Mark Jackley | Content Strategist | February 2023
An enterprise resource planning (ERP) system is the heart of a modern business. Data circulates through the enterprise as staff uses the system to execute common business transactions. Insights flow out of the ERP system to help measure business performance and guide decision-making.
ERP functionality is organized by specific capabilities, often referred to as modules. These modules are designed to serve specific departments within a business—finance, procurement, supply chain, and human resources, for example. Distributed teams access a central ERP platform so everyone uses the same system, creating a shared view of business operations and a single source of truth from data collected into a central repository.
ERP modules are simply the components, or business capabilities/processes, of your ERP system. These modules include functionality that primarily serve the back office of the business, including finance and accounting, procurement, demand planning, and certain nonfinancial functions, such as human resources. Some businesses add front-end functionality, such as customer relationship management (CRM) to their ERP systems, enabling them to integrate the enterprise end to end. With a central platform and database across departments, users spend less time compiling data and more time on strategic tasks.
While ERP systems are modular, it’s important to understand that businesses take varying approaches to purchasing and adding modules. Some companies choose the “big bang” approach for their ERP implementation, meaning they go live with all the capabilities they need all at once. Others take a phased approach—launching financial management capabilities, then maybe procurement or HR—guided by a long-term roadmap for each phase. Sometimes the phases are rolled out by business unit or global region, adding functionality as it’s needed while using the same foundation. Another example is M&A activity: When a business acquires a company, they will often use that as a business case for a phased ERP implementation.
Because an ERP system runs on well-defined data structures within a single database, the modules plugging into it work in similar ways. No matter which department it comes from, data is consistent, based on common definitions and shared user experiences. Instead of the chaos of disparate business processes, there is order and process orchestration.
Most ERP solutions begin with financials and then add extra capabilities, depending on your business priorities, your industry, and changing conditions. Here’s a list of the 10 top ERP modules, how they can help your organization, and why companies decide to use them.
The financial management module is the foundation of an ERP system. By tracking accounts payable and accounts receivable, plus helping to manage the general ledger, this module puts your current financial picture and outlook into focus. It also generates and stores balance sheets, payment receipts, and other key financial documents.
Automation plays a crucial role. The financial module automates tasks related to billing, vendor payments, expense management, asset management, and joint venture accounting, among other things. For example, automated cash management makes it simpler to analyze cash transactions and improve cash flow forecasts. Your accounting team can close the books faster, sometimes saving a week or more, while complying with stringent guidelines for revenue recognition. Balance sheet automation supplies near real-time data for the most accurate snapshot of your company’s financial position.
The procurement module improves your ability to purchase the products or materials you need to make or sell goods. It automates, tracks, and analyzes quotes while helping to prepare and send purchase orders. Using a list of approved vendors, the module can automate purchases of specific items, which speeds up the process, enforces compliant spending, improves supplier relationships, and ultimately helps increase profitability.
More than anything, the right module simplifies procurement end to end—streamlining shopping and spend, plus the way you manage direct materials and services purchases. With real-time data used in supplier negotiations and contract awards, it can also identify ways to consolidate your purchasing power so you can secure the lowest cost while reducing supply disruptions.
A risk management and compliance module uses artificial intelligence (AI) and machine learning to enhance financial controls, enabling finance teams to prevent cash leaks, enforce audits, and protect against emerging risks—all while saving hours of manual work.
With risk management capabilities, you can stay compliant by automating processes, such as separation of duties (SoD) reporting and granting and controlling user access. Automation also accelerates audit transactions so you can quickly identify fraud, errors, and policy violations. You can also streamline workflows for audit and Sarbanes-Oxley Act (SOX) compliance, risk management, and business continuity planning.
Supply chain management (SCM) modules track how supplies and goods move through your supply chain: from suppliers and sub-suppliers to manufacturers all the way to distributors and retailers or consumers. It lets you efficiently plan demand, supply, order fulfillment, and production across your business to reduce disruptions and minimize costs, ensuring the right inventory is available at the right time and in the right place.
Case in point: Supply chain management systems help determine optimal inventory levels and replenishment for each item location based on demand forecasts so you can avoid overstocks or stockouts. And automation saves time and money throughout supply chain processes, such as order management, which simplifies the order capture, settlement, and post-sales customer care.
A supply chain module can also help you predict demand with capabilities, such as segmentation and machine learning that helps you manage variability. Such capabilities build a more resilient supply chain that can weather market changes and global shocks.
Enterprise performance management (EPM) modules enhance the processes that help your business plan, budget, forecast, and report on performance. They enable connected planning (versus old-school siloed planning) by giving a unified view of financial, operational, and line-of-business planning. These modules also use automation to accelerate the reporting of financial results.
Through the use of scenario modeling, long-range planning, and other capabilities, EPM modules give you a deeper understanding of costs and profitability, help you achieve revenue targets, and streamline account reconciliation, tax reporting. With EPM, your teams will be equipped to model and plan across key areas, such as finance, HR, supply chain, and sales.
With a manufacturing module, it’s easier for your business to plan and manage production runs. That includes making sure your facility has the raw materials on hand to meet demand, can efficiently run a shop floor, and keep costs down—all while ensuring the quality of finished goods.
Today’s modules let you run mixed-mode manufacturing, so you can use a combination of manufacturing processes, such as discrete and process manufacturing, instead of only one type. This helps you diversify your portfolio and attract new customers. For example, you could use process manufacturing to produce a line of beverages and use discrete manufacturing, which focuses on parts and assembly, to crank out the bottles and cans. You can also monitor costs and variances by plant, track output against forecasts, and compare supply to predicted demand after calculating the average time it takes to produce an item.
Customer relationship management (CRM) modules help you manage customers by improving sales and marketing processes, especially those supporting sales leads. These modules store all information on customers and prospects, including every customer interaction and purchase history, and offer segmentation data and targeted cross-sell recommendations.
Capabilities to look for in CRM modules include contact management, communication tracking, opportunity or lead tracking, order history, issue ticketing, quote creation, and sales agent productivity. Most importantly, your module must help track customers from the initial marketing stage and through a quote or sales process, culminating in a sale and ongoing customer service.
Note: not all organizations or ERP vendors consider CRM to be an ERP module. Some include only modules more closely related to financial management and other back-office activities, while others take a broader view and include front-office duties, such as managing customer relationships.
A human capital management (HCM) module—sometimes referred to as human resources management (HRM)—contains detailed records on all employees, including performance reviews, job descriptions, benefits selections, and attendance/time off. Like other ERP modules, it supplants annual spreadsheets with automation that continuously gathers data companywide, reducing duplicate data and increasing accuracy, an important benefit given the sheer amount of HR data most businesses have.
A human resources module automates tasks, such as employee scheduling, recruitment, and compensation management. With easy collaboration across internal workflows, an HR module can connect to CRM data to determine bonuses for sales reps—much easier and more accurately if this was done manually.
This module improves project management with shared visualization tools that help to track schedules, budgets, and resources. For example, you can see multiple project plans in a single view, which lets you easily allocate (and reallocate) resources. You can assemble the right project team by using search filters for roles, skills, and location. You can also better manage budgets by standardizing how you capture costs throughout the business. Advanced project management tools also help you maximize cash flow by automating customer invoices and project billing.
Predictably, use of a project management module is common in project-intensive industries, such as construction and manufacturing. Properly deployed, project management modules can increase on-time project completion, monitor and control costs, improve the accuracy of service-based estimates and costs, and optimize the use of staff and equipment.
An ERP analytics module helps finance, procurement, and project management professionals understand the factors that drive profitability, improve the use of working capital, and control business expenditures.
ERP analytics yields general ledger insights on profitability and accelerates the collections process, improving cash flow. It also enhances payables by helping finance teams track on-time and overdue vendor payment amounts to determine payment urgency. This module controls company spending by identifying cost savings and financial risks. For example, it enables finance teams to monitor employee expenses more accurately than they can by using traditional manual processes to quickly pinpoint fraud and ensure adherence to expense policies.
There’s only one best practice to guide your purchase of ERP modules: Select the ones that best meet your organization’s requirements. One size doesn’t fit all when it comes to ERP.
Which ERP modules come standard? No surprise, the answers vary from vendor to vendor. Core financial functions will always be part of the package, while functions, such as sales or HR, may be sold separately. Pricing of ERP modules can vary, but typically on-premises ERP vendors offer a per-user license. Software as a service (SaaS) vendors usually charge on a monthly or annual basis.
Sometimes ERP providers tailor their offerings to industries. For instance, a manufacturing package would probably contain a supply chain module, and a retail package would normally include ecommerce. If your business sells more products than services, you’ll want modules for supply chain and order management, among other capabilities. If you’re in a service industry, you might add a professional services module to offer better customer support. The 10 modules described on this page are just a starting point. You may not need them all, at least not right away, but a premier ERP system allows you to start with functionality you need now and add modules to maintain a competitive advantage. You’ll also want a system that can adapt to your industry as well as your organization’s challenges and opportunities.
Are there mandatory ERP modules?
Not exactly, but a financial management module is core to any ERP system. While your modules should reflect your company’s requirements and industry, they should also handle the essentials: financial management, cash management, balance sheet, and procurement, for starters. These modules are as close to mandatory as ERP systems get. You wouldn’t buy a car without a power train, and you likewise wouldn’t purchase an ERP system that fails to provide financial data to fuel your company’s growth.
What are the basic modules of an ERP system?
Financial management is the core module, along with closely related modules, such as procurement, supply chain, and enterprise performance management. You can augment basic modules with more specialized software: sales (CRM), human resources, or analytics.
What’s the key to selecting ERP modules?
Besides selecting modules that meet your organizational requirements, you’ll want to think about whether it makes sense to launch them all at once or phase them in according to your priorities. Another key is to begin with an ERP system that’s flexible and scalable, allowing your business to shift and transform over time.