What is a Core System?

Categories ERP

A Core System and ERP

Recently, the term "core system" seems to be heard less and less. 

The reason is that more and more companies are integrating their core systems, which used to be divided by department or business and operating them as ERP. As a result, the distinction between the core system and other systems gradually disappears, and the system itself is called ERP.

However, it is one of the things that every business person should know. This article gives you an overview of core systems and what ERP can do for you.

Table of Contents:

  • What is a core system?
  • Difference from information systems
  • What changes will ERP bring?
  • The rise of cloud ERP

What is a core system?

A core system is a business system that is indispensable for running a company's business. It may vary depending on the type of business, but the term "core system" usually refers to the following six business systems:

  • Human resources management system
  • Production management system
  • Financial accounting system
  • Inventory management system
  • Purchasing management system
  • Sales management system

Recently, however, the concept of including Customer Relationship Management in the core system has been gaining popularity because business development from the customer's point of view is of utmost importance in all industries. As a result, many ERP software vendors either include CRM in their products or offer CRM as a system that can be integrated with ERP.

Differences from information systems

The core systems listed above are scattered throughout each department and are the business systems that fundamentally support corporate management. However, these aren't the only business systems running in a company. What about SFA (Sales Force Automation), which has been implemented more and more in recent years regardless of the company size, collaboration tools (groupware) to activate communication in the organization, and MA tools to practice marketing activities? What will happen to these tools?

These business systems are commonly referred to as information systems. One of the characteristics of these systems is that even if the business system were to stop, it would be inconvenient but not a fatal problem. Of course, if the system stops working, it will still have an impact on business management. However, even if the collaboration tool stops working due to some failures, business email software can be used as a substitute, and eventually, there is also the means of telephone. These are not core systems, as management activities can continue despite the troubles caused by the shutdown of information systems. However, in recent years, this barrier is being broken down.

What changes will ERP bring?

ERP is essential when describing core systems. It stands for Enterprise Resource Planning. Today, ERP has an image as a system, but it is originally a business management method that follows the management methods of MRP (Material Resource Planning).

MRP is a production management method. It refers to Material Requirements Planning, a plan for purchasing and manufacturing semi-finished products, parts, and raw materials in the required quantities and at the required times. 

ERP is a further development of this concept. It is a business management method that applies the concept of MRP to the entire business, integrates the management of the whole business resources (people, goods, and money), and utilizes the information in the business activities. The following are the specific objectives:

  • Provide the materials for management decisions on time
  • Management can make business decisions with a bird's eye view of the business situation
  • Visualize the business situation in real-time as much as possible
  • Reduce the operational burden by integrating core systems
  • Manage information generated by each core system in a single database
  • Reduce the burden of on-site operations
  • Incorporate industry best practices
  • Support each department to work across the boundaries
  • Implement Business Process Management
  • Smoothly transfer data between core systems

There are many more, but these are the ten main objectives of implementing ERP. And by implementing ERP, companies can expect to get these changes.

The rise of cloud ERP

If core systems remain fragmented, many problems will occur in future management. It takes time to visualize management information, which slows down the speed of management decision-making, and insufficient coordination among core systems prevents optimization of Supply Chain Management in production. If you continue to have a fragmented core system environment, you will be left behind. For this reason, many companies have realized the importance of ERP, and even small and medium-sized companies, regardless of company size, are now actively considering ERP.

Cloud ERP has gradually emerged since the 2010s. It provides ERP as a cloud service, and companies can benefit from cloud services while reaping the changes that ERP brings.

Cloud ERP does not have the concept of infrastructure. Therefore, the initial investments can be reduced, and system operations are performed by ERP software vendors, reducing the operational burden on the entire system environment. As many companies move to cloud-first, it's fair to say that the market center is already in cloud ERP.

When you are considering ERP implementation, take a look at cloud ERP as well.

See also:
Difference between CRM and ERP
SaaS – Benefits of Implementing SaaS
Advantages of Cloud Services
Benefits of Implementing ERP for the Retail Industry
Benefits of Moving to Cloud ERP for SMEs

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