ERP system – what is it and how does it work?

An ERP system (Enterprise Resource Planning) is a comprehensive software solution used to manage a company’s resources by integrating all core business areas into one consistent whole. The main objective of an ERP-type system is to streamline the flow of information between different departments within an enterprise and to provide a unified database available in real time.

In a world where the number of processes and resources grows daily, and manual data management becomes inefficient, ERP software is becoming a fundamental working tool. But should every enterprise implement ERP-class software? How does ERP differ from other solutions such as MES? And what benefits can be expected from investing in ERP IT systems?

All these questions are answered in this article.

ERP software operates like a central database that collects and processes information from all areas of the business. Thanks to this solution, data entered in one department is immediately available to others, eliminating duplication and ensuring data timeliness.

The ERP system collects, processes, and provides data from areas such as:

The basic functions of ERP software include:

In practice, this means that every decision is based on up-to-date, verified data, not on intuition or outdated reports.

Working in an ERP system involves daily interaction with a tool that collects, processes, and analyzes data from various departments of the enterprise. Every operation – from issuing an invoice, through receiving a delivery, to executing a production order – is recorded in one system.

An ordinary day, yet completely different thanks to ERP. Let’s see how a manufacturing plant works with the support of Enterprise Resource Planning. The sales department enters a customer order. The system automatically checks the availability of materials in the warehouse (thanks to the ERP warehouse module), starts the raw material ordering process (if necessary), and forwards the order to the production department. Accounting immediately registers the order in the books, and logistics plans the delivery.

This entire process takes place in one system, without the need for manual information transfer between departments.

ERP-class systems feature a modular structure, which means a company can implement only those components necessary for its operations. At the same time, all modules are integrated, eliminating the need to enter the same data multiple times and ensuring data consistency across the organization.

Let’s take a closer look at the key ERP system modules.

This is the heart of any ERP system. It manages the company’s finances and includes elements such as:

explitia ERP offers advanced analytical accounts for managers, enabling detailed financial control and better strategic planning.

Supports processes related to employment and employee service, including:

Crucial for manufacturing companies, it enables effective planning and control of the production process, including:

Covers all aspects related to the flow of goods:

Supports customer relationship management. Includes:

Enables effective planning and implementation of projects. Improves:

Provides data analysis tools and supports decision-making through:

Implementing an ERP system brings numerous benefits to companies, translating into increased operational efficiency and competitive advantage. Let’s explore the most important ones.

ERP systems automate many repetitive processes, reducing the time needed to perform routine tasks.

A shared database eliminates discrepancies between departments. With access to current and consistent data, management can make more accurate business decisions.

ERP enables precise material requirements planning, reducing inventory levels and related costs while minimizing the risk of stock shortages that could disrupt production.

Implementing an ERP system can significantly improve the OEE indicator. The system allows for better production planning, downtime reduction, and optimized use of production resources.

With integrated customer, order, and product data, customer service representatives have immediate access to all necessary information, resulting in faster and more professional service and increased customer satisfaction.

Process automation, data duplication elimination, and more efficient resource management lead to measurable savings, including administrative and operational costs.

Modern ERP systems are scalable and flexible, allowing them to adapt to the growing needs of the company. ERP solutions use advanced technologies such as machine learning and predictive analytics to support strategic business development.

ERP systems facilitate compliance with legal and industry requirements through automatic updates and built-in compliance control mechanisms.

In a modern business environment, ERP systems rarely function as isolated solutions. To fully leverage their potential, they are often integrated with other systems and tools. One of the most important integrations is with MES (Manufacturing Execution Systems).

MES (Manufacturing Execution System) is an IT system focused on managing and controlling production processes in real time. Unlike ERP, which covers the company as a whole, MES focuses exclusively on production, offering more detailed and specialized tools for this area.

MES systems handle aspects such as:

It is worth noting that ERP systems may not suffice in every company, especially in manufacturing enterprises with complex production processes. In such cases, implementing MES as the core production management tool, supplemented by selected ERP modules, may be a better solution.

The integration of these two systems brings numerous benefits:

Implementing an ERP system is a complex process that requires careful planning. It typically involves several key stages:

The right time to implement ERP depends on many factors, such as company size, process complexity, and industry. However, some indicators suggest a company may need an integrated management system:

Inefficient communication between departments or duplicate data entry into various systems.

As employee numbers grow, spreadsheets and emails become insufficient.

Management lacks up-to-date performance data or waits too long for reports.

Frequent stockouts or overstocking signal the need for better materials planning.

Employees spend too much time on repetitive, manual tasks that could be automated.

Plans to expand into new markets or introduce new products/services call for a scalable ERP platform.

ERP systems are used across nearly every sector, though implementation varies by industry. Key applications include:

In manufacturing, an ERP system supports production processes through:

Most representatives of the commercial sector use ERP-class software that focuses on:

If you work in the financial sector, you may also encounter ERP systems being used for:

An ERP management system also supports:

Healthcare: Patient data, resource planning, and insurance billing

Construction: Project planning, cost control, subcontractor management

Logistics: Route optimization, shipment tracking, profitability analysis

Public Sector: Budget management and integration with e-government systems

Modern ERP systems are increasingly specialized, offering sector-specific solutions.

The explitia ERP system is a comprehensive enterprise management solution that integrates all key business processes in project- and service-oriented companies.

Implementing ERP management software brings numerous advantages. Depending on the specific solution and industry, these can include: improved operational efficiency, better data quality and decision-making, optimized inventory management, and enhanced production effectiveness. At the same time, it’s important to remember that in many production plants, a standalone ERP system may not be enough. For detailed control of manufacturing processes, integrating ERP and MES solutions is often the best approach.