What Is Enterprise Resource Planning (ERP) and How Does It Work?

What Is Enterprise Resource Planning (ERP) and How Does It Work?

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From accounting to procurement, from regulatory compliance to supply chain operations, managing the day-to-day activities of running a business is an intricate juggling act.

Thankfully, there are ERP systems to help.

ERP stands for enterprise resource planning, which is the process of managing and integrating these business practices. Usually, this is done in real-time and with the aid of ERP software, which is used to collect, store, and manage organizational data. 

For many businesses, ERP software implementation isn’t just a priority; it’s a necessity to increase sales and keep business organized. And because ERP software integrates with other programs and applications like Shopify, Quickbooks and Amazon, it can also ensure that consistent information is shared while it automates workflows.

How ERP Systems Work

Generally, ERP systems have a central database that houses all relevant data, information, and processes. They are typically automated so data can be updated in real-time and people can easily access the most accurate information possible whenever they need to. Some ERP software solutions have mobile functionality to keep your business moving on the go.

When choosing an ERP solution that’s right for your business, it’s important to know the three types of ERP systems and how they can benefit your business:


In-the-cloud ERP solutions are ideal for a rapidly expanding business looking for maximum scalability. A cloud solution is often more affordable, as you only pay for what you use. On the down side, IT and support resources can be less immediately available.


An on-premise ERP solution offers more flexibility if you have specific needs or unique processes because of its adaptability. The cost of this option is higher and typically requires dedicated IT to manage, but the ability to manage compliance-related issues is an advantage


The hybrid solution combines cloud and on-premise functionality by giving users access to cloud-based components to add to their on-premise system. This is an agile ERP system ideal for organizations with a main branch and satellite offices, with the pricing often falling between the two standard options.

Benefits of Enterprise Resource Planning

Though creating and implementing your ERP system will likely be one of the most complex projects you undertake, the benefits outweigh the risks. These include improvements in all the following:


Keeping an eye on the “big picture” requires real-time access to data from all departments. Your executive, sales, customer service, accounting, production, distribution, and HR teams will all have a 360-degree view of operations. Real-time access to data means these departments can make better business decisions.

Productivity and Efficiency

ERP systems streamline business processes and make it easier and more efficient for companies to collect data, no matter what department they’re working in. By eliminating repetitive processes and greatly reducing the need to manually enter information, ERP boosts efficiency and gives everyone more time to devote to mission-critical projects and tasks.

Reports and Forecasts

Modern ERP systems make reporting and custom forecasting easier. You won’t have to depend on IT for data requests, so they can spend their time on critical projects. ERP users and managers also have the tools and resources needed in order to create more efficient/effective demand forecasts.

Customer Service

ERP systems deliver accurate access to customers’ information and history, improving relationships with the end customer and helping you build loyalty and repeat business.

Flexibility and Scalability

Modern ERP systems are robust, flexible and can be tailored to the unique needs of your operation. ERP software is also able to adapt to the changing needs of a growing business, so you won’t need to purchase a new solution when you grow. It’s easy to add new users and functions. As your business grows, you’ll grow your ERP implementation to meet your needs over time.


Collaboration between departments is a crucial part of an apparel business operation. Systematizing the flow of up-to-date data makes it easy to notify everyone when a schedule or product changes, so they can work together with better communication and unity of purpose. An integrated, centralized ERP database facilitates collaboration and decision-making while reducing administrative and operations costs.

Signs Your Business Needs an ERP System

ERP systems may not be the right choice for every business, but there are a few signs that can indicate your need for one.

Use of Multiple Systems

Using multiple software solutions for different business processes can lead to confusion and make it more difficult for your business to run smoothly. However, when everyone can access the information they need from a single location, everything becomes less confusing and more efficient.

Difficulties Accessing Information

Consider how long it takes you to find the information you need, such as orders per day or your sales figures. If information and organizational data are difficult to find, manage, and use, you can likely benefit from using an ERP system.

Complicated Accounting

Doing accounting and financial reporting for your business in spreadsheets or on paper is highly inefficient and makes the process more difficult than it needs to be. ERP systems can automate accounting processes that can take a person hours to do manually. Some ERP software has accounting functionality or can integrate with other platforms that do.

Inaccurate Inventory

Similarly, doing inventory in a spreadsheet is inefficient and leaves plenty of room for error. Inventory errors can lead to massive issues down the line that affects everything from customer satisfaction to your business’s budget. An ERP system can help you avoid many common issues with inventory management by providing real-time updates to prevent stockouts, overproduction, and inadequate forecasting.

Poor Customer Experiences

Implementing an ERP system is one way to improve your online customer service. Your difficulties with finding the right information quickly will affect your ability to ensure a positive experience for your customers. Without satisfied customers, your business will suffer. Modern ERP systems can help you keep your customers happy and your business thriving.

With so many ERP solutions available to the apparel industry, it can be hard to choose the right business management software, but finding the best ERP solution for your needs is worth spending the time it takes to research and compare the options available to you.

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