Enterprise resource planning (ERP) software has long been a foundational business management solution for manufacturers. There’s strong value in connecting many areas of operation to automate processes and gaining insight to make more informed decisions.
Cloud ERP adds an additional layer of benefits to the established advantages provided by traditional ERP. These range from significantly reducing upfront costs to making key information much more accessible.
Let’s take a closer look at what cloud ERP is. We’ll review traditional ERP in more detail and highlight the improvements that cloud ERP offers compared to it.
What is Traditional ERP?
Where does ERP come from?
The history of ERP starts in the mid-20th century. This was when predecessor software like enterprise information systems (EIS) and material requirements planning (MRP) tools emerged.
EIS software helped businesses automate individual processes, like financial accounting or inventory management. MRP platforms started to expand the scope of planning tools, although they focused only on manufacturing. This allowed for part and product planning in the context of production schedules.
Manufacturing resource planning (MRP II) emphasized coordination, bringing together many business functions for connected business strategy. This is a key development — there’s a clear similarity between modern ERP and MRP II in this regard.
ERP emerged as a more advanced and more connected version of MRP II, extending its reach across business operations.
This trend has continued to the present day. Currently, ERP systems can connect with nearly any department or business function. Everything from customer relationship management to human resources and finances can be included in modern ERP.
When connected with core processes like manufacturing and supply chain management, today’s ERP is truly a whole-business solution.
What are the Benefits of Traditional ERP?
The overarching benefit of ERP software is its ability to connect business processes and provide integrated analysis and reporting. By taking all aspects of operations into account, it’s easier to make decisions that benefit the company as a whole.
More specifically, key advantages that ERP software provides include:
- Creating and maintaining a single source of truth for all business information
- Integrated workflow management that allows for the real-time and simultaneous management of multiple business processes
- In-depth tracking and recording of inventory, production, financial information, business obligations, and more
- Automating a variety of important, but frequently repetitive, simple, and time-consuming, tasks
What is Cloud-based ERP, and What Unique Value Does it Provide?
Traditional ERP is already a very powerful solution. What sets cloud ERP apart — what makes it an even better solution for some businesses?
Let’s first define what cloud software is, then review how the concept applies to ERP and your business.
Prior to the development of cloud computing, businesses only had one option. Software, servers, and the IT staff needed to manage them had to be locally located. A company needed to purchase and maintain all of the tools required to run ERP, along with the ERP itself. They also needed to have either on-site staff or dedicated consultants or contractors to maintain it.
Cloud computing simply means the delivery of software and other digital services via the internet, as Investopedia explains. Instead of having to maintain a complete environment to host and use ERP (or any software), businesses can access it online. Service providers maintain, improve, troubleshoot, and update the software and its infrastructure.
So, what is cloud ERP software? It’s ERP delivered over the internet.
Cloud ERP maintains all of the functionality of traditional ERP outlined in the previous section. At the same time, it adds a layer of cloud-specific advantages. These benefits of cloud ERP include:
A More Manageable Cost Structure
Major upfront costs were common in the era of traditional ERP. Between the software, staff, and servers, the high price was unavoidable. Businesses without a strong digital infrastructure already in place had to pay upfront for all of these resources.
Cloud-based ERP solutions tend to be delivered through a software-as-a-service (SaaS) model. The price of software ownership, and the infrastructure and IT costs related to it, are spread out. That makes ERP much more accessible for smaller businesses and those without large amounts of available capital for a major investment.
Cloud ERP is much more globally accessible than traditional ERP. There are options for remote access with traditional, on-premise ERP, but they tend to be complex. Cloud ERP, in contrast, is designed to be delivered over the internet.
The core of a manufacturing business will always be within the factory and facility. That said, there are many situations in which remote access to information and reporting from ERP is valuable.
Sales staff visiting clients and work-from-home staff who don’t work on the production floor are just two examples. Cloud ERP also makes it easier to check in or follow up with a concern or opportunity after hours.
All ERP requires training, learning, and organizational buy-in to become a successful tool for a business. A company must commit to understanding its ERP solution and following best practices related to it. That’s the only way to get the most value out of ERP.
That said, the internet-based delivery of cloud ERP makes implementation easier. There’s no software to install and maintain locally. The same is true for hardware — it’s all handled off-site by the service provider.
With fewer needs overall, the implementation process is streamlined. As long as your business has a high-quality partner, it has fewer pressing needs to worry about. That makes cloud ERP an easier way to add this solution to your business.
What is Cloud ERP? Final Thoughts
Cloud ERP systems aren’t just an alternative to traditional ERP. They’re increasingly the norm for businesses that want to access the benefits of ERP without the downsides of traditional software.
Cre8tive Technology & Design offers a variety of ERP solutions for A&D manufacturers, general manufacturers, and machine shops. Get in touch with our expert team to learn more!