ERP Modules: Types, Benefits, and Functions

Last Updated: June 8th, 2022
Researched and Written by: Russ Davidson

Enterprise resource planning (ERP) systems are a critical part of any modern business. An ERP software is an integrated suite of business applications that automate the back-office functions of your organization–primarily focused on financials, sales, and operations.

Each ERP system package includes a broad variety of modules that are chosen to meet the specific needs of your business. These applications connect all areas of your business processes in real-time by enabling collaboration and eliminating the need to re-enter data into other disparate systems.

ERP Modules

What are ERP Modules?

An ERP module is a software component that meets a particular need of an operation or department within an organization. The specific business function that the modules of ERP provide are based on data collected by or inputted into the system. All ERP software, such as SAP and Oracle, are made up of ERP system modules that meet the needs of financials, warehousing, supply chain, and more.

One major benefit of ERP is the ability to pick and choose the ERP modules desired for your business. Some ERP systems may offer a more rigid set of modules that are required or included as part of a specific package. Other software solutions may allow you to craft your own. Similar to choosing the interior features of a new car, the body of the car can be thought of as the core ERP software, while the seat fabric, electronics, tires, and legroom can be thought of as the modules.

Why are ERP Modules Important?

An enterprise resource planning system is the heart of any organization. This is because ERP software allows a business to add functionality while keeping the same foundation in place. Smaller businesses may outgrow their existing business software–meaning they have to go through a lengthy ERP implementation. But existing ERP users can upgrade or downgrade their system as their requirements change over time.

Because the ERP market is constantly changing and adding new programs and features into the fold, having a scalable and flexible system will have an incredibly positive impact on your business.

List of Important ERP Modules

Because ERP is widespread in all types of businesses, and because of the modular nature of ERP systems, no two ERP systems are alike. Every ERP module can be integrated into a system to work in tandem with another module–likely filling a specific role or business need that your business has.

No single ERP module is more important than another, but there is a handful that tends to be more commonly implemented when a business is adding ERP software to their operations. A qualified ERP vendor will be able to determine which modules will work best for your management system.

Here are these popular ERP modules explained:

Financial Management and Accounting

A financial management module is primarily made up of accounting modules that track the overall profit and loss of your business as well as the overall cash flow. These financial transactions are tracked via a general ledger that shows transactional records and the account structure used to organize these entries.

Entries from other accounting modules will flow into the general ledger and include both accounts payable module and an accounts receivable module. Accounts payable functionality will include tasks such as invoice processing, payables approvals, and executing payments. Accounts receivable will automate the cash flow and funds owed to your business for goods or services provided.

Procurement

The procurement module, or purchasing module, helps your business source items that are needed for your business operations. A procurement module will issue orders for services and products by tracking all key order info in real-time including the vendor, purchase quantities, item or service purchased, delivery timeframes, payment terms, and costs.

A procurement software module creates what is known as a purchase order which is a financial document issued to vendors when buying suppliers or services. A purchase order can usually be created automatically when stock levels are running low and go hand in hand with an inventory management module.

The procurement process also helps manage quotes and is a part of a more complex supplier relationship management process, which ultimately tracks approved vendors and ties those suppliers to particular items.

Inventory Management

An inventory management module provides inventory control by tracking stock levels and prices of all products your company builds, buys, stores, and sells. The solution allows you to view what raw materials you have on hand and where to find them, as well as provide recommendations on when to reorder items.

Items in an inventory management software module are tracked via unique serial numbers or barcodes. These unique identifiers allow personnel to trace their current location. The inventory module can also provide clarity on incoming inventory through integration with a procurement module.

Inventory control modules also monitor inventory costs. Part of inventory tracking is the financials that go with it, as you want to keep sufficient inventory stock without tying up too much cash into inventory. By forecasting supply and demand, you can weigh trends with your products to increase inventory turn and prevent stockouts and delays.

Supply Chain Management

The supply chain management modules manage the flow of goods and services between locations as efficiently and cost-effectively as possible. This means it provides assistance from the initial acquisition of raw materials through to the finished product being delivered to a customer.

Primarily used by manufacturers, logistics providers, distributors, suppliers, and retailers, supply chain management software modules help plan, control, and execute the required manufacturing and/or distribution of finished goods to maximize cost reduction opportunities in getting products from the vendor to the customer.

Supply chain management can include a wide range of modules such as procurement, inventory control, manufacturing, order management, and warehouse management. These tools can help automate requisitions, service/product orders, vendor data, contract management, sales forecasting, demand planning, and managing yards, dock, and labor.

Customer Relationship Management (CRM)

The customer relationship management module stores information on all customers and prospects your organization is pursuing. This tracks the relationships and interactions primarily between your sales staff and customers. CRM data is intended to be used to improve business relationships and grow your business–ultimately improving profitability.

Examples of tools provided via CRM software modules include contact management, communication tracking, opportunity/lead tracking, order history, issue ticketing, quote creation, and sales agent productivity. All customers can be monitored from the initial marketing stage, into a quote/sales process, and ultimately through to customer service.

Human Resources

A human resource management module manages employee information while automating tasks involving the people in your organization, such as employee scheduling, recruitment, and boosting employee productivity. This detailed module keeps records on all employees and stores documents on them like performance reviews, job descriptions, salary information, hours worked, and paid time off.

Because HR software provides better employee record-keeping for the sake of increasing employee performance, it helps your organization achieve its goals by allowing managers to better allocate employee time and resources to become a more productive and profitable business.

Human resource capabilities share many similarities with CRM and can be thought of like a CRM for employee data. This also means there is a lot of room for error when it comes to duplicate or inaccurate data that organizations may input, given the cast amount of information being stored on every employee across the organization.

Other ERP Modules

  • Material Requirements Planning (MRP): Streamline the manufacturing process through production planning, scheduling, and inventory control. Calculate material requirements, coordinate personnel and machine workloads, and optimally plan purchasing to meet customer demand.
  • Order Management: Streamlines order entry and order processing by helping merchants capture, track, and fulfill orders across multiple sales channels. Connects inventory and sales orders, creates shipping schedules, tracks fulfillment, and creates reports.
  • Warehouse Management: Manages and coordinates inventory and actions throughout a warehouse or distribution center with the intention of optimizing the picking and shipping of inventory. This allows distributors to control workflow, stock, labor, bills, and coordinate with shipping yards and docks.
  • eCommerce: Provides the capability to create a web store with a shopping cart, shipping options, and payment processing. Can directly update inventory and calculate sales tax required to fulfill orders.
  • Professional Services Automation (PSA): Assists with project and resource management for service-based companies by collecting and applying time and expense data to customer billing. Can also store contract data, coordinate communication between team members and clients, estimate project expenses, and project revenue.
  • Marketing Automation: Manages marketing processes and multifunctional campaigns across multiple channels. Target customers with automated messages across email, web ads, social media, and text campaigns. Measure tasks and workflows to increase operational efficiency and grow revenue faster.

FAQs

There are some commonly asked questions when it comes to ERP modules:

What is ERP and How Do ERP Systems Work?

ERP is an acronym that stands for “Enterprise Resource Management”, the consolidated process of gathering and organizing business data through an integrated software suite. ERP software contains applications that automate business functions like production, sales quoting, accounting, and more.

In layman’s terms, ERP facilitates your company’s operations across every department. ERP solutions improve how you handle business resources, whether it’s raw materials for manufacturing or staffing hours for human resources.

What ERP Modules Are Required?

Business requirements will determine which ERP modules a company requires. At the very least, an ERP system would require at least two modules. Otherwise, the system would just be a single application product. Most businesses will start with a financial module to run their accounting, and pair that with an operational module such as inventory management, order management, or something else related to the supply chain.

What ERP Modules Exist Outside of Functional Modules?

When the phrasing “ERP modules” is used, most are referring to ERP functional modules. This refers to any module that provides a function for your business, including financials, human resources, engineering/production, sales, purchasing, and more.

There are other types of ERP modules that are non-functional, such as:

  • Technical modules
  • Application Suites

Technical modules work as an operating system for your functional modules. This includes application programming interfaces (APIs), security safeguards, networking and interfaces, and management information systems.

Application suites are the overall connection and relationship your ERP software holds with other information systems within your organization. This ERP framework provides the interactions required for your ERP to speak with other systems, including supply chain management (SCM) software, customer relationship management (CRM) software, product lifecycle management (PLM) software, or supplier relationship management (SRM) software.

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