterprise Resource Planning Definition

Enterprise Resource Planning or ERP is often not a standalone system but features many different ERP modules to manage different parts of your business. However, at its core, ERP applications are developed to streamline and automate business processes, provide businesses with important insights, give internal control over data, and centralizing all the data sources into one central database.

The main central database collects input from departments such as finance, accounting, purchasing, manufacturing, supply chain, sales, marketing, human resources, and others. Also if needed it can draw data from third-party tools as well to create 360-degree visibility of the business and not having data in silos.

ERP systems are designed to be the central database of all your data. This helps ensure that the information across the business and departments is normalized and can be accessed with permission. Of course, depending on the level of permission, role, and other aspects, the user can access a certain amount of data.

Let’s give an example.

A company that creates sneakers and gets its raw material such as rubber, textile, and plastic from multiple suppliers. To effectively manage the business processes, inventory, and production, a company could use an ERP system to track the stock of raw materials and purchasing of these materials to ensure the entire process of purchasing, delivering, and storing is according to the SOP of the business and clean data are collected to create reporting and analytics. Then the company can use the ERP system to gain important information about the business.

For example, different types of “shoelaces” can be easily identified by part name, size, material, source, lot number, supplier part number, serial number, cost, and specification, along with more information. And because visibility into data is essential for business, ERP makes it easy to collect, organize, analyze and distribute any given information to every individual and system that requires such information to effectively carry on their role and responsibilities.

Thus, the person in charge can make an informed decision, whether they are short of stock, having too much stock along with identifying any trends that business could capitalize on. Not only that, but ERP also ensures all your data fields are standardized and everybody uses the same terms for each individual item to avoid any mistakes. Especially when tracking the cost of an individual team. If the company uses 10 different material textile to produce their shoes, then it is essential to track correctly every single material, its cost, quantity, and how much it has been used. This enables a company to identify whether the price of the material is too high and can be negotiated and also predict how much they need to stock the right amount without running out of stock or over-ordering.

The key ERP principle is to centralize data collection across organizations and help companies to avoid using separate and disconnected systems that do not communicate with each other. Which results in endless copy and pasting of data from one system to another with a high risk of making mistakes. ERP System is meant to clear all that, organize and automate your data, and get the right and clean data from CEO to office clerk.

Of course, many ERP systems provide high enterprise-level security so everyone can access confidently their company data and work with them in real-time. This brings the company clear, up-to-date, and complete data visibility.

Why is ERP System Important?

If you are considering implementing an ERP system, upgrading or you are not sure if you actually need an ERP system for your business, then it’s worthwhile to look at some of the reasons why other companies in your industry have invested in the ERP system.

Why businesses implement ERP systems graph. Reasons for Implementing ERP system in Malaysia and Singapore

Some could relate the function of ERP and why is so important for a business to a brain. Think of an enterprise resource planning system as the brain of your company that collects, organizes, analyzes, and distributes all the data within. It helps to control all areas of your business and gives you total visibility of your business.

Data has become the new currency, and for organizations, the amount of data companies create rapidly increasing than ever before. The challenge is how to transform it into intelligence that generates action and drives outcomes.

And as more businesses are moving towards digitalization, ERP system plays a vital role to help businesses with their data management and successfully digitalize their business operations.

ERP helps with removing disconnected systems with information siloes that lead to poor and inaccurate reporting that can result in inaccurate business decisions. Also, ERP provides better options around scalability and mobility to remove the limitation of business growth.

It provides the agility business needs to quickly evolve in rapidly changing business environments. Just the COVID-19 was a huge shift for companies all over the world including in ASEAN countries like Malaysia.

But those companies with integrated ERP systems within the company could adapt faster. For example, the sudden shift for companies with integrated Cloud ERP & CRM systems were more prepared for WFH and MCO environment. As said, everybody can work from home, but does the company retain is the productivity and efficiency?

A good ERP system provides flexibility, scalability and provides the modules business needs. A lot of retail stores suddenly shift to mainly e-commerce style of business during MCO & FMCO. With ERP they could easily plug in a module that supports e-commerce capability so they could carry on with the innovation faster yet still maintain their data and streamline the processes.

And businesses are wasting too much time dealing with multiple systems that can’t talk to each other. According to Forbes, most workers toggle between apps up to 10 times every hour, which means that companies are losing up to 32 days of productive work per employee every year.

That’s why ERP systems play a vital role for businesses especially in today’s time when shifts are happening faster than ever before.

Established ERP systems provide high-end enterprise-level security for your business. ERP vendors like Microsoft spend billions of dollars to secure your data and your customers. This level of security most companies wouldn’t be able to achieve themselves due to lack of funds and expertise. This is especially important as cyber attacks are increasing day by day and being hacked can cost your company hundreds of thousands.

cost of being breached and hacked and using erp to protect your data malaysia erp

Enterprise Resource Planning systems will allow organizations to adopt business apps to streamline their business processes, automate repetitive tasks, increase collaboration, reduce costs and with real-time business intelligence analytics business leaders can transform data into intelligence and make informed decisions faster. This will help proactively guide employees & customers to generate optimal outcomes.

ERP applications are important to be embraced since the beginning when growing businesses have outgrown existing accounting software to quickly help adapt to business growing demands such as connecting their business and make smarter decisions.

Also, modern ERP systems allowing organizations to get up and running faster, along with the requirement to expand the solution as their needs grow.

So, if your organization is looking into the ERP system and want to know why it is so important here are 6 reasons:

1. To Improve Business Performance

the first reason why the ERP system is important is that it improves business performance in Malaysia and Singapore.

One of the greatest reasons why ERP is so important for businesses of all sizes is that ERP improves processes in 95% of the businesses that implement it.

ERP systems improve business performance by streamlining and automating repetitive tasks, effectively plan and manage resources, and optimize productivity.

Business owners and executives gain deep data visibility into core business processes that help optimize business operation, properly manage business resources, and plan for the optimal outcome.

With centralized data across numerous departments like accounting, finance, suppliers, inventory management, human resources, etc. Executives can see data in real-time to effectively manage the operation. ERP can also offer data visibility to user’s customers and vendors, allowing them to view data in real-time and improve relationships in all aspects of your business.

And because ERP centralizes data, it removes data silos and improves data quality so ERP systems are allowing them to see which parts of their processes are most productive and which need to be improved by role-tailored dashboards.

So, like this business leaders can get the right information in real-time to make smarter and better decisions allowing them to improve business performances

If you are learning about ERP systems, then download our ebook: A new approach to evaluating ERP from Microsoft to learn how to evaluate your ERP systems.

2. To Position the Company for Better Growth

Another great reason why the ERP system is important in 2021 is the ERP system in Malaysia position the company for better growth.

While the growing company is an exciting time new challenges will appear as the company is hiring more people, adding more business processes and departments, and changing company structure.

Enterprise Resource Planning system has been the foundation of businesses for decades to connect core business processes and helps companies to position for better growth.

Malaysia based companies that have implemented ERP systems could better manage their expanding businesses and adapt quickly.

ERP can help improve a company’s operational efficiencies and to do more with less as it helps standardize processes, automate, and streamline repetitive tasks and keep everything in order.

Enhanced collaboration across departments is vital and with ERP software your employees can easily share data and automate tasks that once have been employees costing a lot of time.

Also, ERP applications from Microsoft come together seamlessly integrated with collaboration and productivity tools Microsoft 365 suite that helps the organization position themselves even better for business growth and do more with less.

Thus, ERP systems are the foundation to effectively manage business growth, have better visibility of the business, provide consistency and accuracy, and give flexibility to businesses to quickly adapt to changes and respond market.

3. To Reduce Working Capital

The next big reason why the ERP system is important in 2021 is that it reduces working capital for Malaysia based companies.

Technologies are changing the world around us, enabling us to become more efficient, save costs, and become more accurate and faster.

Another great reason why ERP system is so important is that with ERP systems you can reduce working capital as according to recent statistics the top three business goals cited for ERP implementation are achieving cost savings (46%), improving performance metrics (46%), and improved efficiencies in business transactions (40%).

For example, according to recent Forrester research customers using ERP system Dynamics 365 Business Central, After implementing Business Central, the interviewees noted savings in the form of avoided hires by enabling their current employees with the tools to become more effective within their same working hours.

This would be impossible especially as One of the specialty manufacturer interviewees noted that one year the organization’s revenues grew over 40%. Had the company been using its prior ERP tools, additional hires in-line with growth would have been inevitable.

But an overall cost reduction for ERP tools. By migrating to the cloud for ERP functionality on companies can eliminate the costs associated with multiple solution licenses, infrastructure, and related support.

If you want to Learn how businesses reduced costs and increased overall efficiency using Business Central in this Forrester Consulting Total Economic Impact™ study commissioned by Microsoft download the Forrester study here.

4. To Better Serve Customers

Another great reason why the ERP system is so important in 2021 is that it helps to provide better customer experiences and better serve customers.

The power that was once held by the providers of goods and services has now shifted to the customer – whose demand for a seamless and highly relevant experience at every interaction is driving a shift in the way organizations must operate.

As studies show, 90% of customers report they are more likely to interact with brands that recognize them and provide relevant engagement or recommendations – making it vital for organizations to leverage their customer data to deliver unique, modern experiences in order to remain competitive.

With the rise of internet consumerism, customers have access to more content, buying channels, and brand options than ever before. With such an overload of information and choices available, organizations can no longer survive by simply providing the bare minimum necessary to keep customers from leaving – instead, they are shifting to a strategy centered around optimizing customer experiences and outcomes.

As technology has advanced from traditional one-way marketing and generic engagement to allow for data-driven experiences, organizations now have the ability to approach and engage their customers in more proactive, intentional ways than was previously imaginable. Providing an exceptional, highly relevant customer experience is no longer an option, it’s a necessity.

In a market where customers are free agents and where adoption and abandonment occur at the blink of an eye, organizations must demonstrate that they both understand and value their customers. It all starts with data and business applications that leverage that data to drive customer-centric experiences.

For decades, business applications have been relatively static in their functionality and approach. Because ERP business applications embody and automate an organization’s business processes, the business processes themselves have been relatively static as well, limiting organizations to operating in a reactive – versus proactive – manner.

ERP systems provide a 360-degree view of customers and digitally transforming the customer experience not only drives sales but establishes deeper, more lasting customer relationships.

5. To Make Employee Jobs Easier

One of the biggest reasons why the ERP system is important in 2022 is that it makes employee jobs easier and quicker.

Enterprise Resource Planning system’s main objective is to centralize data and streamline processes and operations that help employees to make their job easier, faster, and automated with workflows.

ERP helps employees navigate complex processes by securing a systematic and uniform flow of business data. Also, ERP can completely automate repetitive processes such as replying to customer emails, reporting, routine billing, approval management, etc.

Therefore, after implementing ERP systems businesses can see an increment in business productivity and employees’ efficiency, and on top of that, ERP systems unify a database that allows your entire team to have one source of truth.

This also increases collaboration and By improving collaboration, you can increase productivity by 20% to 30% through these online tools.

6. To Make Better Decisions Faster

One of the top reasons why the ERP system is important in 2021 is because it helps you make better and faster decisions with data-driven insights. Top ERP system in Malaysia.

Digital disruption has introduced more data sources, more channels, more numerous and complex business models, increased globalization, and more reliance on external partners.

Combine this with the fact that data is getting bigger businesses must have a way that helps employees to collect all the data and create insights to make smarter and faster decisions.

Another big reason why the ERP system is so important because it collects data from numerous sources and business intelligence like Power BI transforms the data into actionable insights in real-time.

Like these businesses do not react to market changes but they can anticipate and predict business outcomes with improving decision-making ability by easily accessible information.

Therefore, businesses with unified and modern ERP systems make decisions with 36% less time than they did without the solution.

Why ERP matters in a growth environment

Ironically, while modern digital technology can create new paths to growth, older systems can hit the brakes. Traditional ERP systems typically rely on a high degree of customization that escalates over time.

As this codebase grows, with little documentation, it requires more and more specific, organizational knowledge to keep it running. This leaves businesses with brittle, monolithic systems. Adding new product lines or changing existing ones may require time-consuming custom coding and expensive downtime.

Expanding on-premises ERP solutions may even involve provisioning and managing new hardware, and an often lengthy procurement process. Why ERP matters in a growth environment The limitations of traditional ERP in an environment of rapid growth have an organization-wide impact.

Operations, finance, human resources, and other departments can find themselves siloed, lacking the visibility necessary to respond effectively to change. Onboarding new employees take longer than it should. Supply chain inefficiency eats up margins.

Employees put forth the heroic manual effort to sustain growth. Disparate data and lack of contextual insights make all these problems harder to overcome. Most importantly, traditional ERP systems don’t fit a world where business value comes from rapid innovation, customer-centric personalization and radical efficiency.

These advantages depend on the ability to analyse unified data for insights and opportunities. Cloud-based ERP excels at unifying data and typically offers access to advanced visualisation and analytics capabilities that are built in.

ERP Chapters Overview

Chapter #1: Enterprise Resource Planning Basics ›

For true beginners. Learn what enterprise resource planning (ERP) is, why it matters, and all the need-to-know basics to start yourself off right.

Chapter #2: Benefits of ERP ›

ERP Benefits come in many ways both tangible and intangible. However, one of the biggest benefits of ERP system brings is by reducing IT costs, reducing inventory levels, increase production capacity without added headcount or capital investment and revenue growth.

Chapter #3: How ERP Works? ›

ERP system works as a central database where all company data are stored, analyzed, and distribute across departments to improve workflow and processes.

Chapter #4: Modules ›

Learn different ERP modules exist, how they work and why most of the ERP systems are built as M-ERP (modular enterprise resource planning) systems, and how your organization can benefit from using modular ERP systems.

Chapter #5: Types of Deployment ›

ERP systems can be implemented in a number of different ways to fit your company’s needs. Understanding the different types of ERP deployment will help you to better understand the ERP systems and maximize your ROI from ERP investment.

Chapter #6: ERP Vendors in Malaysia ›

ERP system is developed to help organizations to do more with less and there are many top ERP vendors in Malaysia that help with the digital transformation of businesses. However which ERP vendor will work for you? Here is a list of top ERP vendors in Malaysia.

Chapter #7: How to Evaluate ERP Vendors ›

Learn the process of how you can select, compare and evaluate each vendor to make sure they fit your business needs and requirements. We will give you a step-by-step process with a worksheet that you can freely download and use during the ERP vendor’s evaluation process.

Chapter #8: Best ERP Software in Malaysia 2021 ›

Compare the best ERP software used by small and large size companies in Malaysia today. See the capabilities and benefits of each ERP system.

Chapter #9: ERP Implementation ›

ERP Implementation is one of the biggest IT projects your company may undertake for its own good. It comes with a number of different steps, not one less important than the other and it is essential to be well prepared for the ERP implementation project.

Chapter #10: Change Management ›

By many organizations, ERP change management is an undervalued part of ERP implementation, yet it is crucial for you to successfully implement an ERP system. Change management for ERP focus on the people side of change to effectively use the system and adopt new processes and workflows effectively.

Chapter #11: FAQs ›

Below you’ll find answers to our most commonly asked questions about ERP systems.

Chapter #12: ERP vs CRM ›

In this chapter, we put head-to-head ERP vs CRM and what makes them unique, why companies are choosing them, and how you can select which system is the right for you.