Beginner’s Guide to ERP System: Understanding and Choosing the Right Solution

What is the ERP?

ERP is short for enterprise resource planning. Enterprise resource planning (ERP) is business process management software that allows an organization to use a system of integrated applications to manage the business and automate back office functions. ERP software integrates all facets of an operation, including product planning, development, manufacturing processes, sales and marketing.

ERP software comes in many forms, including supply chain management, manufacturing, distribution, warehouse management, retail management, and point-of-sale software etc. ERP software comes in many forms, including supply chain management, manufacturing, distribution, warehouse management, retail management, and point-of-sale software. Moreover, depending on the state of manufacturing enterprises that have more other sub-systems such as the multilateral trading system, distribution system/ exhibition shop…In this section we just talk about management system, so that we understand the use of ERP management.

Introduction the basic functions of ERP systems

1. The basic data and maintain data

This subsystem maintain and management the common basic data to other systems, establishment the datas and find the common parameters, and the allocation of powers, the code programs, data structures, user management… All are concentrated here to support for managers can understand the structure and know how to use the manipulation system.

2. Procurement and inventory management

This subsystem is mainly for corporate Procurement Processes such as supplier management, procurement operations, provide better job with reminders, receipt and acceptance, automated data processing for operations.

Supplier managementFor all suppliers, recording all the basic data and also recording all transaction in the past, money, rate of failure, the delivery rate… so that we can continue to acquisition or reference exchange rate.
PurchasingProvide a purchase orders (including a lots), but also providing a complete supplier price files and transaction in the past for all the materials and parts.
PurchasingProvide access to various angles such as manufacturers of material in respect to predict the arrival of the purchase situation.
PurchasingProvide evidence for the warehouse manager (check the original purchase order for the product number, quantity, delivery, etc.), provide quality control units for the goods and record the results, the returned product will preserved and notify suppliers to take on, the income test will be logged for preservation.

3. Inventory management

The purpose of inventory management is to store the appropriate number of materials, inadequate or excessive inventories will affect all businesses performance, and the basic inventory management, retention of transaction data, the more important is to immediately provide all relevant statements for managers to understand the stock situation, in order to make appropriate decisions, such as purchasing or inventory disposition.

4. Distribution management

Distribution Management is mainly for orders and shipping operations, such as production order processing, price management, price adjustment process, related orders (customer credit management, transaction records, etc.) and transaction data, updates and provide complete, automated data to strengthen the status of the sales and response.

5. Production management

The ERP production management usually provide product structure management, demand management, material management, demand planning, process costing system and management accounting in order to achieve the capacity of a flexible manufacturing system.

Product Structure ManagementProvide materials related product structure, the cost of data storage, and computer access to the printing and other activities.
Production Order ProcessingIncluding plant injunction, returns the stock management, production storage, production other processing, data processing manager plans, import processing charge, price management, and to provide information for a variety of production managers report to help managers know the situation of production.
Demand Requirement PlanningProvides the ability for the timely preparation of each production planning and material procurement plan and render performance analysis of each plan to assess its feasibility.
Costing SystemSupport setting mode to set the exact price, according to the analysis of the cost structure in order to find out the issues need to improved.

6. Financial management

Financial management is usually divided into accounts receivable / payable, general ledger account, automatic entries, checks, business tax, cost management systems and all six constituent parts success, due to the accounting cycle based on the analysis of transactions to plan, write diary, put detailed classifications , and by the end of the month will be transferred to summarize, others as accounts, make calculations and scheduling so that the enterprises can quickly grasp operating costs and finance-related decisions.

7. Human resource / Transaction management

Human Resource / transaction management is often divided into card-swipe, salary scale and fixed asset, through the management information data to reduce labor time and minimize errors arising from employees. Human resource for easy handling attendance of employees (by card-swipe), calculate and store cash, attendance and other allowances, the insurance, personal income tax payable, etc. Management of fixed assets mainly manage equipment and other assets, calculate depreciation, improvements, re-evaluate, report waste, sale, adjusted, in order to avoid depreciation calculation errors affect production costs of inventory records are incomplete and difficult to manage.

8. Support management and decision making

Support Management and Decision Making is usually the enterprise inventory, sales, finance, payroll and production. Use OLAP tools enable users to analyze multidimensional data interactively from multiple perspectives, providing visual communication simple interface and form drag and drop simplicity, so that the users can view the sales by individual products that make up a region’s sales for decision-making.

9. Export

The export transactions are quiet complex, especially error rate in export documents are increasing by manual handling, and reducing the market performance, so the management of papers and progress are extremely important steps, export management system help set quickly and accurately documents PROFORMA INVOICE, PACKING LIST and other related documents; and control L / C, reduce the bad debts, strengthen L / C control function. In addition, the shipping notification function and the cost of export, after receiving the application, verification trustee, votes notified goods’ quality, selling orders to check out the function, bring out the automatic information related the data to reduce the burden and simplify the management and control the loan and processes.

10. Import

Import transactions related to the supply of goods or raw materials for enterprises, and based on that relationship to tight management, in order to avoid delaying the progress can affect production schedules and delivery is not in time, it is the causes of customer complaints or other problems. Import must be able to assist in operations from prepaid purchase materials, SHIPPING INSTRUCTION (S / L) and the customs declaration documents, including management , the book liabilities, calculate the costs in order to minimize burden and simplify the monitoring of the import process.

From the above, we have understood the general parts of the ERP system, however the manufacturing professions are not the same, the scale productions are also not the same, even as the same competition can also owns various Business Models. How could enterprises choose their own suitable ERP?

How to choose the right ERP system?

When enterprises decide to install the ERP systems, in the face of many diversity commercial software market ERP, how can enterprise choose the most suitable ERP system for their own business? In general, the small and medium businesses are still not familiar with the ERP systems, this causes difficulties for the selection. The enterprises should use the package or design software? What should you also consider between the software and the hardware? How to choose the selection tools and expand the system?

However, enterprises are in the process of discussion and evaluation , there are some ideas, the information technology is only a catalyst not the main, enterprises can not only buy the brand of ERP system can become a big enterprise; and there is no good or bad software, but the main point is that if enterprises know how to use that software functions to promote the advantages , it provide assessment information for enterprises to choose the right ERP system.

A. Supplier information

Professional, full information can help businesses set ERP systems easily, enterprises also avoid missing information. From the business situation and the service process help us to assess how professional of an enterprise, as well as the full information from suppliers.

From business situation:

  1. The financial development of the suppliers from the past to present and what is the advantage of supplier?
  2. The development of products has perfect or not? It can provide a complete information or not?

From information services:

  1. Are there consultants and professional system planners in order to provide information and proposals?
  2. Is there provide a good training program to help enterprises know how to use the system?
  3. Are there advisor and instructor support system to help enterprises reduce the difficulty during switching system?
  4. When you encounter problems, have dedicated staff to handle immediate assistance via phone or not?
  5. When some problems happen, will the support staffs help to solve the problem?
  6. Is there a system constantly updated and upgraded version?

B. System Structure and stability of the system

The design of the ERP system have a basic belief that “All users can use a general DBMS, use a common program and on the same interface “, let the User Interface and business information have a unit of enterprises using ERP, so that the present ERP system use a three-tiers architecture, computation and storage are through by the User Interface to Application Server plus auxiliary database that will combine stratification information management, that is also enhancing the convenience and the functionality of the ERP system management.

To evaluate the stability and maturity of the ERP system, because there are some defects in the function of all software products before they appear on the market (maturity) and efficiency (stability). Therefore, when enterprises choose to buy the best ERP system, they should choose the ERP system that has been on the market for a long time, and it’s also own a large of users, its new function closer to the standard format, the stability of the system is also better.

C. Functional Assessment System

If you want to assess the ERP system is suitable with the needs of enterprises’ operations, you can start the process functions and check the ERP systems to see is it the most appropriate program? Then, you can view the difference between the needs of enterprise and itself, prepare a report of analyzing enterprises’ needs, which shall affect the operation of the system to avoid being repair or inappropriate costs. On the other hand, experience and ability related to ERP software can improve processes.

Software prices has always been an important enterprises’ consideration, but the ERP systems have a great influence on the enterprises, so that its price as the main reason, when you use an unsuitable ERP, it will become the enterprises’ burdens. In addition, when the enterprises evaluate the ERP software, they should set some transfer rule and the important directions to provide the suitable ERP software.


After the above processes, you can know how to select your own suitable ERP system. However, the right selection of the ERP system does not mean that you are succeeded in using digitization. The using of the ERP system for business management processes will have an influence on the enterprises’ management, so that the using of the main method is also an important key to create the affection. The next chapter, we will tell you how to set the ERP system.

How to switch to ERP?

Selection methods in using ERP

Because the ERP software systems of each enterprise has their own complexity, repair, and their own install, plus the difference of the needs of enterprises, so there is no one common method, but in the using process there is ” Adviser information ” which has the influence on the success of using the ERP system. In general, advisers need to understand the process of enterprises’ operation, and know about information technology in order to in order to assist enterprises in ERP implementation. Therefore, if the ERP software company that has chosen business advisers who can provide how to using the ERP system, however, the choice of enterprise, enterprises’ management consultant or the planning of enterprises, there are can be divided into three steps:

First, a comprehensive import:

The way to do is put all the enterprises’ systems put directly into using the entire ERP system to link all the administration or the related sectors in order to achieve business process reengineering. If the enterprises do not have a good plan in advance, they will face to the high risk of failure, even lead to the serious crisis, and in the end they will face to the capital loss because of the extremely high price.

Second, the progression:

The risk of importing points are about choosing one administration or one functional element to give all the necessary module in using, until the system runs smoothly then proceed fluently into comprehension. Therefore, it can reduce the risk of failure. There are can accumulate experience and resources to put in using. However, the enterprises have to spend for a long time for waiting all administrations and functional elements corporate functions when using the new ERP system, so that the enterprise must take a long time to have a complete ERP system.

Third, the rapid-imports:

Based on a certain part of enterprise management, job requirements to select the suitable module for accounting management, human resources, production and distribution system etc…until having the new demand into other functions in order to achieve the purpose of using. However, it also brings the lack of overall planning, because of using only one module without other overall planning, if using other modules, enterprises will face with the cost and the Resumption of Work.

The process of using ERP

Above all we have described three different ways to import. There are always four stages when enterprises choose which way to import: project planning, instructions for use, retesting, utilization. You can refer the model to understand the process and using of the system.

ERP implementation program

First, the project planning phase

Enterprises need to establish a project crew for the ERP system, because the introduction of the ERP should have supported not only by the entire operation but also the internal parts of the enterprise, it’s not IT’s responsibilities, this crew should have a deep knowledge about enterprises’ present processes, it will facilitate the project schedule, the organizational structure, the overall process, forms etc… in order to improve the quality of computerization and productivity of enterprises.

Second, instruction for use

The ERP suppliers support all members of the project crew or the users in order to facilitate users to be familiar with the system, help them to know about ERP’s benefits. Preparing the basic features for the ERP project allow the enterprise complete the installation or testing the ERP systems, support the users ready to practice operations, or basic data collection, the structure of the BOM, the system processes / field descriptions etc… the consultants will explain how to prepare for the next step.

Third, retesting

Consultants and the project crew will compare the differences between business processes and review process, it also start a variety of basic data system (suppliers, customers, materials, product structure…), test the internal data and subsystem simulation, step by step to teach users and administrators are familiar with the operating ERP systems.

Fourth, utilization

When the system put into use, consultants have to take participate in the whole process in order to ensure that the data errors which are handle immediately, on the other hand, saving all the check-list or related documents. For example, the new cryptogram, standards workflow books, ERP system operation etc… to avoid all the job turnover of internal staff in the future, resulting in no one can continue the ERP system to make sure that the system can have a smoothly operation.


“Everyone on his trade” can help the ERP systems achieve the double effectiveness, the support and participation of senior management in enterprises, the implementation of project crew and professional staff about the ERP systems, which are four aspects to operate the smooth introduction of the ERP systems. However, the system has to have not only the stability and excellence in business operations but also the corporate investment and continuous converse, it will become the best solution for enterprises.

Share with your colleagues and friends