What is ERP? Bringing finance, stock, sales and production onto one data backbone

ERP (enterprise resource planning) is business software that runs sales, purchasing, stock, production and finance on the same data. When an order is entered, stock, purchasing needs, shipment and collection all draw on that one record; no department produces its own separate truth in its own spreadsheet.

To most managers the word ERP suggests a heavy, long and complicated project. Yet the core idea is simple: enter the same information once and let everyone see the same information. In this article we explain which problem ERP solves, which areas it covers and what to look for when choosing, through the YazSis ERP approach.

Where does the data break?

A typical flow looks like this: the sales team takes the order and emails it to the warehouse. The warehouse updates the stock sheet by hand. Accounting issues the invoice in a separate program and tracks the collection in yet another file. Each step makes sense on its own, but in total the same order ends up with three or four different records, and which one is correct only becomes clear when someone asks.

• The stock sales sees and the stock the warehouse counts do not match.
• A customer’s total exposure can only be found by adding up three different files.
• Whenever a management report is requested, the data is compiled by hand again.
• When a person leaves, the process knowledge leaves too, because the rule lives in someone’s head, not in the system.

Small businesses face these problems as well, but as the business grows they eat more time and effort. Every new customer, product or warehouse multiplies the number of disconnected records.

Which areas does ERP cover?

YazSis ERP brings six main areas together in the same data flow:

• Sales: quotation, order, customer, price, shipment and collection.
• Purchasing: request, quotation, approval, order, supplier and delivery.
• Stock and warehouse: transfer, count, lot/serial, barcode, RFID and location.
• Production: bill of materials, recipe, work order, subcontracted processing, scrap, yield and cost.
• Finance: expenses, collections, budget, cash and financial operations.
• Management: KPIs, real-time reports and a decision-support view.

Not every business needs all six to the same extent. For a trading company the production area may be unnecessary; for a company with a workshop, the bill of materials and the work order are the heart of the job. So ERP should be thought of not as a single monolithic package but as a question of which area goes live in which order. Often you start with the area that costs the most time, for example the line from order to stock, and add production, finance and management reports later on the same data. That way the team does not have to learn everything at once.

An order’s journey through ERP

ERP’s difference shows most clearly when you follow a single order from start to finish. All the steps below move along the same record; what one department has done is already waiting on the next department’s screen. Nobody has to ask for the result of the previous step by phone or email.

1. The sales team prepares the quotation; once the customer approves, the quotation becomes an order.
2. The order is checked against the stock record: is the product in the warehouse, in another warehouse, or does it need to be procured?
3. A purchase request is opened for missing material and, if the item is to be produced, a work order.
4. The shipment goes out and stock is reduced; the delivery note and invoice proceed from the same record.
5. When the payment arrives, the customer account is updated; an overdue payment shows up on the finance team’s screen.
6. Management reads all of this from reports without asking for separate files, and sees at which stage work is piling up and where it is waiting.

The value of ERP is not in the number of screens but in every department giving the same answer to the same question.

Four questions to ask when choosing

• What will happen to your current system? If you already run an ERP, completing the missing processes without ripping it out is a separate option. You do not have to build everything from scratch.
• What if the standard screens do not fit your workflow? A workflow the standard product does not cover can be developed to fit the organization as a custom module. The expectation is that ERP adapts to the business, not the business to ERP.
• How will the data come together? A shared flow of information with other systems is built through API and database integrations. Which data flows in which direction should be written down from the start.
• How will you measure the result? Management reports should make bottlenecks and results visible. An ERP set up without choosing what to measure becomes just a more expensive ledger.

ERP is not a software installation, it is a process discipline

A common mistake in ERP projects is to pick the software and leave the processes for later. If questions such as who sits in the approval chain, who has discount authority and how often stock is counted are not answered before the software, the software merely carries the existing confusion into digital form. That is why a sound project starts with an analysis that understands how work is done before installation. The analysis lays out what each department gets today, from whom and with which tool; after that, it is decided which area to start with and which data will be linked together.

If you would like to see how we can bring your processes onto a single data backbone, you can start from the YazSis ERP page.