Defining ERP softwareFor many business managers who are making their first foray into researching ERP software, the subject can see daunting. Search the internet for ‘ERP software’ and you’ll be inundated with dozens of pages of information and opinion; it’s a big subject and there is no shortage of commentators, experts and marketers, all vying for your attention and, of course, a share of your IT budget.
The good news is that despite the technical acronym, the basic principles of ERP software are easily defined and once understood, a business manager is in a solid position to begin considering the different options available to their company.
A single, centralised database
The central feature of all ERP systems is a shared database that supports multiple functions used by different business units within an organisation. As opposed to using multiple software systems to manage different areas of a business, ERP software centralises all information within a single system. This means that whatever job function a user happens to perform, they and their colleagues are working with a single source of data, as opposed to multiple databases created using separate, disparate software applications.
Using multiple systems – especially as a company grows –can cause major problems and affect the flow of information around a business. If each department in a business uses their own software application and these programs have not been configured to talk to each other, there is a high risk of ‘data silos’ emerging and these can wreak havoc. Data silos are essentially different versions of data held by different people within an organisation. Information may differ widely in terms of its accuracy and this can disrupt operations and hinder supply chain management, potentially undermining customer relations as a result.
For example, someone in a roofing supplier’s sales department closes a sale, emails her colleague in accounts who raises and posts an invoice. The customer makes a payment for the products they have ordered and this is recorded using the supplier’s accounting software. So far, so good.
Someone in the purchasing department, however, has overlooked an email with details of the products they need to buy to fulfil the order. Ten days later, the salesperson receives an angry call from the customer asking why their order hasn’t arrived and complaining that they’re unable to complete the job for which the products were required. Not a great start to a new business relationship.
This is a simple example, however, hopefully it illustrates that’s its very too easy for information to become lost if communications channels between departments and people are anything less than seamless.
By implementing and using a single ERP system that is used by all personnel within an organisation, there is far less risk of information going missing or being overlooked because everyone is using a single application to manage operations. Going back to the example above, an ERP system could be configured to automatically alert the purchasing department once a sales has been registered. The margin for error created because the process was based on someone having to remember to send an email is removed.
The Business Value of ERP
By automating processes, a business can achieve more than mitigate against the risk of personnel losing or overlooking information. Automation goes a long way to eliminating time-consuming manual processes and this is key to helping people become more efficient and productive.
Relieving a salesperson from their administrative burden, for example, means they have more time to spend focusing on speaking with customers and growing sales.
Automation is key to effective supply chain management and ensuring complex work flow processes related to production planning, manufacturing and inventory control. Step back to think about the different elements that need to come together in order to produce an item and the number of different businesses units involved in the overall process.
Sales and purchasing personnel need to be in close contact to ensure that promises can be kept. Staff in the warehouse need to know exactly what they have in stock and plan for deliveries. Production staff need to carefully plan what they need to buy and when. The accounts department need to control and record all incomings and outgoings. Management need complete visibility what is happening at any given moment alongside the business intelligence that is necessary for strategic planning.
Using a single system to produce accurate reports is also key to the business intelligence with is central to joined-up decision making. If a senior manager has to hunt around different systems to find the information they need to produce a report, and there is no guarantee that this information is up to date and accurate, there is a real risk that the document will be fundamentally flawed from the outset.
ERP systems are key to providing high quality customer service. Sales and customer service people can interact with customers better and improve relationships with them, through faster, more accurate access to customer information and purchasing histories.
Even though the ‘E’ in ERP stands for “enterprise”, an ever increasing number of small and growing companies are adopting ERP systems as the benefits become more widely understood.
Although is ERP is regarded as a complex subject – and there is no doubt that a successful deployment demands careful thinking and planning – its major benefit is that it enables businesses to streamline performance by simplifying processes and operations.
ERP systems have become more affordable and the fact that many are available on a monthly subscription basis via the cloud means they are accessible to small businesses with limited budgets.
Once an ERP system has been deployed and is being used fluently and confidently by personnel within an organisation, it will pay for itself many times over.