ERP System Development: Features, Benefits, and Tips

Hive team posted on October 23, 2023

Managing data and making decisions are complex tasks that demand careful attention and responsibility. Consequently, modern businesses are quick to abandon outdated solutions for managing resources, sales, marketing, personnel, and finances. Over 50% of enterprises view ERP as a top-priority area for investment. The ERP software market is experiencing a 10% annual growth rate and is expected to surpass $90 billion in total market share by 2028.

To ensure they select the appropriate product and accurately assess its long-term advantages, organizations of all sizes and industries are turning to current ERP solutions to reduce costs, validate value, enhance collaboration, and streamline business operations. Let us take a closer look at ERP system development, its value for the business, and how you can take advantage of ERP solutions to optimize and propel your business.

Table of Content

• What is an ERP System and What are its Core Functions?
• What are the Key Challenges of Implementing ERP software?
• The Many Layers of ERP System Architecture
• What are the Industries That Need ERP Software the Most?
• 10 Steps for Successful ERP System Development
• FAQ
• Efficient ERP System Development With Hive

What is an ERP System and What are its Core Functions?

An ERP system, or Enterprise Resource Planning system, is a comprehensive and integrated software solution designed to help organizations manage and automate a wide range of business processes and functions across various departments and functions within an organization. The primary goal of an ERP system is to enhance efficiency, productivity, and decision-making by providing a centralized platform for collecting, storing, and managing data from different areas of a business. Here are the key aspects of an ERP system:

• Integration: ERP systems bring together data and processes from various departments such as finance, human resources, manufacturing, inventory management, sales, marketing, and more into a single unified platform. This integration eliminates data silos and enables real-time data sharing and collaboration across the organization.
• Centralized data: ERP systems maintain a centralized database that stores all relevant business data. This single source of truth ensures data consistency and accuracy, making it easier for employees to access and use data for decision-making.
• Streamlined processes: ERP systems automate and optimize business processes, reducing manual and repetitive tasks. This automation leads to increased operational efficiency, reduced errors, and faster response times to customer demands.
• Improved reporting and analytics: ERP systems offer robust reporting and analytics tools, allowing organizations to generate customized reports and gain insights into their operations. This data-driven approach helps in better decision-making and forecasting.
• Scalability: ERP systems are designed to grow with the organization. They can adapt to changing business needs and can accommodate additional modules or functionalities as the company expands.
• Compliance and security: ERP systems often include features for regulatory compliance and data security. They help organizations adhere to industry-specific regulations and protect sensitive business data.
• Mobile and cloud capabilities: Many modern ERP systems offer mobile access and cloud-based deployment options, enabling remote work and providing flexibility for users.
• Customization: ERP systems can be customized to suit the specific needs of an organization. Companies can tailor the software to their industry, processes, and unique requirements.

Common modules or components within an ERP system include financial management, human resources, inventory management, supply chain management, customer relationship management (CRM), production planning, and reporting and analytics. Implementing an ERP system is a significant undertaking that requires careful planning, investment, and training. However, when properly implemented, ERP systems can bring substantial benefits by enhancing operational efficiency, reducing costs, improving decision-making, and supporting overall business growth.

What are the Key Challenges of Implementing ERP software?

Implementing ERP software can be a complex and challenging process for organizations. That is why so many businesses turn to external vendors who already have relevant experience building such solutions. With the help of an experienced software development partner, you can overcome most of the challenges associated with EHR system development. Some of those challenges include:

1. High initial costs: ERP implementation involves substantial upfront costs, including software licenses, hardware, consulting services, and employee training. Budget overruns are not uncommon.
2. Complexity: ERP systems are intricate and require customization to meet the specific needs of an organization. This complexity can make the implementation process challenging and time-consuming.
3. Data migration: Migrating existing data from legacy systems to the new ERP can be a complex and error-prone task. Ensuring data accuracy and integrity is crucial.
4. Change management: ERP implementation often necessitates significant changes in processes and workflows. Employees may resist these changes, leading to resistance and morale issues.
5. User training: Employees need to be trained on how to use the new ERP system effectively. Inadequate training can result in errors, inefficiencies, and frustration.
6. Project management: Managing an ERP implementation project is complex. Poor project management can lead to delays, scope creep, and cost overruns.
7. Vendor selection: Choosing the right ERP vendor is crucial. Poor choice of vendor can lead to compatibility issues, inadequate support, and a mismatch between the software and the organization's needs.
8. Data security: Ensuring data security is critical, especially when sensitive business information is stored in the ERP system. Data breaches can have serious consequences.
9. Maintenance and upgrades: ERP systems require ongoing maintenance and periodic upgrades. Failing to keep the system up to date can lead to security vulnerabilities and compatibility issues.

To mitigate these challenges, organizations should conduct thorough planning, involve key stakeholders, select an experienced implementation team, and prioritize change management and user training. It's also essential to set realistic expectations and have contingency plans in place to address unexpected issues that may arise during the ERP implementation process.

The Many Layers of ERP System Architecture

ERP system architecture is the structure that defines how the various components and modules of the ERP software interact and function. As with most aspects of ERP, its architecture is complex and deserves a deep dive. Here’s a brief overview of the most critical layers of the ERP architecture you must consider when approaching ERP systems development projects:

1. Database layer: At the core of the architecture is the database layer, which stores all the data needed for different business functions. It serves as a centralized repository for information and ensures data consistency.
2. Application layer: This layer contains the ERP software's business logic and application modules. It handles tasks such as data processing, user interfaces, and workflow management.
3. Presentation layer: The presentation layer is the user interface that allows users to interact with the ERP system. It can include web-based interfaces, desktop applications, and mobile apps, making it accessible to different devices.
4. Integration layer: ERP systems often need to integrate with other software applications, both internal and external. The integration layer facilitates data exchange and communication between the ERP system and external systems, such as CRM, e-commerce platforms, or third-party services.
5. Infrastructure layer: This layer includes the hardware and networking infrastructure that supports the ERP system. It encompasses servers, storage, networking equipment, and security measures to ensure system reliability and data protection.
6. Security layer: Security measures, including user authentication, authorization, encryption, and data access controls, are essential components of ERP system architecture to protect sensitive business data.
7. Reporting and analytics layer: Many ERP systems include tools for reporting and analytics, allowing users to generate customized reports, dashboards, and data analysis to support decision-making.
8. Customization and extension layer: Organizations often customize or extend their ERP systems to meet specific business needs. This layer allows for the addition of custom modules or functionalities without altering the core ERP software.
9. Cloud services (optional): Some ERP systems are deployed in the cloud, utilizing cloud infrastructure and services for scalability, accessibility, and cost-effectiveness.

Overall, ERP system architecture aims to provide a structured framework for data management, business processes, and user interaction, enabling organizations to streamline operations, enhance collaboration, and make informed decisions. The architecture can vary between ERP vendors and implementations but typically adheres to these fundamental principles.

What are the Industries That Need ERP Software the Most?

ERP systems are used across various industries, but four core industries that heavily rely on ERP solutions include manufacturing, retail, healthcare, and finance. While these four core industries prominently use ERP systems, ERP solutions are also applied in other sectors like education, construction, and hospitality to improve operational efficiency, data management, and decision-making processes. The adaptability of ERP systems makes them valuable across a wide range of industries, and your business can benefit from these solutions nearly in any industry.

Manufacturing

Manufacturing companies often have complex operations involving production, inventory management, supply chain coordination, and quality control. ERP systems are crucial for optimizing these processes and ensuring efficiency.

ERP systems help manufacturers plan production schedules, manage raw materials and finished goods inventory, track work orders, and monitor machine performance. They provide real-time visibility into production processes, allowing for quicker decision-making and better resource allocation. Improved production efficiency, reduced lead times, enhanced quality control, better demand forecasting, and streamlined supply chain management.

Retail

The retail industry involves managing large inventories, sales transactions, customer data, and supply chain logistics. ERP systems are essential for retailers to efficiently handle these operations while providing a seamless shopping experience. Retailers use ERP systems for inventory management, order processing, point-of-sale (POS) systems integration, customer relationship management (CRM), and demand forecasting. These systems help retailers optimize stock levels, manage promotions, and analyze customer data to personalize marketing efforts. Enhanced inventory accuracy, improved sales performance, increased customer satisfaction, better supply chain visibility, and streamlined financial operations.

Healthcare

The healthcare industry faces challenges related to patient care, billing, regulatory compliance, and resource management. ERP systems play a crucial role in enhancing operational efficiency and patient care quality. Healthcare organizations use ERP systems to manage patient records, scheduling, billing, and inventory. ERP solutions facilitate communication among healthcare providers, streamline billing processes, and ensure compliance with healthcare regulations. Improved patient care coordination, reduced administrative errors, enhanced billing accuracy, compliance with healthcare regulations, and efficient resource allocation.

Finance

The financial sector encompasses banking, insurance, investment firms, and other financial services. ERP systems are vital for managing financial transactions, risk assessment, compliance, and reporting. Financial institutions use ERP systems for accounting, financial reporting, risk management, and regulatory compliance. ERP systems automate financial processes, monitor transactional data, and provide comprehensive reporting tools. Enhanced financial visibility, improved risk management, streamlined compliance reporting, increased operational efficiency, and better decision-making based on real-time financial data.

10 Steps for Successful ERP System Development

ERP development is a complex process that involves a number of steps and requires profound knowledge and skills on the side of the development team. The description of the development process deserves a series of its own articles, so we are going to give you a brief description of the core steps. Here’s how the Hive teams approach the ERP system development in 10 steps:

1. Requirement analysis: Gather and document detailed requirements from stakeholders across various departments and identify the specific needs, processes, and workflows that the ERP system must address.
2. System design: Create a system architecture and design that outlines how the ERP components will interact. Define the database schema, user interfaces, and integration points.
3. Development: Write and test the code for the ERP modules and functionalities. Your development team must ensure that the software aligns with the design and meets the specified requirements.
4. Testing and quality assurance: Conduct thorough testing to identify and resolve bugs, errors, and issues. The QA experts will perform system integration testing to ensure seamless communication between modules.
5. Deployment: Install the ERP system on the chosen hardware infrastructure, whether on-premises or in the cloud. Configure the system to align with the organization's requirements.
6. Data migration: Migrate existing data from legacy systems to the new ERP system and validate data integrity and accuracy during the migration process.
7. Training: Provide training to end-users and administrators on how to effectively use the ERP system. This step will help you ensure that employees can navigate and utilize the system for their respective roles.
8. User acceptance testing: Allow end-users to test the ERP system in a controlled environment. Gather feedback and make any necessary adjustments based on user input.
9. Launch and support: Transition to the live environment, where the ERP system is fully operational. Provide ongoing support to address user questions, issues, and system maintenance.
10. Monitoring and optimization: Continuously monitor system performance and user feedback. Optimize the ERP system based on evolving business needs, technology updates, and user requirements.

These core steps provide a high-level overview of the ERP system development process. Developing an ERP system is a complex and iterative endeavor, often involving collaboration among cross-functional teams and continuous refinement to ensure the system aligns with the organization's evolving needs.

FAQ

How to build an ERP system from scratch?

Building an ERP system from scratch involves defining requirements, selecting technology, designing the system, and developing the modules. After thorough testing and deployment, data migration and staff training are essential. Continuous maintenance and updates are necessary to adapt to evolving business needs.

What is the cost of implementing an ERP system?

The cost of implementing an ERP system varies widely depending on factors like the size of the organization, complexity of requirements, choice of ERP software, and customization needs. Small to medium-sized businesses might spend hundreds of thousands to a few million dollars, while large enterprises can invest tens of millions or more. Ongoing costs for maintenance, support, and user training should also be considered.

Efficient ERP System Development With Hive

When it comes to ERP system development, having a software development partner with the right expertise is absolutely essential. The complexity and critical nature of ERP projects demand a deep understanding of the intricacies involved. With an experienced partner like Hive, organizations can benefit from a wealth of knowledge and relevant experience in developing ERP solutions. Hive's understanding of ERP system intricacies ensures that the development process is not only efficient but also tailored to meet the specific needs and challenges of each client. Our expertise encompasses the entire ERP development lifecycle, from initial requirement analysis to deployment and ongoing support.