Enterprise resource planning (ERP) systems have become a critical tool for businesses overthe past several decades. An ERP solution automates critical business processes and servesas a shared database for all financial and operational information from across the company.It pulls this data from a number of modules built to help various departments, fromaccounting to supply chain to human resources, perform their individual functions.
An ERP solution gives all employees access to the information they need to answer importantquestions about their department’s current performance and future planning, as well astarget areas for improvement. This single source of information minimizes data accuracy andconsistency issues and ensures everyone is looking at the same numbers, no matter theirrole. It also drives better decision-making that leads to more efficient processes and costsavings. Additionally, ERP can automate many tasks,reducing errors and freeing up employees to focus on more strategic work.
Common ERP modules support back- and front-office functions like finance and accounting,procurement, manufacturing, inventory management, ordermanagement, warehouse management, supplychain management, customer relationship management (CRM)procurement and workforce management. More functionally rich solutions may also includeprofessional services automation (service resource management), human resources management,ecommerce and marketing automation.
What Are ERP System Modules?
Each ERP module is designed for specific business functions, providing the data andsupporting the processes that will help those employees do their jobs. Every module plugsinto the ERP system, so the system provides a single source of accurate data, even as thebusiness adds new modules. If the ERP system is the toolbox, the modules are thescrewdriver, wrench, hammer and other tools in the box that each have specific uses.
Video: What Are ERP Modules?
How Do ERP Modules Help Businesses?
The modular design of ERP allows it to meet the shifting needs of a business and is a bigreason this software has become ubiquitous. An organization can purchase only the modulesrelevant to its business model, operations and key challenges. It can then add ERP modulesto address new needs or challenges as the organization evolves.
The beauty of modular ERP software is that a company can add this functionality while keepingthe same foundation in place. There is no need to implement a new ERP system—a lengthyprocess—when requirements change, as long as the company chooses an established ERPproviderwith a wide selection of modules.
How Do ERP Vendors Charge for Each Module?
There is a wide variance in what is included in an ERP purchase and which modules vendorscharge extra for. Typically, the core financial functions are included with the basepackage, while features like CRM and human resources management may costextra. Some offerings are bundled by industry so, for example, a manufacturer would buy apackage with supply chain management included or a retailer would buy a package withcommerce included. On-premises ERP vendors typically charge an upfront per-user license,while software-as-a-service (SaaS) vendors charge on a per-user, per-month or year basis. Insome cases, there are transaction-based charges.
13 ERP Modules and Their Features
1. Finance
The finance and accounting module is the mostimportant ERP module because it allows businesses to understand their current financialstate and future outlook. Key features of this module include tracking accounts payable (AP) and accounts receivable(AR) and managing the general ledger. It also creates and stores crucial financialdocuments like balance sheets, payment receipts and tax statements.
The financial management module can automate tasks related to billing, vendor payments, cashmanagement and accountreconciliation, helping the accounting department close the books in a timely mannerand comply with current revenue recognition standards. It also has the data that financial planning andanalysis employees need to prepare key reports, including profit and loss (P&L)statements and board reports, and run scenario plans.
2. Procurement
The procurement module, also known as the purchasingmodule, helps an organization secure the materials or products it needs to manufactureand/or sell goods. Companies can keep a list of approved vendors in this module and tiethose suppliers to certain items, helping withsupplier relationship management. The module can automate requests for a quote, thentrack and analyze the quotes that come in.
Once a company accepts a quote, the procurement module helps the purchasing departmentprepare and send out purchase orders. It can then track that purchase order as the sellerturns it into a sales order and ships the goods, automatically updating inventory levelsonce the order arrives.
3. Manufacturing
The earliest version of ERP, material requirementsplanning (MRP) systems, were designed for manufacturers, and manufacturing remains akey piece of ERP. Today, ERP systems typically have a production management or manufacturing execution system (MES). The manufacturing module helps manufacturers planproduction and make sure they have everything they need for planned production runs, likeraw materials and machinery capacity. During the manufacturing process, it can update thestatus of goods-in-progress and help companies track actual output against forecastedproduction. It also provides a real-time picture of the shop floor, capturing information onitems in progress and finished goods. It can calculate the average time to produce an itemand then compare supply with forecasted demand to plan adequate production.
4. Inventory Management
The inventory management moduleenables inventory control by tracking item quantities and location down to individual SKUs.This module offers a complete picture of not only current but also incoming inventory,through an integration with the procurement tool. This piece of software helps businessesmanage inventory costs, making sure they have sufficient stock without tying up too muchcash in inventory. An inventory management application can weigh sales trends againstavailable product to helps companies make informed decisions that boost margins and increaseinventory turn (a measure of how often inventory is sold over a certain period). It can helpprevent stockouts and delays, which enhances customer service.
Businesses that lack other supply chain management modules may also use the inventorymanagement application to handle purchase orders, sales orders and shipping. Largerorganizations will need a version of this solution that can track inventory across multiplelocations.
5. Order Management
An order management module tracks orders from receipt todelivery. This piece of the ERP feeds all orders to the warehouse, distribution center orretail store after customers place them and tracks their status as they’re prepared,fulfilled and shipped to the customer. The order management module prevents orders frombeing lost and boosts on-time delivery rates to keep customers happy and cut unnecessaryexpenses for expedited shipping.
More advanced order management applications can help a company determine the mostcost-effective option for fulfilling an order—a store vs. a warehouse vs. athird-partyfulfillment partner, for example—based on available inventory and the buyer’slocation.
6. Warehouse Management
A warehouse management module can deliver a rapid return oninvestment for businesses that operate their own warehouses. This application canefficiently guide warehouse employees through all warehouse processes based on the layout ofthe facility, from putaway when shipments arrive to picking to packing and shipping. It canalso help companies plan labor based on expected order volume. The warehouse managementmodule can support different picking strategies like batch picking, wave picking and zonepicking depending on which is most efficient for a given business, and some modules can showemployees the most efficient pick path.
When the warehouse management module is integrated with inventory management and ordermanagement applications, employees can quickly find the right products and get shipments outthe door quickly. Faster delivery ultimately increases customer satisfaction.
7. Supply Chain Management
A supply chain management module tracks each step in themovement of supplies and goods throughout the supply chain, from sub-suppliers to suppliersto manufacturers to distributors to retailers or consumers. It can also manage any materialsor products returned for refund or replacement.
As noted earlier, supply chain management can include a wide array of modules likeprocurement, inventory management, manufacturing, order management and warehouse management.However, it may have functionality beyond the core capabilities of those modules.
8. Customer Relationship Management (CRM)
The customer relationship management (CRM) module stores allcustomer and prospect information. That includes the company’s communication historywith a person—the date and time of calls and emails, for example—and theirpurchase history.A CRM improves customer service because staffers can easily access all the information theyneed when working with a customer.
Many businesses also use CRM to manage sales leads and opportunities. It can trackcommunication with prospects and suggest which customers should be targeted for certainpromotions or cross-sell opportunities. More robust CRM modules may support customersegmentation (enabling more targeted marketing) and advanced contact managers and reportingtools.
9. Professional Services Automation (Service Resource Management)
A professional services automation (PSA) module, also called aservice resource management module, allows an organization to plan and manage projects.Services-based businesses often use this module. The application tracks the status ofprojects, managing human and capital resources throughout, and allows managers to approveexpenses and timesheets. It facilitates collaboration between teams by keeping all relateddocuments in a shared place. Additionally, the PSA module can automatically prepare and sendbills to clients based on rules around the billing cycle.
10. Workforce Management
A workforce management module is similar to a human resourcemanagement module but is designed for companies with more hourly than salaried employees. Itcan monitor workers’ attendance and hours and measure things like employeeproductivity and absenteeism.
Payroll could also fall under the workforce management module. A payroll sub-moduleautomatically distributes paychecks to employees on a set schedule with the appropriatetaxes deducted and handles expense reimbursem*nt. It can also provide reports on payrollexpenses, total overtime hours and similar KPIs.
11. Human Resources Management
A human resource management (HRM) or human capital management(HCM) module usually encompasses all the features of a workforce managementapplication and offers additional capabilities. HRM could be viewed as CRM for employees.This popular module has detailed records on all employees and stores documents likeperformance reviews, job descriptions and offer letters. It tracks not only hours worked butalso paid time off (PTO)/sick days and benefits information.
Since the HRM module stores a vast amount of information on every employee across theorganization, it eliminates a lot of duplicate or inaccurate data that many organizationsstore in various spreadsheets.
12. Ecommerce
Certain ERP vendors offer an ecommerce module forbusinesses that want to sell online. This module allows companies to quickly launch abusiness-to-business (B2B) or business-to-consumer (B2C) ecommerce website. Leading commerceapplications include user-friendly tools that allow employees to easily add new items,update product content (item descriptions, titles, specs, images, etc.) and change the lookand feel of the website.
When the ecommerce application is integrated with other ERP applications, all payment, orderand inventory information feeds from the ecommerce module into the shared database. Thatensures all transactions are added to the ledger, out-of-stock items are removed from thesite and orders ship on time.
13. Marketing Automation
Like with ecommerce, certain software providers have developed a marketing automation module. A marketingmodule manages marketing campaigns across digital channels like email, web, social media andSMS. It can automate email sends based on campaign rules and has advanced customersegmentation features, so customers only receive relevant messages.
Marketing automation software, whether part of the ERP system or a separate solution, canprovide detailed reports on the performance of campaigns to shape future marketing plans andspend. These applications increase leads, customer loyalty and, over time, sales.
How to Build Resilience and Agility With ERP
This guide details how using ERP to share information andcollaborate—even with working remotely can help you build momentum, increaseefficiency,and minimize operational risk.
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Choosing the Right ERP Modules for Your Business
While the ERP modules a business should invest in will vary based on business model,industry, current obstacles and other factors, there are a few modules that mostorganizations need to run their business operations. Every company needs a finance andaccounting module to operate, monitor its financial health and ensure its bills are paid.It’s difficult to run a business without software that can provide financialinformation and execute basic accounting tasks.
Though not as critical as finance and accounting, almost every company—regardless ofindustry, and whether it’s product- or services-based—depends on some type ofcustomer, so CRM is another module that would benefit most businesses. Similarly, theworkforce management or HRM module is a worthy investment for most companies with more thana few employees. Employees must be paid on time, and employers need a central place to tracktheir information and career development.
Any products company—a category that includes almost all manufacturers, distributorsandretailers—will benefit from a supply chain management module. Most organizations startwithinventory and order management modules, since those are crucial to daily operations, andmight later add solutions for manufacturing, warehouse management and procurement.
Services businesses like consultancies, agencies and maintenance and repair companies couldrealize a fast return on investment with a project management module. It automates complex, time-intensive billingprocesses andsimplifies resource planning for projects.
Commerce and marketing automation are both pieces of software that some would not put underthe ERP umbrella, though many businesses rely on them to attract and convert customers,especially as the internet has become a primary driver of new business. Though there areplenty of marketing automation and commerce solutions available from non-ERP vendors,solutions from your ERP provider offer a tighter, more reliable integration and may share acommon user interface that reduces the learning curve and increases adoption amongemployees.
Purchasing and implementing an ERP platform used to be intimidating, even overwhelming, butby beginning with an ERP system that’s right for your business allows youto hit the ground running with the foundations and build it out as you grow. The ideal ERPmodules for your business is one that meets your need right now and is scalable to help youmeet the challenges and opportunities that growth presents.
ERP Modules FAQs
What are ERP modules?
ERP modules are applications dedicated to certain business functions and processes. Allmodules are integrated with the ERP system’s central database so there’s asingle source of accurate data. This also allows different systems — like finance andinventory management, for example — to easily exchange information and work togetherto execute more complex tasks.
What is ERP and its types?
ERP stands for enterprise resource planning and is a platform many businesses rely on tosupport their daily business operations. Systems that manage key processes related tofinance, supply chain, HR, customer relationship management (CRM), project management andmore are all connected to the ERP.
There are multiple delivery models for ERP, including cloud, on-premises and hybrid. A cloudsystem runs on remote servers and may be managed by the software vendor, while anon-premises system requires local, company-owned servers. A hybrid approach blends the two,combining aspects of both on-premises and cloud ERP platforms.
What are the mandatory modules of any ERP system?
Business requirements determine which ERP modules a company needs, but most start with afinance module to automate accounting processes, track all financial information and providekey reports. A CRM is another popular module, as just about any company has customers tomanage. Products-based businesses typically need inventory management, order management andother supply chain-related modules, while services organizations often require aprofessional services automation application.
