What is an ERP System?
Enterprise resource planning, or ERP, is all about information sharing. Each department within an organization generates, accesses, and depends on information to get work done, whether that information is customer data, inventory details, employee information, or financial figures. Between departments like finance, marketing, sales, customer service, and more, it can be challenging to keep the information accurate and up-to-date if every team is working in a silo with their data.
ERP systems bring data and people together by sharing, integrating, and synchronizing business information and processes in a centralized database. Everyone across an organization has access to the same data at the same time, and that data is integrated seamlessly into the other systems your business uses. ERPs reduce the need for manual processes and data entry, ensuring high-quality and up-to-date information for everyone.
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What are the Types of ERP Systems?
Because ERP systems are flexible and modular, these solutions can fit into any organization, no matter the unique challenges. But not all ERP systems are alike. There’s an ERP platform out there that is ideal for your business.
A standardized ERP system extends benefits to businesses across the board. These systems aren’t focused or specialized in one type of industry or organization, but they are a good starting point for companies that don’t feel the need to hone in on specific improvements or requirements.
Industry-specific ERP systems are for niche organizations in manufacturing, retail, construction, and others that may be dealing with specific regulations and requirements. Some niche organizations may choose an ERP system that is built for and tailored to their industry. Others may build a fully customized, industry-specific solution.
You will also find ERP systems for small businesses that are scaled down from the many modules and features of an ERP suited for a large company. These are more affordable for small organizations but may only support a handful of users and a limited amount of data. An organization can also choose to enhance the ERP with add-on modules.
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What are the Key Features of an ERP System?
To make the most of an ERP system, you’ll need to make sure that it has all of the features you need to streamline and improve your business operations and decision-making. Your ERP should be flexible and scalable so that it can grow with your business.
Ask yourself if your ERP can adapt to:
- new or expanding markets
- different types of data
- added processes
- an increase in the volume of information your organization generates
You can future-proof your system even further with a platform that is accessible via mobile devices, which will significantly improve business agility and flexibility.
Additionally, a sound ERP system should offer automation. Automation is a critical feature as it reduces your organization’s reliance on manual operations and prevents human error.
Data analysis and reporting is also a significant attribute, helping put that centralized information to work with informed predictions, insight into your organization’s productivity and efficiency, and other business intelligence details that improve your company’s performance and profitability.
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What are the Benefits of an ERP System?
When looking at the features and purpose of an ERP system, significant benefits are clear.
ERPs help businesses to:
- streamline operations and activities
- improve collaboration and communication between departments and teams
- achieve greater insight into every aspect of the company
However, there are even more benefits to ERP systems if we dig a little deeper. Decision-making improves with an ERP system, as each team and each team member compares and analyzes the same data in the same ways, making it easier and faster to collaborate. In general, understanding is better, and actions happen more smoothly when everyone is working with the same information.
Customer service improves in much of the same ways. Customer-facing staff can make better-informed decisions and communicate with more accuracy and speed. You can allocate the time freed up by a new ERP system to high-value customer service tasks, such as attracting and retaining clients, or expanding customer service offerings into areas like e-commerce.
In today’s rapidly changing business world, the modularity and customization of an ERP system is a clear benefit. It allows your organization to flex the system as needed with modules that can shift with the business currently and as it grows.
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Which Industries Benefit Most from an ERP System?
Practically any business, in any industry, at any scale, can benefit from an ERP system. The more complex or broad an industry is, the more data there is to contend with, which makes an ERP all the more appealing.
Many of the industries we serve have detailed and unique inventory and production requirements. These include foundries and forging companies, oil and gas, commercial bakeries, and electronics manufacturers. ERP systems also benefit industries that need greater control and visibility regarding products throughout their lifecycle, such as equipment and machinery companies, metal fabricators, and mining and material processing.
Service, maintenance, and repair industries benefit from ERP systems that provide field service teams with dispatch information, customer history data, product details, and other data that needs to be available at any time and anywhere. ERP systems match regulatory needs as well, so industries like food manufacturing, aerospace and defense, and oil and gas have access to the full-featured systems they need to stay in compliance.
Is an ERP System Right for Your Business?
An ERP system is an investment in your business. So, it makes perfect sense to investigate if your organization needs one before rearranging your budget.
Watch out for these common signs of business trouble that can be solved with an ERP platform, then consider the cost savings and other advantages of an ERP system.
- Inaccurate or inaccessible data
Can you rely on your company’s data? Is it accurate, up-to-date, and accessible? If your decision-making boils down to guesswork, it is undoubtedly impacting your business success. An ERP system solves this problem by collecting data, centralizing it, and helping you make decisions based on reliable, real-time information.
- Falling sales or rising customer complaints
Maybe you see sales declining, or you are struggling to build up your business. An ERP system offers valuable business insights and customer service advantages, taking care of issues with inventory, supply chain, warehousing, and customer satisfaction. It will also boost product visibility and customer communication for improved experiences all around.
- Financial information is in disarray
An ERP system can be the solution to the all-too-common but potentially disastrous problem of financial disorganization. It will take the stress out of this problem by keeping data together and modernizing your business systems, so reporting and reconciling are a breeze.
- Internal communication issues
Finally, consider whether your departments and systems are integrated. If your staff is frequently delayed due to information sharing (or lack of sharing) or having to find workarounds between programs that don’t communicate well, know that an ERP platform can introduce harmony to your teams and your systems.
An ERP system will streamline business management, provide real-time information, and help your business scale up as needed. These benefits all add up to cost savings and new opportunities for your organization.
Choosing the Right ERP System for Your Business
When you’ve decided that an ERP system is a good fit for your organization’s challenges and needs, the next step is to find the specific ERP that is best for the company. Outlining those challenges and needs gives your organization a good understanding of your system requirements. Consider who will use the ERP within your business and how they will use it. Gather input from various teams and departments to find out what their pain points are and encourage them to envision how their ideal system would function. Look at the overall goals and plans for your organization to ensure that your selected ERP system will continue to be a good fit well into the future.
As your organization works to establish what changes will improve operations and processes, evaluate what you currently have in place. The odds are good that some aspects of your business infrastructure are working well. Choosing an ERP system that integrates with legacy platforms you want to keep is often easier than starting from scratch.
As with any business decision, budget is always a factor —remember that when you invest in an ERP platform that suits your company, you should see a good return on that investment. Make enough room in your budget to get the best system you can, without spending more than your business can reasonably afford.
The Costs of an ERP System
It is hard to say outright what an ERP system will cost, as each ERP platform should be customized and personalized to a business and its users. That means it is better to look at the factors that influence ERP pricing when initially setting up a budget for this investment.
ERP prices rise with the number of users that will access the system. Many vendors operate on a per-user basis. With this setup, you’re only paying for the user access you need.
Deployment impacts pricing as well, so consider this when choosing between a cloud-based ERP system, which comes with subscription fees, and an on-premise ERP, which comes with start-up fees for licensing and infrastructure.
The individual modules and features of your chosen ERP system will drive the pricing as well. Expect a more robust and highly integrated ERP to cost more than a lightweight system that is better suited for a company with more straightforward requirements.
These are the direct costs of an ERP implementation, and they are relatively predictable. When you’re budgeting, remember that there are also indirect costs that aren’t always as easy to see upfront. Indirect costs are added costs, like training staff to use the ERP across all departments and sites, as well as maintaining the system over time. Human resources costs may increase if your ERP allows for increased hiring and personnel costs (such as overtime) to accommodate for the initial implementation and testing. Some of these costs are ongoing, while direct costs are typically a one-time fee.
Your ERP system vendor should be able to explain the exact cost of implementation so that you can arrange your budget accordingly.
What is the ROI Potential of an ERP System?
Don’t let the costs of an ERP system deflate your dreams. With this investment comes a return that makes it all worthwhile.
The ROI potential of an ERP system depends on a few factors, like the initial system cost and customizations, how your business intends to use the ERP, and how quickly you start to see the benefits from implementation.
Calculating the ROI potential involves adding up all of your direct and indirect costs, then calculating the revenue and benefits. The latter is trickier than the former, as some advantages of an ERP system are challenging to quantify.
Consider the dollar figures around ERP benefits like reduced inventory costs, increased sales revenues, converted leads, improved compliance, and lowered costs in administration and operations.
Take the returns, subtract the costs, and divide that figure by the expenses again. If you end up with a positive percentage, you’re looking at an ROI gain. If not, that means you’re sitting at a loss and need to make some changes. The sooner an ERP system is in place, the sooner you’ll see that positive return.
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Why do ERP Projects Fail?
What if your business is experiencing negative ROI from an ERP implementation and can’t seem to get ahead? There are a few reasons why ERP projects fail, many of which can be prevented with planning and research before you get to the implementation phase. If you’re already past that point, don’t worry — a good partner can help keep a project on the right path or turn a failing project around.
ERP failures often result from organizations that do not understand what they need their ERPs to do or end up choosing the wrong system for their needs. Without the right features and modules in place, an ERP isn’t going to be nearly as helpful as it could be. You can get ahead of this issue by clearly outlining your company’s goals and priorities and matching them with an ERP system. If you’re already using a system that isn’t working, consider how the modules can be changed to make a better match.
Another pain point for ERP projects is the implementation stage. Data migration problems, lack of training, and underestimated costs all add up to failure. Ensure that your data is of the highest quality possible before migration. Don’t bother moving old, redundant, or unnecessary data over to the new system. Invest in training for everyone who will use the ERP, as well as ongoing training as you onboard and transition.
Use our cost estimate information to give you a good idea of what to budget. When it doubt, it is better to overestimate costs and underestimate returns rather than the other way around.
Read more: Why do ERP projects fail?
Let’s talk more about ERP implementation. It is critical to understand the implementation process, challenges, and how to test the system once implemented. We have mentioned the need to assess organizational requirements carefully before choosing an ERP, and we’ll highlight it again here. It is that important!
A proper implementation starts with a solid foundation, which includes a needs-assessment, established key performance indicators, and specific system requirements. Since these details inform your ERP platform selection, don’t cut any corners.
In our experience, there’s often a challenge to overcome at this stage, which is your employee and stakeholder buy-in. Change is difficult for many people to handle. Adopting an ERP system is a significant shift for many organizations. Sharing your organizational needs assessment with stakeholders is an excellent way to show where the business could use help, and how an ERP will benefit everyone on an individual level, not only providing organizational advantages.
The next stage in the implementation process is working with your ERP vendor to set the timeline, priorities, and project strategy. At DRI, we build an ERP prototype, analyze any gaps, and get to work constructing the final product. At this stage, we use configured applications, custom extensions, a data conversion rehearsal, and a lot of system and integration testing.
Technical difficulties can be a challenge in ERP implementations, and our approach gets those roadblocks out of the way before you go live. Testing is one of the most critical stages in the ERP implementation process. We vet the system through a thorough testing process for functionality, integration, and performance.
Then, your business will transition to the ERP system, followed by careful analysis, monitoring, and evaluation to finalize any post-implementation tweaks that will make your system work even better.
The Latest Trends in ERPs
Enterprise resource planning is improving every day, and we are excited about many of the latest ERP trends.
Automation is a hot topic in the tech and business worlds. Why focus time and money on manual processes that invite human error, when you can use technology to do that heavy lifting and allow people to focus on more lucrative ventures? ERP systems and automation work hand-in-hand, reducing the potential for error, increasing productivity, and promoting real-time accuracy. Forget about repetitive manual data entry and guesswork-based business decisions and enjoy the advantages of ERP automation.
The cloud is another compelling technology. Cloud deployment reduces costs while offering a high degree of optimization. Still, for those who can choose an off-premises platform, there are immediate cost savings in not having to pay for servers, databases, and other related infrastructure. Cloud-based ERPs also leave IT management, upgrades, backups, security management, and other time-consuming operations in the skilled hands of an ERP vendor, further streamlining your organization.
We are also excited about the convergence of artificial intelligence and ERP systems. AI is a newer technology that holds so much promise. As with automation and ERP platforms, AI and ERPs combine to optimize your company’s performance based on your outlined goals and priorities.
ERP and Your Employees
The technological potential of an ERP system is always exciting to explore, but the human aspect of enterprise resource planning is critical to your company’s success. Switching over to an ERP platform is bound to be challenging for employees who don’t feel prepared. When you’re making a business decision this big, it is crucial to start getting everyone on board as early as possible. This support comes in the form of financial resources for training, time allocations for staff to get to know the new system, and, perhaps most importantly, leadership setting the tone to showcase how an ERP will benefit the business and how it will impact employees’ daily tasks.
ERP systems don’t exist only to help businesses meet profitability goals. They improve the work lives of staff. Communicating that idea is vital. ERPs will positively change your staff’s productivity, time management, and workload in many ways. Regularly check in with staff on all levels to ensure that they’re feeling confident and ready to adopt the new system and offer additional support to people who aren’t there yet.
Read more: Employee training and adoption
Hiring an ERP Consultant
Partnering with an experienced ERP consultant can help you overcome the everyday challenges of choosing, testing, and implementing an ERP system. Your consultant can help get employees and stakeholders up to speed, too. As experts in the field, ERP consultants will offer you the knowledge, experience, and skills to untangle even the most complicated situations.
Robust technical knowledge is vital, but it is not the only thing to look for in a consultant. When hiring an ERP consultant, be sure that their communication skills and style mesh with those of your business and its employees. The consultant you choose should demonstrate the listening skills that show an understanding of what your business needs from an ERP–and they need to be able to put that into action with a firm handle on ERP product options and how to tailor each to your organization. There’s no such thing as a one-size-fits-all ERP, so if your consultant is pushing that kind of approach, it may be best to look elsewhere.
A consultant with experience in your industry is a bonus, especially if you’re working in a highly regulated environment. A company that is exceptionally large or small can also present unique challenges. In any situation, you can rely on an ERP consultant who has successfully walked similar companies through ERP implementation.
Remember that you don’t need to hire one consultant to do everything. Many organizations see value in hiring a selection consultant and a separate implementation consultant. Each role is important but very different. It is often better to select the person or firm with the most experience and knowledge in each area rather than settling for someone who does ‘good enough’ in both.
When you’re interviewing potential consultants, ask about their experience, how they plan to bring your company through implementation successfully, and how they will manage your company’s timeline and budget responsibly. It is also a good idea to take a look at references and case studies from the consultant, to gauge how they have handled clients’ needs previously.
Summing it All Up
An ERP system can make a myriad of improvements to your business. To get the most from an ERP implementation, you’ll need to make several informed decisions throughout the process, but you’re not alone. Centralizing and automating business process management is a mighty task, and it is one that you can complete successfully, on time, within budget, and without any significant failures, with help from someone who has been there before for businesses like yours.
At Decision Resources, Inc., we have dedicated more than 40 years to helping organizations of all types and sizes find the ERP solutions they need for business productivity, efficiency, and optimization. To learn more about how an ERP can positively impact your business, to find answers to your questions, or to set up a consultation and quote, please get in touch with us today. Our staff will not bombard you with potential plans and solutions. We will take the time to listen to your current situation, your needs, and your goals and work together to find the right solution for you.