Glossary

8.2 ERP modules and their functions

4 min read•august 7, 2024

ERP modules are the building blocks of enterprise resource planning systems, each handling specific business functions. These modules work together to streamline operations, from finance to manufacturing, ensuring data flows seamlessly across departments.

Understanding ERP modules is crucial for grasping how businesses integrate their processes. By exploring these modules, we gain insight into how organizations use technology to manage resources, improve efficiency, and make data-driven decisions across the entire enterprise.

Core Business Functions

Financial Management and Accounting

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  • involves planning, organizing, and controlling financial activities such as procurement and utilization of funds
  • Includes financial accounting which measures, processes, and communicates financial information about economic entities (businesses, organizations)
  • Managerial accounting provides financial information for managers inside an organization to direct operations and make decisions
  • Ensures legal compliance with financial regulations (Sarbanes-Oxley Act) and tax laws
  • Handles accounts payable, accounts receivable, general ledger, and payroll

Human Resources and Talent Management

  • Human resources management (HRM) is the practice of recruiting, hiring, deploying, and managing an organization's employees
  • Handles employee onboarding, training, professional development, and retention
  • Manages employee benefits programs (health insurance, retirement plans, paid time off)
  • Ensures compliance with labor laws and regulations (fair hiring practices, workplace safety, anti-discrimination policies)
  • Talent management is a key function focused on attracting, developing, motivating, and retaining high-performing employees

Supply Chain and Logistics Coordination

  • (SCM) encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and logistics
  • Coordinates the flow of goods, services, and information from raw materials to end customers
  • Manages supplier relationships, purchasing contracts, and quality control of inputs
  • Handles warehousing and of raw materials, work-in-progress, and finished goods
  • Logistics involves planning, implementing, and controlling procedures for the efficient transportation and storage of goods (fleet management, order fulfillment, delivery)

Customer Relationship Management and Sales

  • (CRM) focuses on managing a company's relationships and interactions with customers and potential customers
  • Involves using data analysis about customers' history to improve business relationships and drive sales growth
  • Handles all communications and interactions with customers across channels (website, phone, email, live chat, social media)
  • Sales management is the practice of overseeing, training, and motivating a team of salespeople to achieve sales targets
  • Includes sales forecasting, setting quotas, creating sales plans, analyzing sales metrics, and managing sales pipelines

Production and Inventory

Manufacturing Operations and Quality Control

  • (MRP) is a system for planning, scheduling, and controlling the materials and resources used in a manufacturing process
  • Handles production planning, scheduling, and execution to optimize throughput and minimize inventory
  • Ensures quality control by monitoring and controlling manufacturing processes to ensure finished products meet quality standards
  • Includes maintenance management to maximize equipment uptime and performance
  • (PLM) is the process of managing the entire lifecycle of a product from inception through engineering design, manufacturing, and service

Inventory Tracking and Optimization

  • Inventory management is the supervision of non-capitalized assets (inventory) and stock items
  • Tracks inventory levels, orders, sales, and deliveries to ensure adequate supply without overstocking
  • Handles inventory valuation using methods like FIFO (first in, first out) or LIFO (last in, first out) for accounting purposes
  • uses predictive analysis of historical sales data to estimate future customer demand for products
  • Inventory optimization aims to minimize the holding costs by keeping stock levels low while still ensuring adequate supply

Procurement and Supplier Management

  • Procurement is the act of obtaining or buying goods and services, especially for business purposes
  • Handles the activities involved in obtaining the goods and services needed to run a business (raw materials, supplies, equipment)
  • Strategic sourcing evaluates supply options, costs, and vendor reliability to find the best suppliers for the organization's needs
  • (SRM) involves developing and maintaining strong partnerships with key suppliers
  • evaluate purchasing activities, spending, and vendor performance to identify cost savings opportunities

Strategic Management

Project and Portfolio Management

  • Project management is the practice of initiating, planning, executing, controlling, and closing the work of a team to achieve specific goals and meet success criteria
  • Involves balancing project constraints including scope, quality, schedule, budget, resources, and risk
  • Agile project management is an iterative approach that focuses on delivering value to the customer through the rapid delivery of working software
  • (PPM) is the centralized management of projects and programs to achieve strategic objectives
  • PPM analyzes and collectively manages projects based on costs, timelines, and objectives to determine the optimal resource mix

Business Intelligence and Analytics

  • (BI) leverages software and services to transform data into actionable insights that inform an organization's strategic and tactical business decisions
  • Incorporates data mining, analytical processing, querying, and reporting to analyze business data
  • uses charts, graphs, and maps to provide accessible ways to see and understand data trends and patterns
  • Dashboards display key performance indicators (KPIs) and other important metrics at a glance to monitor the health of a business
  • uses data, statistical algorithms, and machine learning to identify the likelihood of future outcomes based on historical data

Enterprise Asset and Risk Management

  • (EAM) is the process of managing the lifecycle of physical assets (buildings, equipment, vehicles) to maximize their use and minimize costs
  • Includes asset tracking, maintenance scheduling, work order management, and replacement planning
  • Facilities management handles the maintenance and operations of an organization's buildings, equipment, and grounds
  • Risk management involves identifying, assessing, and controlling threats to an organization's capital and earnings (operational risks, financial risks, legal liabilities)
  • (GRC) is a strategy for managing an organization's overall governance, enterprise risk management, and compliance with regulations

Key Terms to Review (36)

API Integration: API integration is the process of connecting different software applications or systems through their Application Programming Interfaces (APIs) to enable them to communicate and share data. This connection enhances the functionality of software by allowing disparate systems to work together seamlessly, improving efficiency and streamlining workflows across various platforms.
Automation workflows: Automation workflows are structured sequences of tasks that automate a business process to improve efficiency and consistency. These workflows are designed to streamline repetitive tasks by using rules and logic to connect different applications and services, minimizing the need for manual intervention. By integrating various components, such as data sources, RPA tools, and user interfaces, automation workflows can enhance productivity across different business functions.
Business intelligence: Business intelligence refers to the technologies, applications, and practices for the collection, integration, analysis, and presentation of business data. It helps organizations make informed decisions by providing actionable insights derived from data analysis. In the context of ERP modules, business intelligence plays a crucial role by enhancing reporting capabilities and providing real-time data analysis that supports strategic decision-making.
Centralized database: A centralized database is a single database that is stored and managed in one location, allowing multiple users or applications to access and manipulate the data from that central point. This structure enables consistent data management, enhances data integrity, and simplifies data sharing across various functions within an organization. With a centralized database, information can be readily updated and retrieved, making it essential for efficient operations in many business environments.
Change management: Change management refers to the structured approach for ensuring that changes are implemented smoothly and successfully, while minimizing disruption to the organization. It encompasses processes, tools, and techniques to manage the human side of change, ensuring that employees are prepared, supported, and able to adapt to new systems or processes.
Customer relationship management: Customer relationship management (CRM) is a technology and strategy that companies use to manage interactions with customers and potential customers. It helps businesses streamline processes, improve customer service, and increase profitability by organizing customer data and analyzing customer interactions across various channels.
Customization complexity: Customization complexity refers to the challenges and difficulties that arise when modifying an Enterprise Resource Planning (ERP) system to meet specific business needs. This term highlights how intricate and time-consuming these modifications can be, often requiring extensive planning, resources, and technical expertise. The greater the level of customization required, the more complex the integration becomes, which can impact system performance, updates, and overall functionality.
Data migration: Data migration is the process of transferring data between storage types, formats, or computer systems. This often happens when organizations adopt new systems, such as ERP solutions, requiring the careful movement and transformation of data to ensure compatibility and continuity in operations. Successful data migration is crucial for leveraging the full capabilities of new systems and involves meticulous planning, execution, and validation to minimize risks associated with data loss or corruption.
Data silos: Data silos refer to isolated data repositories that are not easily accessible or integrated with other systems within an organization. These silos can create barriers to data sharing, limit visibility into overall business operations, and hinder collaboration across departments, making it difficult for organizations to leverage their data effectively.
Data visualization: Data visualization is the graphical representation of information and data, enabling users to easily comprehend complex data sets through visual formats like charts, graphs, and maps. This technique helps in identifying trends, patterns, and correlations that might not be immediately apparent in raw data, making it an essential tool for effective decision-making and communication in business processes.
Demand forecasting: Demand forecasting is the process of predicting future customer demand for products or services based on historical data, market trends, and analysis. It plays a crucial role in helping businesses make informed decisions about inventory management, production planning, and resource allocation, ensuring they meet customer needs without overproducing or understocking.
Enterprise Asset Management: Enterprise Asset Management (EAM) is a systematic approach to managing an organization's physical assets throughout their lifecycle to maximize their value and performance. This includes planning, acquiring, operating, maintaining, and disposing of assets in an efficient manner. EAM integrates closely with other enterprise functions, particularly in relation to resource planning and management, to enhance productivity and reduce costs.
Financial management: Financial management is the process of planning, organizing, directing, and controlling financial activities within an organization to achieve its financial goals. This involves making strategic decisions about investments, capital structuring, budgeting, and risk management, all of which are crucial for ensuring the organization’s financial health and sustainability. Effective financial management ensures that resources are allocated efficiently, maximizing profitability and minimizing costs.
Governance, Risk Management, and Compliance: Governance, Risk Management, and Compliance (GRC) is a framework that ensures an organization operates with integrity and adheres to legal standards while managing risks effectively. This approach connects strategic goals with risk management and compliance obligations, creating a cohesive system that helps organizations achieve their objectives while minimizing risks. In the context of enterprise resource planning (ERP), GRC is crucial as it informs how ERP modules operate together to ensure operational efficiency and adherence to regulations.
Healthcare erp: Healthcare ERP (Enterprise Resource Planning) refers to integrated software solutions specifically designed to manage and streamline various operational processes within healthcare organizations. This system enhances efficiency by automating core functions such as finance, supply chain management, human resources, and patient care services, allowing healthcare providers to focus on delivering quality care while reducing operational costs.
Horizontal integration: Horizontal integration is a business strategy where a company expands its operations by acquiring or merging with other companies at the same level of the supply chain, usually within the same industry. This approach helps businesses increase market share, reduce competition, and achieve economies of scale. By integrating horizontally, companies can streamline their operations and improve their service delivery, which is crucial for enhancing the functionality of ERP modules and their overall effectiveness in managing various business processes.
Integrated processes: Integrated processes refer to the coordinated and seamless flow of information, activities, and tasks across different functional areas within an organization, enabling a holistic approach to business operations. This integration allows for better collaboration, improved efficiency, and enhanced decision-making by breaking down silos that often exist between departments. In the context of ERP systems, integrated processes play a vital role in ensuring that various modules work together to provide real-time data and insights.
Inventory management: Inventory management is the process of overseeing and controlling the flow of goods and materials in a business, from purchasing to storage and ultimately to the sale of products. It involves tracking inventory levels, orders, sales, and deliveries to ensure that the right amount of stock is available at the right time. Effective inventory management helps prevent stockouts, reduces excess inventory, and improves overall efficiency within an organization, making it a crucial aspect of operations that is often supported by various ERP modules.
Manufacturing erp: Manufacturing ERP (Enterprise Resource Planning) refers to a suite of integrated applications designed specifically to manage and streamline manufacturing processes, from production planning and scheduling to inventory control and quality management. It connects various business functions, allowing manufacturers to optimize operations, reduce costs, and enhance overall productivity. By providing real-time data and insights, manufacturing ERP helps in making informed decisions and improving collaboration across departments.
Manufacturing Resource Planning: Manufacturing Resource Planning (MRP II) is a method for the effective planning of all resources in a manufacturing company. It integrates data from various sources to optimize production scheduling, inventory management, and overall resource allocation. By providing a framework for production planning, MRP II helps manufacturers align their operations with demand while improving efficiency and minimizing waste.
Modular architecture: Modular architecture refers to a design approach that divides a system into smaller, manageable, and interchangeable components or modules, each serving a specific function. This structure allows for flexibility and scalability in system development, making it easier to implement changes and updates without affecting the entire system. It is especially important in integrated systems like enterprise resource planning (ERP) systems, where different modules can handle distinct business functions while working cohesively.
Predictive analytics: Predictive analytics refers to the use of statistical algorithms, machine learning techniques, and historical data to identify the likelihood of future outcomes based on past patterns. This process enables organizations to make data-driven decisions, improve efficiency, and reduce risks by forecasting trends and behaviors across various operations.
Process standardization: Process standardization refers to the practice of establishing uniform procedures and guidelines across an organization to ensure consistency, efficiency, and quality in operations. This practice is crucial as it helps to minimize variations in processes, making it easier to automate tasks, enhance workflow management, and improve integration with enterprise resource planning systems. By creating a standardized approach, organizations can streamline their operations and facilitate better collaboration among departments.
Procurement analytics: Procurement analytics is the process of collecting and analyzing data related to purchasing activities to enhance decision-making, improve efficiency, and drive cost savings within an organization. By leveraging data insights, organizations can evaluate supplier performance, optimize spending, and forecast future procurement needs, all of which are critical components of effective resource management.
Product Lifecycle Management: Product Lifecycle Management (PLM) is a systematic approach to managing a product's entire lifecycle from initial concept through design, manufacturing, service, and disposal. PLM integrates people, processes, data, and technology to facilitate the seamless flow of information and collaboration across all stages of the product lifecycle, enhancing efficiency and reducing time to market.
Project portfolio management: Project portfolio management is the centralized management of processes, methods, and technologies used by project managers and project management offices to analyze and collectively manage a portfolio of projects. This approach enables organizations to prioritize projects, allocate resources effectively, and align project outcomes with strategic goals, ensuring that each project contributes positively to overall business objectives.
Real-time data: Real-time data refers to information that is collected, processed, and made available immediately or within a very short time frame. This immediacy enables organizations to make informed decisions quickly and efficiently, especially in dynamic environments where timely responses are critical. It enhances the effectiveness of various business operations and is particularly vital in systems such as ERP, where up-to-date information across modules ensures seamless integration and management of resources.
Retail erp: Retail ERP (Enterprise Resource Planning) is a comprehensive software solution designed to streamline and integrate various business processes within retail organizations. It connects different functions like inventory management, sales, procurement, and customer relationship management into a single system, enabling real-time data access and improved decision-making. This integration helps retailers enhance operational efficiency, optimize inventory levels, and deliver better customer experiences.
Return on Investment: Return on Investment (ROI) is a financial metric used to evaluate the profitability of an investment relative to its cost. It is calculated by dividing the net profit from the investment by the initial cost, typically expressed as a percentage. Understanding ROI helps businesses assess the effectiveness of various projects, including automation efforts, resource allocation, and the integration of enterprise resource planning systems, ultimately guiding decision-making and strategic planning.
Supplier Relationship Management: Supplier relationship management (SRM) is a systematic approach for developing and managing partnerships with suppliers to optimize their performance and value to the organization. Effective SRM focuses on fostering collaboration and transparency, ensuring that suppliers align with the company's goals and contribute to its success. This concept is crucial in managing the supply chain and integrates seamlessly with various ERP modules that streamline procurement, inventory management, and overall operational efficiency.
Supply chain management: Supply chain management is the coordination and oversight of all activities involved in the sourcing, procurement, conversion, and logistics of goods and services from suppliers to customers. This process ensures that the right products are delivered at the right time and at the right cost, ultimately improving efficiency and customer satisfaction. Effective supply chain management relies on a seamless flow of information and collaboration among various stakeholders, impacting everything from inventory management to customer relationship management.
System Scalability: System scalability refers to the capability of a system to handle an increasing amount of work or its potential to be enlarged to accommodate growth. This is crucial in ensuring that as a business expands, its processes and systems, such as ERP modules, can support increased demand without sacrificing performance. A scalable system can adapt to changes in workload efficiently and economically, making it a vital feature for organizations looking to grow or adapt to market changes.
System uptime: System uptime refers to the duration in which a system, such as an enterprise resource planning (ERP) system, is operational and accessible without interruptions or failures. High system uptime is critical as it ensures that users can consistently access and utilize the ERP modules, which are designed to streamline business processes and enhance organizational efficiency. Maintaining high uptime not only supports business continuity but also fosters trust in the system's reliability and performance.
User satisfaction: User satisfaction refers to the extent to which users feel that a product or service meets their needs and expectations. This concept is critical as it affects user engagement, loyalty, and overall success of technologies and systems, especially in areas like enterprise resource planning (ERP) modules and human-bot collaboration models, where user experience can greatly influence effectiveness and adoption.
User training: User training refers to the process of educating individuals on how to effectively use a system or software, ensuring they have the necessary skills and knowledge to perform their tasks. This process is crucial when integrating new technology, such as ERP systems, as it directly impacts user efficiency, satisfaction, and overall productivity. By providing comprehensive user training, organizations can enhance the effectiveness of ERP modules and streamline their implementation and customization processes.
Vertical Integration: Vertical integration is a business strategy where a company expands its operations by acquiring or merging with other companies at different stages of the supply chain, from production to distribution. This strategy aims to increase efficiency, reduce costs, and enhance control over the production process, thereby streamlining operations and improving profitability.
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