Evgeny Belenky - PeerSpot reviewer
Director of Community at PeerSpot (formerly IT Central Station)
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What are the main components of an ERP system?

Hello peers,

What major components does any ERP system include? What is the purpose of each component?

Thanks for sharing your knowledge with the community?

PeerSpot user
6 Answers
PaulAlarde - PeerSpot reviewer
Solutions Consultant at Simple IT Today
Top 10
Feb 28, 2022

Every ERP is basically alike for the purpose that they try to address in the industry that they have a strong focus. 

The 2 main components in an ERP system are: Financials (GAAP) - it is mostly the basic requirement and Inventory Mgt (or Warehousing). 

These two are where the money of the company is, that should be accounted regularly. 

Other components are distribution, assembly, materials, mgt, etc. So, be very keen on getting one, that should fit your business need.

Search for a product comparison in ERP
Muhammad Shaamel - PeerSpot reviewer
Sales Director at Orangekloud Inc
Real User
Top 5
Feb 28, 2022

Enterprise Resource Planning (ERP) integrates in a seamless manner, all the various Business Functions of an Enterprise ala Finance/ Sales / HR / Procurement / Inventory/ Warehouse / Production Planning (Shop Floor)/ Quality Management/  Plant Maintenance (Department / Operations) as a unified system to a Centralized DataBase thereby enabling all the various Departments to share data where required, removing data redundancy (which is usually prevalent in all the disparate systems that handle each different Applications pertaining to each Department/Function. 

Some Enterprises depending on their Business and Business processes may not require all the modules pertaining to each Department/ Business Function. However, most Enterprises (Businesses) will require a) Finance b) Sales-related Data to be integrated so they typically would need a like-minded ERP that provides these two modules. 

Each of the modules focuses on streamlining the business processes of their respective Departments/Functions. However, when you buy an ERP it will still need to be configured and customized relevant to the Business Processes practiced by the Enterprise. This role of configuring and mapping the Business processes is handled by the so-called Functional Consultant. The Technical Consultant is tasked to Customize with added code the ERP.  An example that comes to my mind is customizing the existing reports provided by the standard ERP.

Some ERPs provide basic modules as part of the standard ERP package for implementation and allow the user to add additional modules either at an additional fee or to allow integration to external systems provided by the ISV providers. eg: Integrating a third-party CRM that your company uses like SalesForce to the ERP to share data across the two systems.

Janice Scott - PeerSpot reviewer
Associate Dean of Enterprise Systems at Pasco-Hernando State College
Real User
Top 10
Mar 8, 2022

I work in higher education. 

We have the student ERP and it is a fully integrated system. There are many components in the system such as Student demographic, Financial Aid, Student Finances, Course and Course Schedule, and Registration, course history.  

There are dependencies throughout the system. For instance, in order to register, the student must exist, the course schedule must exist and fees must be in place.  

The key to a modern ERP is to follow the best business practices of the industry it serves.

Osama Nabih - PeerSpot reviewer
Chief Executive Officer at Easy Touch
Real User
Top 10
Mar 1, 2022


Microsoft says the core of ERP is finance, maybe because every transaction finally impacts finance, or maybe because not all the companies need other modules such as production, maintenance, etc.

But In my opinion, if we are talking about an industrial company the core is production, planning and warehouse management.

If we are talking about a trading company, ERP will not be the best solution. Maybe SalesBuzz or Salesforce is a much better solution.

If we are talking about real estate, the core will be the project module.

What I want to say is the core module will be different from one business to another business.

Many thanks,

Dr. Osama Nabih

Gene Hammons - PeerSpot reviewer
Director at ProfitFromERP
Real User
Top 5Leaderboard
Feb 28, 2022

So for a primer on ERP - basically a relational database designed to record transactions, store records and report on business activity. 

It starts with the business office and accounting functions - as every department has a single common measurement that can be modeled by accounting. From there, we move into things like purchasing, very much related to accounting but here's where we start to cut the transactional costs. 

Historically, someone in every department would enter data on a Requisition form and send that to the business office where the AP team would review if there was a budget for such an expense, who needed to authorize, and then when it was all OK, they'd re-enter the same data on a Purchase Order. 

Today, with ERP we have the Requisition online, filled out one time but the requisitioner and the system checks the departmental budget tables to confirm approved budget is available, checks authorization levels to see who needs to approve and even calls up the last price paid and the approved vendor  - and also checks to see that we don't have that item on hand in another department's inventory. When proper approvals are complete, the Requisition converts to a PO eliminating redundant data entry. The company is paying one person to do a task that formerly required two. 

What we've also just done is eliminate up to 8 rounds of email/printout/sign/scan/email as each manager approves what he already approved during the budget process. We also took an AP clerk who did nothing but type Requisitions into PO's (with the standard data entry error rate)  - and we've now vastly lowered the transaction costs of the paper requisition. 

A simple example but imagine the collective impact. 

Multiply it across all the inventory managers, receiving dock workers, warehouse guys, sales, operations, HR, manufacturing, distribution, field service and a dozen other areas - and you can see the savings starting to add up over time rather quickly. 

We also have better reporting - even in the background - when that Requisition came in, who signed for it, where we put it - and we're cross-referencing raw materials inventory against all the sales quotes we have coming in measured by the throughput of our manufacturing lines and instead of yesterday's printing of all 3,000 of our inventory items, we get a select list of 24 items that need re-order by Tuesday if we're going to have it on-site in time for the manufacturing run on the 30th. 

Of course, not everyone is a manufacturer - but you see the interconnected reporting analyzing operations and forecasting - by the ERP itself - something that formerly took huge amounts of time and wasn't always accurate. Now we're avoiding lost sales due to stockouts, having the right inventory at the right place at the right time. 

So there are hundreds of ERP vendors and programs for nearly every industry or vertical, eCommerce, HR-related for professional businesses, aerospace, pharma, retail, restaurants - the list goes on. 

There are also hundreds of price points - smaller systems for the $1m company, huge ERP platforms for $1b companies. 

The trick is determining how much cost you're driving out of the company and what revenue-enhancing options are present. Also, with the variety of industries and every potential ERP reseller running out a sales guy saying "we can do that". It's important to work with someone who at least has a modicum of expertise in the industry AND works with businesses of your size. 

Larger companies have dozens of business analysts to work out these details, smaller and mid-sized firms outsource to companies like our ProfitFromERP to manage the details. 

Almost every major company has some form of ERP in place these days - but it's a very complex undertaking and new developments like Cloud ERP are great tools for a more digital transformation - and with our changing marketplaces, running a 1980s code-base ERP is driving companies to the cloud in record numbers. 

But that's the short story on the main functions of ERP. 

Evgeny Belenky - PeerSpot reviewer
Director of Community at PeerSpot (formerly IT Central Station)
Community Manager
Feb 27, 2022

Hi @Gene Hammons, @Ayman Said, @Antonio Lira, @Muhammad_Irfan, @Daniel Robus ​and @Najva Mahdzadeh,

Can you please share your professional knowledge with our community members? ​

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