45 min read    July 30 , 2024

How to build an ERP system from scratch?

The implementation of an ERP System from scratch requires intense planning, effective skills, and proper commitment to the process involved. However, all this is well compensated by the outcomes which can be seen below.

What is an ERP system?

ERP is a class of software systems that assist organizations in the management of key operational activities for operational efficiency. Best ERP solutions integrate data transactions between the firm’s business functions. So that real-time information is utilized for activities at various organizational levels. It can integrate a company’s financials supply chain, operations, commerce, reporting, manufacturing, and HR (Human Resources) functions in a single system.
Almost every company has a finance and operational system in place. However, siloed systems can't go beyond everyday business processes or support future growth. Adapting to the needs of growing companies is essential. Systems should grow with them as well.

Types of an ERP system

There are several types of ERP systems we’ll discuss a few of them. These are;

On-Premise ERP

On-premise ERP is when an organization/company installs an ERP system on its computer systems and servers. This approach will offer you a high degree of control but will be costly and serious responsibilities.

1. Scalability

Scaling on-premise ERP systems is feasible but can be slow and costly. The process may also require increasing physical capacity, such as computing equipment and IT staff.

2. IT Infrastructure

It implies that there should be a professional IT team responsible for managing system installations and required updates. This team should also address problems encountered and perform general health checks of the system.

3. Data Security

Measures can be taken inside the organization to enhance security. For example, strict security protocols can be implemented to prevent external access to sensitive data.

4. Complete Ownership

The organization has complete control over how the system configuration, and data processing. Even the security features would be implemented.

5. Customization

On-premise ERP systems allow for numerous original adjustments concerning the integration with business procedures and demands. Example: SAP ECC (ERP Central Component)

Cloud ERP

Cloud ERP systems are hosted on the vendor’s servers and accessed via the Internet. The service provider is responsible for maintenance, management, and security. Here is some detail discussed below:

1. Accessibility

We can be accessed from anywhere with the help of an internet connection.

2.Scalability

Easily scalable to accommodate business growth.

3. Cost

Lower initial costs with subscription-based pricing, reducing the need for significant upfront capital investment.

4. Maintenance

Automatic updates and maintenance are managed by the service provider.

5.Security

Data security is managed by the provider, often with high-level security protocols and compliance standards.

Hybrid ERP

Hybrid ERP systems seamlessly combine the strengths of on-premise and cloud-based ERP solutions. That offers a flexible and cost-effective approach to enterprise resource planning. Some Key Benefits are given below:

1. Flexibility

Critical data and processes can remain on-premise, while non-core functions can be migrated to the cloud. That ensures optimal security and efficiency.

2. Cost-Effectiveness

It balances initial investment and ongoing expenses by leveraging the scalability of cloud services. At the same time, it utilizes the control of on-premise solutions.

3. Integration

It ensures seamless communication and data consistency between on-premise and cloud components. This streamlines processes and enhances productivity.

4. Customization

Allows for tailored on-premise solutions while benefiting from cloud-based scalability and flexibility.
Open-source ERP and Industry-specific ERP are also types of ERP systems.

Why do we need to build an ERP system?

It became a common question in the field why do we need to build an ERP system? So, here’s what will answer your question. ERP systems unify different systems into a single coherent framework, reducing manual work and eliminating redundant tasks. They centralize data management, which helps in reducing errors and ensuring data consistency. ERP systems are designed to be scalable. That allows organizations to add new functionalities, users, and processes without significant disruptions.

Now is the best time to build an ERP system for your company to gain advantages such as enhanced efficiency and productivity. An ERP system also provides increased agility and adaptability, giving your company a competitive edge. Additionally, it improves decision-making and overall business performance.

Steps on how to build an ERP system from scratch

Defining Objectives and Requirements

The first step is the most important because direction determines the whole process of the project. They include the approaches that must be delivered to provide strategic direction. This is essential for the accomplishment of business objectives through the implemented ERP system. For instance, the objectives may be set to raise efficiency or integrate activities. This feedback provides valuable insights that can be analyzed from a higher level.

Together, these elements help in refining and optimizing the ERP system for better business outcomes. When specific needs and expectations are properly documented, it enhances the creation of a detailed plan for the sequential development stages. This ensures that the final developed product fully meets the business needs.

Choose the Right Technology Stack

Selecting the optimal mix of the technology base is an important factor when designing a scalable and reliable ERP system. This entails choosing the proper programming languages, frameworks as well as databases to properly align with the goals of a project.

These aspects would mean that the chosen technology stack must increase the efficiency, protection, and compatibility of the system. Decisions on these two areas therefore affect the maintainability of the system. As well as its transformability to accommodate new web developments in technology.

Designing the System Architecture

Developing the architecture is the process of defining the framework of the overall design of the ERP system. This design shows how each module and component of the system will be developed with the ability to interconnect. And how this modularity will support scalability.

A good architecture also allows one to maintain the system easily. It facilitates further modifications in the future with relative ease. It also assists in the mitigation of various dependencies. And caters to the growing capacity as the business scales.

Developing Core Modules

The creation of core modules is the stage at which the key competencies of the specific ERP system are established. These include modules for the financial section, personnel, stock control, and other operational sections of a business.

Every module has to be designed with proper integration and data coherence with the other modules in the ecosystem. Since they are the basis for further features and adjustments, these key modules are given priority.

Testing and Quality Assurance

The functions of testing and quality assurance are essential for guaranteeing the ERP system’s effectiveness and efficiency. This step focuses on conducting different kinds of testing. Such as unit tests, integration tests, and systems tests to detect faults that exist.

In the final phase of testing, User Acceptance Testing (UAT) is crucial. It ensures that the system meets the end-users' needs and is fit for its intended purpose. UAT also verifies that the system performs satisfactorily under real-world conditions. Proper testing is instrumental in developing a new product, as it aids in establishing an error-free rollout.

Key features of the ERP system

Financial Management

Financial management with the tools designed to automate accounting processes and create the budget. Have a clearly defined system where the business and its financial statements are updated on a real-time basis.

And expenses were recorded without difficulty. Perform every aspect of cash management and simply prepare various financial statements.

Human Resources Management

Enhanced features for HR personal data management to minimize HR processes’ complexity. Reduce the complexities of the operation in the areas of payroll, recruitment, and performance assessment.

Improve the data stored with employees, tracking their attendance and even the payroll.

Inventory and Warehouse Management

Increase effectiveness in managing surplus/shortage of goods through automated stock and order management updates. Automate procedures for determining the status of inventory and its reformation.

There is a need to space out the stock in the warehouse to avoid unnecessary stock outs. At the same time, it is important to avoid overstocking.

Customer Relationship Management (CRM)

Improving customer communication and selling procedures with the help of incorporated CRM options. Analyze customer relations and the status of sales leads.
Ensure that you offer adequate services to increase sales and at the same time meet customers’ needs.

Supply Chain Management

Officially combine supply chain activities such as purchasing and supply management or production planning. More coordination of the transportation system helps to cut the relevant costs.

Reporting and Analytics

Numbers do not lie, analyze business performance with state-of-the-art reporting features. Accumulate extensive class reports and data visualization to support strategy development. Enable users to find trends and analyze KPIs effortlessly.

Benefits of building an ERP system

An Enterprise Resource Planning (ERP) system is a strategic innovation tool recognized in today’s business environments. It is central to an organization’s operation and functions as a hub for connecting and coordinating work from different departments. Its various benefits are as follows:

1. Improved Productivity

ERP systems perform best with transactional processes that entail repetitive work like data input, billing, and wages. This always relieves the employees and makes them less stressed about their day-to-day work. They are free to engage in other productive activities that are more important to the sustenance of the organization. This leads to increased productivity because many of the processes and forms that were time-consuming were automated and eradicated respectively.

Improved Decision Making

Supplying actual time data also it is analytics functionalities, the ERP systems help businesses make appropriate decisions. As they give a big picture of organizational operations, such systems reveal previously obscured patterns and trends. These insights help the organization identify conditions it needs to steer for or avoid. Additionally, they highlight facets of performance that can be improved.

2. Scalability

ERP systems are implemented according to the state and needs of the company. ERP systems are anticipative of the development of the business. As the organization grows and more stakeholders join the system, more users, functions, and data can be added. This ensures that the system continues to meet the evolving business needs.

3. Cost saving

In this way, through optimization of the internal processes and the increase in the level of controlling the integral costs, ERP systems directly influence the growth of the company’s profitability. Inventory control, supply chain ordering and provisioning, as well as cost accounting, are among the various ways that ERP systems create value.

4. Risk Mitigation

ERP systems have embedded strict security features to ensure that any business is secured against any cyber-attack. Also, since ERP exposes the operations in real-time, organizations can see where they are likely to meet certain risks. This allows them to deal with these risks before they occur. Legal requirements in the industries are also easily met through the ERP systems to avoid penalties and legal cases.

Bringing it to Close

ERP implementation from scratch involves a lot of planning, skills, and commitment in the process. But all this is well compensated by the outcomes which can be seen below. The benefits of implementing a custom ERP system include operations automation and optimization. It also includes the improvement of decision-making processes through data availability and data analysis.

Business growth and adaptation to changing needs, decrease of costs and effective utilization of resources, risk management, and compliance are other benefits. An up-to-date ERP system is no longer a luxury for any business to have. Rather, it is an essential tool to possess in today’s hi-tech world. With the following ERP implementation guidelines presented in this article, an organization will be able to build a successful ERP system that will enhance its performance.