What is an ERP system?
ERP systems are often modular and offer specialised tools for each department: e.g. Human Resources, Manufacturing, Marketing, Project Management, Finance, etc. The data link between the modules ensures that transactional data and business processes are integrated, and important processes are automated. ERP software such as Oracle NetSuite, SAP S/4HANA or Sage 100 typically also bundles operational data from other systems that are not part of the ERP module bundle: e.g. industry-specific CRM, WWS or WMS systems. The ERP then organises the data flow between the systems and makes it available in a harmonised manner in a single, central system. As part of a comprehensive ERP strategy, such fully integrated platforms ensure smooth planning and make an important contribution to business success. To put it simply, ERP provides companies with a network of employees, business processes and technology.
How do ERP systems work?
ERP systems mostly consist of several modules for different business areas. The individual modules are usually presented separately, but not all of them have to be used. For example, a logistics service provider who is not satisfied with the range of functions of the warehouse management included in the ERP system could use a specialised WMS (Warehouse Management System). In any case, employee training is necessary, as only correct data entry and maintenance increases the value of an ERP system. In order for the ER software applications to be able to communicate with each other, they are run on a central database. ERP systems have standard interfaces so that they can communicate with other software applications in the company, e.g. Customer Relationship Management (CRM) software or Supply Chain Management (SCM) software. Always embedded in the internal IT infrastructure. ERP software can be accessed company-wide via the intranet or internet.
ERP systems are often installed on-premises, i.e. they run on servers and local infrastructure in the companies themselves. However, ERP providers increasingly also offer cloud-based ERP solutions that can be accessed by customers via the internet. This platform-independent service has become increasingly established under the name “ERP as a Service” – in the same way as a Software as a Service (SaaS) – or “Cloud ERP system” or “Cloud ERP” for short.
The use of cloud technology has been driven in particular by the increasing data volumes and mobility requirements of the modern working world. Technologies such as the Internet of Things (IoT) and Artificial Intelligence (AI) and Machine Learning (ML) generate large volumes of data every second. After their evaluation and transformation, they end up in the ERP system in a decision-relevant distillation. There, they ensure that better decisions are made in the business process. Cloud-based ERP therefore enables rapid technological adaptations and is highly scalable compared to installed on-premises ERP systems.
What to consider when introducing ERP?
The introduction of ERP systems is extremely costly and time-consuming for companies. Depending on the size of the business, ERP implementations can take years. One thing is clear: an ERP solution that is powerful in terms of potential possibilities, but which does not correspond to its actual use in the company, does not hit the mark. An ERP system may contain a great deal that will never be used but must be paid for. In terms of a successful ERP strategy, the following points should therefore be considered when selecting a suitable ERP system:
Process landscape
In the run-up to an ERP implementation, the careful analysis of the affected company processes plays a considerable role. Which processes should the ERP solution map? Are the core processes of the company even known? Which supporting processes exist? Which organisations/departments/people are connected via which business processes? How long does it take to maintain the master data accordingly? Will day-to-day business be affected for the duration of the changeover? Who is responsible for the introduction? It is also important to choose the right time for the introduction and not to exceed the set time frame.
Company size
ERP is typically used in medium-sized companies and corporate groups, but in principle it is suitable for any size of business. Larger companies often still use classic on-premises solutions that were introduced in large-scale projects. In contrast, ERP solutions hosted in the cloud are particularly suitable for small and medium-sized enterprises due to their good scalability.
Industry
ERP software can be specifically programmed for certain industries, but it does not have to be. Attempts have been made, especially in the past, to build an industry-agnostic standard framework with ERP systems. Which ERP system is best suited for which company therefore depends on its specific requirements. There are a wide variety of ERP manufacturers on the market whose software has specialised functions or can be adapted accordingly for companies. ERP systems can therefore be usefully deployed in any industry.
IT infrastructure
ERP systems always run embedded in the IT landscape of a company and must be compatible with the existing (data) infrastructure accordingly. In order for the employees to achieve a high level of understanding for the changing business processes, attention should be paid to a user-friendly infrastructure, a uniform look and feel/design and therefore a common user experience in the company, from the back to the front office.
Benefits of ERP systems.
ike every well-coordinated activity in a company, a centralised ERP solution also brings with it numerous commercial advantages.
Improved efficiency
Efficient companies are successful companies. ERP increases business efficiency through integrated data management, automated processes, accurate identification of data flows and improved linkage with existing processes. ERP is also suitable for simulating different forecasts so that possible courses of action can be tested, corrected or optimised and only then rolled out. For example, ERP systems in the area of customer relationship management help to manage customer relations more effectively (updating customer data, deleting outdated entries, saving individual or regional customs, etc.), in logistics to optimise the supply chain including order and supplier management (automated order confirmation after warehouse queries, simultaneous delivery notifications to customer and logistics service providers, optimised route planning, etc.) or in sales to increase turnover through well-defined processes (acquisition planning, customer visits, recognising potential for up and cross-selling).
Cost reduction
By providing accurate and complete data from a single data source, ERP leads to a significant reduction in management and operational costs. ERP ensures more efficient use of all resources, reduced error rates through coherent product names or part numbers, and easier traceability should any errors occur. ERP enables optimised warehouse planning and order processing, as well as ensuring that established best practices are adhered to within the company. Last but not least, ERP ensures the proper recording and presentation of all costs required for reporting and analysis. For example, the accurate calculation of all costs associated with the purchase of ERP software (licence, maintenance, training, hardware, implementation, etc.).
Improved cooperation
The centralised and harmonised data in the ERP system improves operational cooperation within the company. ERP solutions and an appropriately communicated ERP strategy also promote a deeper understanding among departments and increase the comprehensibility of management decisions for employees.
Improving the basis for decision-making
ERP systems support management in making business-critical decisions not only on the basis of intuitions and estimates, but also data-based and thus verifiable – for example, for the efficient use of resources in the event of supply bottlenecks, a shortage of skilled workers or unstable exchange rates. In addition, thanks to real-time data and thereby a real-time overview, ERP helps with ad hoc decisions required in critical situations such as accidents or unexpected downtime. In terms of the legal aspects of corporate governance, ERP also avoids problems in the context of financial controls and compliance thanks to high data quality.
What solution does Lobster offer?
With Lobster_data, the Lobster Group distributes software that is an excellent complement to numerous ERP solutions. This is because the middleware enables the integration of data from systems both inside and outside the organisation in the area of EAI (Enterprise Application Integration) and EDI (Electronic Data Interchange). The connection between Lobster_data and the ERP system is made via the “DatabaseService”. It is important to mention here that all necessary settings must be made bilaterally – in Lobster_data the integration of a JDBC (Java Database Connectivity) driver as well as the maintenance of the connection settings, on the database side the creation of a user responsible for Lobster_data as well as the assignment of the corresponding rights to this person.
Some ERP systems offer various APIs that can be addressed via REST or SOAP. In this case, messages with the exported structure description, whether Swagger or XSD, can simply be implemented in Lobster_data in order to read in ERP data or provide data for the ERP system.
A special feature of the Lobster portfolio is the connection to the ERP system from SAP. Lobster_data offers a very efficient solution here via the “SapConnectionService”. The “SAPConnectionService” establishes the connection to SAP systems via a mechanism similar to the general DatabaseService. This means that connections are represented by aliases and maintained if they remain unused for a certain time. In addition to pure connection management, which defines the integration server as a client to an SAP system, there is also the option of implementing ALE scenarios. For this purpose, it is possible to name so-called request listeners that react to incoming requests from the connected SAP system and, for example, pass on IDocs for further processing to subsequent processes. But Lobster_data does not only exchange data with SAP via ALE. The software also offers the possibility of providing an RFC (Remote Function Call), which is clearly defined in the SAP ERP and is adopted identically by Lobster_data. Ultimately, of course, every ERP system should offer at least one interface that enables other systems to connect and exchange data.
