ERP and IoT: 6 Benefits for Completely Overhauling Efficiency

ERP illustration

IoT technology is here to stay. Whether in our personal or professional lives, the idea of linking devices via the internet has the power to revolutionize how we do things.

One area quickly gaining traction is Enterprise Resource Planning (ERP) and IoT. In this article, we’ll look at why ERP and IoT work so well together and the benefits this combination can offer businesses.

What is ERP, and How Does it Work?

Enterprise resource planning (ERP) is a business application that collects information from different departments and manages them from a central location. Some common departments (resources) involved in ERP include HR, supply chains, marketing, manufacturing, accounting, and sales.

ERP refers to a type of business management software that may include several different applications. When combined, they collect, store and manage data from numerous departments across the business. Centralizing their management allows for greater efficiency across the business.

Check out this video for a brief rundown of ERP systems.

How Does ERP Work?

The workflow for an ERP system is relatively straightforward. It goes as follows:

  1. A department feeds its data into its relevant application.
  2. Once in the system, the data is available to all authorized users.
  3. It gets tagged, formatted, and sorted based on department, location, and other factors. Importantly, all data uses the same formatting.
  4. Data then links to workflows and processes, allowing for better interpretation.

Let’s look at an example to clarify how ERP works.

A food manufacturer has several sites in the same town. It often shares resources and employees across these sites to better manage its productivity. Each site inputs data each day on the amount of product it made and how many people worked there.

Image showing a food factory to illustrate why ERP and IoT work well together.
Food factories – like chemical production plants – are perfect for ERP and IoT.

Managers can use this data from an ERP system to see which location is the most productive. If, for example, it manages to produce more than the other sites with the same number of people, it might make sense to move some to another location.

The same information highlights whether one site creates more waste than another due to its lower productivity. HR can decide whether staffing levels are appropriate at each site based on this information.

Finally, upper management (along with finance) can compare sales and rent figures to determine whether it’s worth keeping all the sites open.

ERP and IoT: How it Works

Image showing IoT systems in relation to factory processes.
IoT systems are the future of efficient production.

If you know anything about IoT, its role in an ERP system should already be obvious. We’ve spoken previously in greater depth about IoT systems, so check out that information if you need a refresher.

The main link between ERP and IoT is data. To function properly, ERP systems need lots of data, and what do IoT devices collect? Data.

In the past, a food manufacturer may monitor productivity manually. A line manager would collect figures on how many units the site produced, how long it took, and how many employees worked that day.

With IoT technology, this process gets automated. Not only that, but IoT technology can send, collect, and organize data without any human intervention.

The Advantages of ERP and IoT

Combining ERP and IoT is another almost perfect match. IoT technology addresses any potential failings in an ERP system. To break it down even further, let’s look at the biggest advantages of integrating ERP and IoT.

1. Faster deployment time

Generally speaking, IoT devices are incredibly easy to deploy. Many sensors and trackers are designed to plug in and work. Wireless devices connect to larger ERP systems with very little specialist knowledge, meaning almost anyone in the company can get them started.

2. Better decision-making

IoT devices allow for better data availability and overall higher quality. Compared to manual data collection, IoT devices are less prone to error and can collect information much more quicker. Better yet, the information collected can be finer and more specific.

All this equals better decision-making. ERP and IoT combined means access to real-time data that’s already sorted and adjusted based on predefined settings. A decision-maker can then enter the system, see what they need, and use it to influence choices with much greater accuracy than ever before.

3. Improved asset management

Supply chain management involves gathering data on different processes and understanding it in a meaningful way. While this is important for any chain, it’s vital for high-value assets.

Image showing asset management in an industrial context.
Asset management is one of the biggest advantages of ERP and IoT integration.

One major category of IoT devices is trackers. Whether it’s Bluetooth trackers or RFID tags, there are numerous ways to monitor materials and equipment in a supply chain.

Combining ERP and IoT means information on location, state, and usability is in the system immediately. In turn, relevant stakeholders can manage everything more effectively.

4. Real-time data

Real-time access to data is one of the biggest benefits of combining ERP and IoT. As mentioned, it means better, faster decisions relating to workplace operations.

It also means that potentially damaging problems (such as broken equipment) get resolved as quickly as possible, as management isn’t waiting for an employee to report the problem. Instead, the ERP system generates a report, sends it to maintenance, and resolve it.

Similarly, obtaining data in real time can change a business from reactive to proactive. IoT systems can generate trends, allowing managers to take action before a problem arises.

5. More efficient operations

Combining ERP and IoT helps automate many tasks, such as collecting and inputting data. This alone improves efficiency, as it doesn’t require any human effort.

But, systems can be automated further. With the help of machine learning, you can use ERP and IoT to teach a system how to order stock, send error reports, track deliveries, and much more. While none of these are complicated tasks, automating them helps to save a lot of time.

6. Better forecasting

Businesses love forecasting. It helps them to plan for busy periods (and quiet ones). Unsurprisingly, forecasting relies on data and interpretation patterns. You can probably already see how ERP and IoT help with this.

Integrating IoT devices into customer-facing processes (such as sales) creates a direct link between production and consumption. You can also use data from previous years to create patterns, such as upping production around the holiday season. Automating this using ERP means the system will increase orders without any human intervention.

The Challenges of ERP and IoT

Of course, no technological revolution is without its challenges. This is no different for ERP and IoT, although many of these challenges are relatively easy to overcome with the right processes.

Here are some of the biggest concerns about integrating ERP and IoT.

1. Data security

Data security is perhaps the biggest concern with IoT technology. Many sensors and trackers are vulnerable to hacks due to their ability to connect to the internet.

Padlock With Keyhole icon in

The easiest way to overcome this is to integrate blockchain technology, although this isn’t a viable option for all businesses.

2. Combining the old and the new

ERP systems have been around for a good 30 years, during which time they’ve become pretty good at what they do. IoT technology is comparatively new, leading to a potential lack of trust in the data it provides.

For many businesses, putting trust in disruptive technology can be very risky. For example, a chemical plant switching to IoT sensors could lose millions of dollars during the switch.

3. Implementation time and cost

Although IoT devices are often inexpensive and easy to integrate, this is less true on a massive scale. A company with several production sites and masses of data might be skeptical about the up-front cost of combining ERP and IoT.

The process could be done over a longer timeframe, but this doesn’t represent clear savings for a business. Management likes to see cost savings immediately, which can be difficult to justify.

Industries Suited to ERP and IoT

Realistically, any industry that uses ERP systems to control its data will benefit from IoT technology. But, it’s particularly helpful for industries with lengthy supply chains or carefully controlled processes.

Some notable examples include:

  • Food processing and manufacture
  • Chemical processing (for example, where processes are monitored 24/7)
  • Clothing production
  • Healthcare
  • IT services
  • Retail

The list could go on. The important takeaway is that organizations with numerous departments and assets will find clear benefits in the fusion of these technologies.

Departments that can benefit the most include:

  • Finance. ERP systems help to track spending, financial information, and payroll. IoT technology helps automate some of the easier processes.
  • Sales. Monitoring different levels of the sales funnel can highlight wastage or lost leads, allowing the whole thing to become more streamlined.
  • HR. Tracking workforce trends throughout a company helps better to manage employee location, retention, and other metrics.
  • Supply chains. Tracking asset location using IoT and ERP systems makes everything more efficient, leading to less wastage and better deliverables.

Final Thoughts on ERP and IoT

Fusing ERP and IoT has the potential to overhaul fundamental business processes. Many companies rely on ERP systems and would benefit massively from the addition of IoT tech.

Of course, it’s not without its challenges, and the sheer age of ERP is one of the biggest. Hopefully, as IoT technology continues to rise, this will become less of an issue.

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