How Does ERP Software Work?

ERP software Enterprise Resource Planning

No matter which industry your business is in, there are many software solutions available to help you optimize certain processes. One of the most popular of these software solutions is ERP software, which stands for Enterprise Resource Planning.

ERP software is a modern solution to a problem that has plagued supply chain stakeholders for decades – how to streamline HR, accounting, and other business processes. But how does it work, what type of businesses can benefit from its platform, and moreover – is it worth the investment?

Below, we are going to explain exactly what enterprise resource planning is, how it works, what features it includes, and the process for installing and implementing this software.


Definition of Enterprise Resource Planning

Enterprise resource planning software is a tool that maintains databases of information related to several different business processes, such as human resources or customer relationship management. Additionally, ERP solutions allow business processes to be automated and integrated. This reduces the amount of manual labor workers in your company must perform.

ERP’s centralized database of various business processes reduces manual labor and simplifies workflows. This database can be accessed via dashboards which allow users to see real-time data about different aspects of the business and measure profitability and productivity.

Without ERP software with a centralized database, data can only be accessed from within individual departments which makes things difficult across the company. ERP allow data from several departments to easily be shared and accessed across the organization. 

By centralizing and simplifying all company information, an ERP software solution helps in the development of business goals and reduces the time spent by employees on tasks that can be automated.


Features Included with an ERP Software

One of the biggest selling points for ERP software is the wide array of features that come with it. Keep in mind, however, that some of these features are only offered with certain software options, while others are always included.

Since the main premise behind an ERP system is the ability for various modules to interact with each other and generate actionable insights along with performing business functions, it’s important to make sure the company you’re working with to develop your these solutions includes these essential features along with any specialized features that can help streamline business operations.



An accounting module will reduce the amount of time your accountants need to spend on tedious and monotonous tasks, such as manually inputting information into spreadsheets. Also, an accounting module from an ERP software system will be automated and integrated to perform other tasks such as automatically sending invoices to customers with outstanding balances.


Human Resources

A human resources module helps automatically keep track of candidate applications, allocation of employee bonuses and Paid Time Off (PTO) updates, along with many other tasks. An example of how this module can integrate with other modules is that this tool can integrate with the accounting module to automatically reimburse any employees that have extra PTO leftover at years’ end. 

This would work by having the accounting module calculate how much is owed to employees who have leftover PTO days and then automatically submitting the payment to the employee’s bank account which would be stored under the human resources module.



Any manufacturing and/or distribution company can also benefit from having ERP software, as the tools in an ERP software can be used to streamline several aspects of the manufacturing process. For instance, a tool within this software can be used to determine the point at which materials to produce certain goods need to be reordered.


Customer Relationship Management

A CRM (Customer Relationship Management) module works to improve customers’ relationships with your company and ensures that they will have a flawless experience. CRM can analyze a customer’s purchasing and browsing history and send them targeted ads based on the products they’ve been looking at. Also, CRM and TMS solutions can be used to update customers on the shipment status of their orders.


Inventory Control

Another common ERP module is one that automatically tracks your company’s inventory. This tool can predict when an item will be sold out and automatically reorders products, which means you will always have products in stock. 

This tool can also help streamline the distribution process by providing recommendations about which items should be placed next to each other in inventory based on the purchasing habits of previous customers.


Which Industries Use ERP Programs?

ERP software is used by a wide range of different kinds of companies, from small businesses to mega-corporations, to help streamline workflows. ERP solutions are used by companies in several different industries, including:

  • Manufacturing
  • Retail
  • Distribution
  • Pharmaceutical
  • Hospitality
  • Technology
  • Aerospace and Defense
  • Construction

Arguably the best attribute of ERP software is its custom configuration. A business can work with a professional 3PL like Redwood Logistics to optimize and set-up this platform for their specific needs. The systems are likewise scalable and more affordable than you’d think. 

If you manage a logistics-based business, contact Redwood Logistics to learn more about how you can leverage the power of ERP software.