When implementing ready-made ERP systems, 53% of companies significant challenges that require changes in business processes and organizational approaches, and 44% of companies face significant technical problems. In a series of articles, we break down what an ERP system is, why it is beneficial, how to determine the need for its implementation, what you need to know when choosing a platform provider and how to implement it.
The concept of an ERP system came from the United States and is literally translated as enterprise resource planning - Enterprise Resource Planning. Academically, it looks like this: βERP is an organizational strategy for integrating production and operations, human resource management, financial management and asset management, focused on the continuous balancing and optimization of enterprise resources through a specialized integrated package of application software (software) that provides a common data model and processes for all areas of activity.
Each supplier can understand the system he has developed in his own way, based on its focus and tasks. For example, one ERP system is more suitable for retail, but not suitable for an oil refinery. Moreover, each company and its employee who uses the platform represent it in their own way, based on the part they come into contact with in their work.
At its core, ERP is an information system for managing all business processes and company resources based on a single database.
What is an ERP system for?
Like any information system, ERP works with data. Every employee and department is constantly creating hundreds of megabytes of information. In a small organization, the manager has direct access to all the information and time to track processes. If a large amount of data is created within one or two business processes, then it is enough for the manager to digitize them with point IT solutions. As a rule, an organization buys accounting software and, for example, CRM.
With the growth of the company, those individual processes that used to take a minimum of time to manage are transformed into large amounts of information. In conjunction with other business processes, disparate information flows require a huge administrative staff to combine and analyze them. Therefore, an ERP system is required not by small, but by medium and large businesses.
How to understand that a company needs an ERP system
The usual story of our customers is as follows. At some point, it becomes clear that all the main processes are automated, and work efficiency does not increase.
It turns out that each process is in its own separate information system. To connect them, employees manually enter data into each system, and then management manually collects duplicated data to analyze the performance of the entire company. In principle, such work mechanics are productive up to a certain point. The main thing is to determine the moment of achieving maximum efficiency before it occurs, and not when it will be necessary to change the mechanisms of processes in a rush mode.
None of the information systems will ever report that the moment has come when the company has grown to the point where an ERP system is needed. World experience shows 4 main features that will allow you to understand this:
There is not enough data to make an informed management decision.
Any decision in business has consequences that ultimately result in financial losses or, conversely, in income. The quality of a decision depends on the information on which it is based. If the data is outdated, incomplete, or incorrect, the solution will be wrong or unbalanced.
The main reasons for the inconsistency of information:
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critical information is scattered across individual employees and departments;
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there are no regulations for data collection;
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information is collected by employees with different roles and at different times.
With an ERP platform that fits your business processes, you can centralize all your data. All information is created by each employee and department in a single system in real time. This means that the data you and anyone else in the company may need is always as accurate and up to date as possible.
Lack of integration between IT systems leads to disruptions and hinders company growth.
Each IT system has its own requirements for the data format, built at different times and on different technologies, principles and programming languages. This is reflected in the work of employees who interact as if in different languages, and in the speed of interaction.
An ERP system combines individual functions in one integrated and understandable space. The ERP system works like a translator that speaks multiple programming languages ββto ensure collaboration and consistency.
Your customers are unhappy with the service.
If customers complain or leave, you should think about efficiency. This is due to demand outweighing supply, late deliveries, slow service, or just a general feeling that the business doesn't have the resources or time to take care of every customer.
When a business has grown to a medium or large scale, ERP turns dissatisfied customers into loyal ones. Customers begin to feel the improvement in service and experience the changes with the company.
You are using outdated systems.
According to Veeam 2020 Data Protection Trends Report, outdated technologies are the main barrier to business digital transformation. If a company is still working with manual entry systems or paper documents, then in the post-pandemic period, it will definitely be overboard.
In addition, the IT systems in a company can be quite modern but disintegrated. In this case, each department creates its own information bunker, the data from which comes out dosed or incorrect. If the integration of individual systems is extremely costly or impossible, then it is necessary to change them to a single ERP system.
What are the benefits of an ERP system for a business?
An ERP system is a product that a company purchases at its own expense. Its implementation is seen as an investment that should bring profit. No manufacturer of an ERP system guarantees that it will bring revenue growth to a company. And this applies not only to ERP systems, but also to any IT solutions. However, all the advantages of implementation indirectly affect the profit:
Savings on IT systems
Instead of spending resources on several disparate systems, each of which needs specialized support, infrastructure, licenses, and employee training, you can focus all costs on one ERP platform. It consists of modules that replace disparate systems with integrated parts.
If an ERP system is developed from scratch for the needs of a particular company, it can include third-party systems and services that will be convenient for business partners, suppliers, customers and other counterparties to work with.
Full transparency
ERP provides management with full access to every business process of any department 24/7. For example, you can track inventory on a daily basis, including scheduled deliveries and shipments in transit. Having a complete picture of the volume of stocks, you can more accurately control working capital.
Report automation and strong planning
ERP creates a single unified reporting system for all processes. It automatically generates useful reports and analytics at any time. With it, management does not have to manually collect spreadsheets and letters.
Thus, the platform frees up time for strategic planning, better analysis and comparison of departmental performance. The ERP system helps to find in analytics those trends that were not noticed before and did not even have a chance to notice.
Increased efficiency
ERP itself is not a panacea. It is important not only to comply with the specifics of the business, but also the correct implementation. According to Of the 315 off-the-shelf ERP vendors, the share of implementations with only partial success is estimated at 25 to 41 percent, depending on the industry. A suitable ERP significantly reduces the time and effort spent on routine.
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Customer service is a key part of the business. An ERP system shifts the focus of employees from maintaining customer registries to building and maintaining relationships with customers.
Statistics show that 84 percent of customers in the company if they do not receive enough responses to inquiries. ERP gives the employee all the necessary information and customer history right at the moment of contact. With it, employees are not engaged in bureaucracy, but in attracting and retaining customers. Customers feel the benefits of its implementation without even knowing about the changes in the company.
Data protection
There is hardly an information system that can give an absolute guarantee of data security. Personal data of customers and employees, emails, intellectual property, financial data, invoices, contracts - the more systems process this information, the more difficult it is to trace risks. The ERP system introduces uniform standards for access, input and output of data and centralized storage of information.
However, the greater the market share of a ready-made ERP system, the more often it is subjected to hacker attacks. It would be preferable to develop your own ERP system, the access to the code base of which will only be yours. If the ERP system for your company is developed from scratch, hackers will not be able to find copies of the system to pre-check it for vulnerabilities.
Collaboration Productivity
Often, interest in collaboration between departments or employees fades away, because data transfer requires a lot of routine operations or because of the psychological climate in the company. A single system automates access to information, eliminates the negative experience of the human factor and speeds up communication within the company.
Unified business processes
Ready-made ERP systems are developed in accordance with the best industry practices. This allows businesses to standardize their own processes.
However, in reality, an enterprise has to make a difficult choice: either it is time-consuming and costly to set up and modify the ERP system to the company's standards, or it is painful to adjust their own business processes to the standards of the ERP system.
There is a third way - to initially develop a system for your own business processes.
Scalability
Whether you are expanding your customer base, expanding into new markets, introducing new processes, departments or products, or otherwise scaling your business, with the right vendor choice, an ERP platform adapts to change.
Since the ERP system is embedded in all company processes, the list of benefits may increase depending on the specifics. Dozens and hundreds of ready-made solutions have been developed on the market that drive buyers into the scope of subscriptions, the speed of updates and support, closed functionality and architecture - within the framework of one supplier. Only the development of your own ERP-system gives you maximum opportunities without any restrictions.
Read the following articles to learn how to choose an ERP system manufacturer, what questions to ask him so as not to lose money, and what to consider when planning an implementation.
Source: habr.com