A Guide to Understanding ERP Terminology

Source of Experience: The AME Group has a top-rated ERP division providing implementation support and customized integrations for over 30 years. We are a Value-Added Reseller of Acumatica and SYSPRO. For more information, contact Joshua Dick , ERP Strategic Advisor.

Enterprise Resource Planning (ERP) systems are essential tools for businesses looking to streamline their operations and improve efficiency. However, the terminology associated with ERP systems can be complex and overwhelming. In this blog, we'll break down some of the key terms you need to know to navigate the world of ERP systems effectively.

What is Enterprise Resource Planning (ERP)?

ERP is a type of software that helps organizations manage and integrate their core business processes. This includes areas such as accounting, inventory management, order processing, human resources, and customer relationship management (CRM).

These terms describe ERP systems in different contexts and highlight their various functionalities and benefits. 

The most common is Business Management Software: This term emphasizes the comprehensive nature of ERP systems in managing various business functions.

System Software: A general term that can be used to describe ERP systems as essential software for business operations.

Business Planning Software: Focuses on the planning and strategic aspects of ERP systems.

Integrated Information System: Emphasizes the integration of various business functions within ERP systems.

Modular Business Application: Refers to the modular nature of ERP systems, where different modules handle specific business functions.

Enterprise-wide Information System: Highlights the scope of ERP systems in managing information across the entire enterprise.

Central Database Repository: Focuses on the centralization of business information within ERP systems.

The Benefits of a Modular ERP System

ERP systems are typically composed of various modules, each designed to handle specific business functions.

Modular Business Applications, such as those offered by Acumatica, provide flexibility in terms of pricing and functionality. Businesses can start with a basic set of modules and expand as needed, making the implementation process faster and more cost-effective. This approach allows for tailored solutions that can be adjusted as the business grows or changes. Additionally, modular systems often support collaboration outside of the business, including customers and suppliers.

Traditional ERP systems, on the other hand, are typically comprehensive solutions that integrate multiple business processes into a single platform. While they offer extensive functionality, they can be more complex and time-consuming to implement. They provide a unified platform for managing all business operations but may lack the flexibility to adapt to changing business needs as quickly as modular systems. Traditional ERP systems often require significant upfront investment and ongoing maintenance.

Common modules include:

• Inventory or Warehouse Management: Tracks stock levels, orders, and deliveries.
• Financial Management: Manages accounting, budgeting, and financial reporting
• General Ledger: Integrates with existing systems to import and export GL transactions
• Banking: Manages bank transactions, including balancing system information with the bank and posting transactions
• Accounts Payable: Handles payments to vendors, including check payments
• Customer Relationship Management (CRM): Manages customer interactions and sales data
• Distribution Management: Handles inventory, order management, and purchasing
• Project Accounting: Tracks project costs, budgets, and billing
• Field Service Management: Manages service appointments, equipment maintenance, and warranties
• Commerce Edition: Integrates with e-commerce platforms to manage online sales and inventory
• Order Entry: Provides real-time access to inventory, order status, shipment information, and current pricing
• Construction Edition: Tailored for construction companies, managing project costs, budgets, and schedules
• Manufacturing Edition: Includes modules like Bill of Material (BOM)/Routing, Production Management, Material Requirements Planning (MRP), Product Configurator, Estimating, Engineering Change Control, and Advanced Planning and Scheduling (APS)
• Human Resources (HR): Handles employee data, payroll, and benefits.

Other Terminology Used when Selecting and Implementing an ERP System

Customization and Configuration

Customization refers to modifying the ERP software to meet specific business needs, often involving coding changes.

Configuration, on the other hand, involves setting up the system's parameters and options without altering the underlying code.

Data Migration

This is the process of transferring data from existing systems into the new ERP system. It involves data cleansing, transformation, and validation to ensure accuracy and consistency.

Cloud ERP

Cloud ERP systems are hosted on the vendor's servers and accessed via the internet. They offer benefits such as scalability, lower upfront costs, and automatic updates.

On-Premise ERP

On-premise ERP systems are installed locally on a company's own servers. They offer greater control and customization but require significant upfront investment and ongoing maintenance.

Integration

Integration involves connecting the ERP system with other software applications to ensure seamless data flow and process automation. This can include integrations with e-commerce platforms, supply chain management systems, and more.

User Roles and Permissions

ERP systems allow administrators to define user roles and permissions, ensuring that employees have access only to the information and functions they need to perform their jobs.

Business Intelligence (BI)

BI tools within ERP systems help organizations analyze data and generate insights to support decision-making. This can include dashboards, reports, and data visualization.

Implementation

The process of deploying an ERP system within an organization. It typically involves several phases, including planning, configuration, data migration, training, and go-live.

Examples of Popular ERP Systems

There are many ERP systems available, each with unique features and capabilities tailored to different business needs. Some of the most popular ERP systems include:

• Acumatica: available in five different editions—General Business, Distribution, Manufacturing, Retail-Commerce and Construction—to meet specific industry requirements.
• SYSPRO: Aimed at manufacturing and distribution companies.
• Oracle NetSuite: A cloud-based ERP software used by over 30,000 companies.
• SAP S/4HANA: Known for its real-time data processing and analytics capabilities.
• Microsoft Dynamics 365: Offers a range of applications for different business functions.

Understanding these key terms and examples will help you navigate the world of ERP systems more effectively and make informed decisions for your business. Whether you're considering implementing a new ERP system or optimizing your current one, having a solid grasp of the terminology is essential.