Expert Insights Into Different Types of ERP Systems

Enter the ERP software system — an all-in-one solution for managing and coordinating various aspects of a business. But not all ERP systems are created equal — you may have already found yourself falling down the rabbit hole of different ERP options, trying to figure out which one is the best fit for your company.

To help you identify which type of ERP software is right for you, we’ve put together this guide — one that will walk you through the various types of ERP options on the market and give you tips on how to find the type that works with your business rather than forcing you to change your operations to fit the software.

What Is ERP Software?

Before we detail the different types of ERP systems, let’s get up to speed on what enterprise resource planning systems are and the many benefits they have for businesses.

At its most basic, Enterprise Resource Planning (ERP) software is a comprehensive business management tool that integrates and streamlines various core processes across an organization. It’s the single source of truth across various systems, ensuring you have one spot where all data gathers before you act.

ERP software facilitates integrated business processes by ensuring all departments can access and share information seamlessly, leading to more coordinated and efficient operations.

Typically, ERP software provides a single source of truth for your business data, including modules for:

• Financial management and accounting
• Supply chain and inventory management
• Human resources and payroll
• Customer relationship management
• Manufacturing and production planning

While most ERP software options will meet these needs, different businesses have unique needs that their system must address. Luckily, there are several different ERP software types designed to fit the bill.

The Different Types of ERP Deployment Models

When considering an ERP system, one of the first decisions you must make is about the deployment options. This means determining whether the software will be hosted on-premise or in the cloud. Each option has its own set of pros and cons that should be considered.

Cloud ERP

Cloud ERP, also known as Software as a Service (SaaS) ERP, is hosted on the vendor’s servers and accessed via the Internet.

Like other cloud-based software, a cloud-based ERP system offers a highly flexible and scalable solution, allowing businesses to pay only for the features and resources they need. The vendor is responsible for maintaining the infrastructure and performing updates, freeing up your IT team to focus on other tasks. Cloud ERP systems also allow for easy remote access and collaboration.

• Lower upfront costs as there’s no need for on-premises hardware
• The vendor handles automatic updates and maintenance
• Accessibility from anywhere with an internet connection
• Scalability to accommodate business growth
• Built-in disaster recovery and data backup

On-Premise ERP

While some enjoy the off-site benefits of Cloud ERP, others prefer the control and security provided by on-premise ERP systems. This model involves hosting the software and infrastructure on-site within your company’s servers.

One key advantage of On-Premise ERP is enhanced data security, as it allows businesses to have full control over their sensitive information.

• Full control over data and security
• No reliance on internet connectivity for access
• Potentially lower long-term costs for large enterprises
• Ability to customize extensively

On-premise solutions require significant upfront investment in hardware and IT staff, and updates can be more complex and time-consuming.

Hybrid ERP

As the name suggests, hybrid ERP combines elements of cloud and on-premise solutions. This model allows companies to keep certain core functions on-premise while moving others to the cloud.

• Flexibility to choose which functions to keep in-house and which to move to the cloud
• Ability to gradually transition to the cloud
• Can be a good compromise for companies with strict data regulations

However, integration challenges associated with Hybrid ERP must be addressed to ensure a seamless operation.

The hybrid model can offer the best of both worlds but requires careful planning to ensure seamless integration between on-premise and cloud components. You may need to work with a provider and technical experts to ensure a smooth transition and ongoing support.

Types of ERP by Tier

Beyond their implementation style, ERP systems are often categorized into tiers based on their complexity, scalability, customization, and target market.

These tiers help companies determine which ERP systems may best suit their business processes without investing in enterprise resource planning software that overwhelms their teams with unnecessary features and capabilities.

Tier 1 ERP Systems

Tier 1 ERP systems are designed for large multinational corporations with complex processes and extensive customization needs. Think of global companies that need ERP solutions that allow for easy data management and other key ERP modules that can be accessed worldwide.

These systems are particularly suited for global operations, providing the necessary tools to manage and streamline processes across different countries and regions.

Here are some key characteristics of Tier 1 ERPs:

• Highly scalable to support global operations
• Extensive functionality across multiple industries
• Robust customization capabilities
• Support for multiple languages and currencies
• Typically requires significant investment in time and resources for implementation

Examples of Tier 1 ERP vendors include SAP, Oracle, and INFOR. While these vendors offer comprehensive solutions, they may be overkill for smaller or mid-sized businesses due to their complexity and cost.

Tier 2 ERP Systems

Tier 2 ERP systems cater to mid-sized businesses or larger companies with less complex needs, often by providing industry-specific solutions. They offer a good balance of functionality and ease of use. These companies need robust business management software solutions — but may not need an ERP solution that enterprises rely on (just yet!).

Here are the critical features of Tier 2 ERPs:

• More industry-specific solutions
• Easier to implement and maintain than Tier 1 systems
• Lower total cost of ownership
• Typically offer both cloud and on-premise options
• May have limitations in scalability or customization compared to Tier 1

Vendors in this category include Infor, Epicor, and Sage. These systems can be an excellent fit for growing manufacturing and distribution companies that need robust features without the complexity of a Tier 1 system.

Tier 3 ERP Systems

The third tier of ERP systems is designed for small to medium-sized businesses (SMBs) with straightforward processes and limited customization needs. Small business ERP software system needs are similar to those of larger companies but may not need the business operations features that come with hefty price tags. These systems are often called affordable ERP solutions due to their cost-effectiveness and ease of use.

Characteristics of Tier 3 ERPs:

• Focus on core business functions
• Often, industry-specific or niche solutions
• Generally easier to implement and use
• More affordable for smaller businesses
• May have limitations in scalability or advanced features

Examples in this tier include NetSuite (for smaller deployments), Syspro, and Acumatica. These systems can be ideal for smaller manufacturing or distribution operations looking to streamline processes without breaking the bank.

Manufacturing Specific ERP

While any company can benefit from an ERP system, manufacturing companies have unique needs that require specialized ERP solutions. These systems are designed to handle the complexities of production business processes — from supply chain management to quality control.

Production planning is crucial in manufacturing-specific ERP systems, ensuring efficient resource allocation and scheduling.

Typically, this type of ERP system will lean on an ERP vendor that has experience in customizing ERP implementation for unique manufacturing resource planning. Here are some of the specific types:

Discrete Manufacturing ERP

Discrete manufacturing involves the production of distinct items that can be easily counted, such as automobiles, furniture, or electronics.

• Bill of Materials (BOM) management
• Production scheduling and planning
• Work order management
• Assembly line control
• Inventory tracking for individual parts and finished goods

Discrete manufacturing ERPs are ideal for companies that produce items with clear, separate parts and assembly processes. They help manage complex BOMs and streamline production workflows.

Inventory tracking plays a crucial role in Discrete Manufacturing ERP, ensuring the accurate management of individual parts and finished goods.

Process Manufacturing ERP

Process manufacturing deals with products produced in bulk quantities and cannot be easily separated into individual units, such as chemicals, pharmaceuticals, or food and beverages.

• Recipe and formula management
• Batch production control
• Quality control and compliance tracking
• Lot traceability
• Expiration date management
• Yield management

Quality control is essential in Process Manufacturing ERPs to ensure that products meet the required standards and specifications.

These systems are crucial for industries where consistency, quality control, and regulatory compliance are paramount. They help manage the unique challenges of working with ingredients rather than parts.

Mixed Mode Manufacturing ERP

Mixed-mode manufacturing combines elements of discrete and process manufacturing. This type of ERP is suitable for companies with diverse production methods or products that require both processes.

• Support for both assembly and batch production
• Flexible BOM and recipe management
• Ability to handle different units of measure
• Integrated quality control for both discrete and process operations

Flexible BOM management plays a crucial role in mixed-mode manufacturing ERP by allowing companies to manage their diverse product lines efficiently.

Mixed-mode ERPs offer the versatility needed by companies with diverse product lines or those transitioning between different manufacturing methods.

Other Manufacturing Modes

While discrete, process and mixed mode are the primary categories, there are other specialized manufacturing modes that ERPs cater to:

• Engineer-to-Order (ETO): For companies that design and manufacture unique products for each customer.
• Make-to-Order (MTO): Supports production that begins only after receiving a customer order.
• Assemble-to-Order (ATO): For businesses that assemble standardized components into customized final products.
• Job Shop: Ideal for companies that produce small batches of specialized products.

Each mode requires specific ERP features to manage its unique workflows and challenges. Engineer-to-order capabilities are essential to handle custom designs and unique customer requirements in specialized manufacturing modes. 

For instance, an ETO ERP system would need robust project management and engineering change order capabilities. At the same time, a job shop ERP might focus more on flexible scheduling and capacity planning to handle varying production runs efficiently.

Types of ERP Classified by Functionality and Complexity

Enterprise Resource Planning (ERP) systems vary widely in functionality and complexity, catering to diverse business needs across industries. This section examines the spectrum of ERP solutions, from pre-configured packages to highly customizable platforms.

Understanding these categories is helpful for businesses seeking to implement an ERP system that aligns with their operational requirements, scale, and industry-specific challenges. Let’s explore the main types of ERP systems, categorized by their functionality and complexity:

ERP in A Box

As the name implies, these types of ERP systems options are pre-configured, ready-to-use ERP solutions that cover core business functions.

• Ideal for small to medium businesses
• Quick implementation
• Limited customization options
• Examples: Sage Intacct, Fishbowl

Complex ERPs

This ERP system is designed for large enterprises with intricate processes and extensive customization needs.

• Highly customizable
• Support for global operations
• Require significant implementation time and resources
• Examples: SAP S/4HANA, Oracle E‑Business Suite, IFS

Flexible ERPs

When your business processes fall in a middle ground between ​“in a box” and complex systems.

• Modular design allows for scaling
• Balance between out-of-the-box functionality and customization
• Suitable for growing businesses
• Examples: Microsoft Dynamics 365, INFOR Industrial CloudSuite

Industry-Specific ERP

These ERPs are tailored to meet the unique needs of specific industries and help them streamline processes across their business:

1. Food ERP: Focuses on recipe management, lot traceability, and food safety compliance.
2. Metals ERP: Handles complex pricing, material properties, and quality control.
3. Industrial Machinery ERP: Emphasizes project management and engineer-to-order capabilities.
4. Pharmaceutical and Biotech ERP: Prioritizes regulatory compliance and quality control.
5. Distribution ERP: Focuses on inventory management and order fulfillment.
6. Medical Device ERP: Emphasizes compliance with FDA regulations and product traceability.
7. Aerospace ERP: Handles complex supply chains and strict quality standards.

Other industries specialized ERP applications serve include education, healthcare, retail, construction, and more. These industry-specific solutions offer targeted features that address unique sector challenges and regulatory requirements. 

Selecting the Ideal Type of ERP System

Choosing the right ERP system is a critical decision that can significantly impact your business operations beyond simply enhancing your processes. Each industry has specific needs, and selecting an ERP solution that caters to those requirements is key.

At Top10ERP, we have a 10-step guide to choosing the perfect ERP software system. This guide will help you identify which ERP software best fits your business processes and invest in one that will plug into your existing processes and grow with your company. 

Remember, there’s no one-size-fits-all solution when it comes to ERP systems. The ideal choice depends on your unique business needs, industry, and growth plans.

At Top10ERP​.org, we understand the complexity of this decision. That’s why we offer free, personalized ERP software recommendations based on your requirements. Our team of experts can guide you through the selection process, helping you find the ERP system that best fits your business.

Ready to find your ideal ERP solution? Use our ERP comparison tool to get started. Answer a few questions about your business, and we’ll provide you with a curated list of ERP options tailored to your needs.

Don’t let the complexity of ERP selection overwhelm you. Let us help you make an informed decision that will drive your business forward. Contact us today for personalized assistance in your ERP journey.