An ERP (enterprise resource planning) system can be the catalyst for optimizing operations for your organization.
According to Panorama Consulting, 95% of businesses experienced an improvement in their processes after implementing an ERP system. In addition, research by The Aberdeen Group says small businesses experience a 36% reduction in the time it takes to make decisions because of ERP software.
But is an ERP purchase or upgrade worth the initial investment of money, time and effort that’s involved in deploying and using it?
Time to make the ERP change?
If you answer “yes” to any of these questions, it’s a sign it may be time to consider an ERP system – or an upgrade – to improve efficiency:
- Are your teams using spreadsheets to keep track of similar data?
- Is too much time being spent compiling data for client reports?
- Is it often unclear how much inventory you have and how much you need to reorder?
- Do team members often book orders, but then discover the items aren’t in your warehouse?
- Is your company having any other difficulties meeting customer demands?
- Are metrics such as productivity levels difficult to track down and monitor?
- Is it difficult to retrieve customer-specific financial information?
When communication breaks down between siloed departments or core business processes that depend on each other, it can hurt your bottom line. An ERP should remedy that by integrating functions, eliminating duplicate processes and organizing important operations data. For instance, when a new sales order gets processed, the software should automatically prompt interaction with your inventory, Finance and shipping departments.
With all the supply chain disruptions since COVID, having supply chain processes linked to an ERP can improve visibility and contribute to faster decision-making, leading to flexible sourcing and a more connected supply chain network that can better respond to customers’ needs and prevent setbacks.
In addition, implementing or upgrading an ERP system is a key step to take in automating time-consuming manual processes in A/P, A/R and general ledger accounting. ERPs reduce the risk of data entry errors, since information only has to be entered once into the centralized system.
Where to begin
The time and money saved by streamlining and/or automating business processes, maximizing workflow efficiency and improving communication can lead to lower operational costs that drive business growth and profitability.
However, because exploring something as complex as an ERP system can seem overwhelming, here are some good first steps to take:
- Meet with your employees and major stakeholders to find out what operational challenges they’re experiencing from using multiple systems or an older ERP.
- Perform an audit on your current processes and systems and analyze how a new ERP purchase might specifically improve your workflows. Do you need a system that’s designed for a specific industry, such as manufacturing, retail or health care?
- Click here for a free ERP Vendor Comparison Guide from BetterBuys.com featuring reviews on over 50 ERP software solutions.
Some experts recommend dedicating at least two to four months to researching and evaluating the systems on the market to find the one that’s the best fit.
Some metrics to capture to fairly compare an existing system (or systems) to your next one:
- time and labor cost/savings
- amount of waste and scrap
- factory, warehouse and production efficiency
- general operating costs
- data management and analytics, and
- compliance and safety expenses.
How much is it going to cost?
Up-front costs are lower than they used to be, thanks in large part to the emergence of subscription model, cloud-based software. But the cost of the platform you choose will depend on a lot of factors, such as:
- your organization’s functional requirements
- the number of user licenses and their access levels (since not everybody in your company will need to access all system features and functions)
- costs related to customization, like how many modules or third-party add-ons you may need
- costs involved with change management and training (keep in mind that implementation could take as long as several months to a year), and
- the type of technical support contract you choose.
And if you’re favoring a subscription pricing model, will the total cost be affected by your frequency of payments (e.g., monthly, quarterly, annually) or the length of the contract?
Also consider: If you’re only going to realistically use half of a system’s available features, you may be able to make an arrangement to just pay for what you need when negotiating with the software vendor. It might be worth asking the vendor if it would consider a pay-as-you-go license.
You also might be able to save money by having your IT team or developers configure and customize an ERP solution that best meets your needs. But keep in mind that any mistakes can be expensive to fix, so you’ll need to evaluate if your tech people have the right skillset to take on customization projects.