Dilemmas of ‘ERP’

By Aruna Shameera

The question many business leaders ask themselves is, should they go for an ERP system or not? Implementing an ERP system is one of the biggest investments a business can make, yet many small and young businesses claim that they are ‘too small’ for an ERP. This stems from the mindset that the number of users drives the need for an ERP solution.

The truth is, a small business must be faster and sharper than their competition. In today’s business landscape, no business is too small for an ERP solution. ERP allows small businesses to appear, act and operate like any enterprise-scale business.

Enterprise Resource Planning (ERP) has been known to be the backbone for many enterprise-scale businesses. This software system is a key tool to manage organisation wide resources in holistic approach.  Production planning and controlling, Sales and Distribution Purchasing, Procurement processing, Material and inventory management, financial status of the organisation such as Financial Accounting, Fixed Assets accounting and Cost Accounting – are just some organisational processes that will benefit with an ERM System. 

In addition, an ERP System also provides business resources between stakeholders such as; revenue, materials, orders, staffing and manufacturing capacity. All of this is done in a single interactive database management system with built-in analytics and a dashboard. An ERP can be implemented across several industries and domains like manufacturing, retail, human resources, steel, concrete, banking, pharmaceutical, chemical, oil gas, as well as agricultural, farming, printing and packaging and livestock management. There haven’t been as many suitable ERP options available to small-sized businesses in the past, as these businesses simply didn’t have the funds or technical support to create the infrastructure necessary to adopt the traditional corporate-scale ERP solutions. Therefore, growing businesses end up creating a fragmented business structure made up of several separate programs that handle finance, inventory, sales, payroll and more. However, recent technological advancements have opened the door to more practical small business solutions.

What do small businesses need to understand about ERP?

ERP systems geared towards small businesses are able to blend and automate key business functions such as order processing, production and finances.

However, ERP software is integrated overall into process areas and spread through departments of an organisation. Implementing an ERP system entails careful planning in order to minimise the risk of failure and to ensure goals are met.

This requires a standardised implementation blueprint, which is an established ERP strategy prior to selection and involvement of all business and IT staff members in the process. Any business can get a real ROI from the use of an integrated ERP system if executed correctly.

Benefits of ERP

Transparency: Instead of each department having its own information system, all relevant data can be shared and accessed by all the departments. This eliminates the need to re-enter or export data, which can result in less errors, increased productivity and reduced expenses on human resource.

Decision-making: Real-time data provided by the system can be beneficial for marketing, management, accounting, and enables the organisation to make vital decisions on time and reduce waste. Teams can detect any potential obstacles or issues that may shake productivity levels. An overall picture of operations allows for business leaders to make effective decisions and respond quickly to a changing business environment.

Productivity: With increased clarity by streamlined business processes, staff can shift their focus on managing increased volumes of business. This aids in transforming various facets of your business and overcoming the challenges involved in business growth.

Streamline process: Implementing an ERP is a change management process in an organisation. None productive processes and process steps should be eliminated during the exercise of the implementation with benchmarking with industry best practices.

People Centric implementation: Many researches proved that 80% of the success of the implementation is depend on the people part of the project the balance which is just a 20% contribution is from the technology aspect. So, implementers and consultants are taking additional care on user’s involvement during the project.

What are signs that your business needs an ERP system?

The majority of small businesses start with just the basics. This may include a combination of simple accounting software and document-based processes – i.e., spreadsheets, synced documents, etc. As the business expands and transactions increase, it may become more time-consuming and difficult to process a larger volume of data. Business processes become much more tedious, such as; inputting customer purchase orders, sales acknowledgements to customers, purchase orders to suppliers/vendors, updating inventory, reserving/allocating stocks for sales, check the material requirements for production process, stock tacking and verification, raising invoices for customers, pass finance entries to relevant journals, payment vouchers, keeping track of purchasing behaviours and patterns, etc. ERP can automate these manual processes, allocating more company time to sales and business development instead of administrative tasks. Furthermore, ERP software allows synchronous workflow from inquiry to invoice and payment. The ideal ERP system would handle the processes in one fluid system.

It may be time for ERP implementation,

• When the amount of inventory in the warehouse becomes difficult to determine
• When the sales forecast is based mostly on guesswork
• When the company is struggling to keep up with an upsurge of orders or relies heavily on excel spreadsheets
• When getting solid facts becomes problematic

What is the Right Choice of ERP?

There is no one size fits all ERP system. Each business has different competitive profiles, customer mixes and business standards that make for a massive range of solutions.

A good ERP option will offer a suite of business management tools such as; Customer Relationship Management – CRM, Business Intelligence – BI, Dash Board, Portal, Document Management System – DMS, Electronic Business – eBusiness, etc. 

However, too many unnecessary tools may cut back revenue or may be additional overhead.

As a small business you want to invest in the most cost-effective solution that meets your needs, fits your industry and is manageable. 

There are various factors to consider when choosing which ERP is best for you and your company.

Ease of Use: Consider the learning curve involved. Is it user-friendly? What would be the amount of training involved? Modern ERP solutions come with responsive user interfaces and can easily integrate with most business tools such as Microsoft programs, Google, Social Networks, etc.

Cloud or On-premise Platform: Traditionally, on premise systems required expensive licensing costs and large initial investments. Now with the emergence of cloud ERP solutions, an affordable ‘pay-per-transaction’ pricing model is now available to smaller businesses and start-ups. This minimises the risk of you purchasing an inadequate solution that is too powerful for your needs. Customisation: Does the software accommodate changing business models? Does the software utilisation, platform and user count adapt with business growth? The system should be scalable to your business goals. Frequency of Upgrading: Be aware of the support guarantee regarding mandatory upgrades. Unless you are purchasing additional components for your software, make sure enhancement fees are locked in and don’t increase with developments and future releases. Also consider the ease of upgrading; a cloud platform may provide faster and automatic updates while an on premise update may involve more work.

Security Measures: Ensure that the security of your data is as much of a priority to the vendor as it to you. Be aware of how to manage and determine different access and authorisation roles in the system to prevent data violations. Make sure passwords are strong and securely encrypted. Also, ask the vendor what security measures are employed for integrating third-party products. Support Service: Take into account how much support is offered by the vendor and find out if there are any additional fees involved for troubleshooting your system. The vendor should also have plenty of personnel to assist with setting up and maintenance of your ERP software.  

References:

1) OrgadGratch (September 29, 2015)

2) http://mashsol.com/erp-system

(The writer is Senior Software Engineer at TechSys, a subsidiary of Just In Time Group)