We often hear that everything is digital these days. The digital transformation witnessed in this decade is surreal, to say the least. In businesses, the role of IT has increased and taken a strategic role as well. Technology has become an inevitable part of the modern business structure. Enterprise Resource Planning (ERP) is one such IT tool without which most businesses cease to function. It was primarily established for manufacturing industries but later it expanded to other industries like finance, education, health care, service, hospitality and many more.
What is ERP?
ERP is a software that helps in managing and simplifying all the essential processes. It enhances and smoothens the functioning of any business. Streamlining your business and providing management with valuable and insightful data. The ERP system has been around since the 1960s and is evolving ever since. The recent ones also have Artificial Intelligence (AI) and machine learning technology. Also, most of the ERP vendors have an established cloud system.
How does ERP work?
ERP systems usually have different applications synchronized in them together. The different application depends upon the industry the ERP is specially designed for. Say you are running a finance business; you will have all the sectors inside your business in the ERP. The application for accounting will be different than that of HR. However, both will be able to access the same data as everyone is kept in the loop in an ERP system. ERP ensures that different departments of a business are on the same page.
Technology like art is a soaring exercise of the human imagination.
- Daniel Bell
What are the features of ERP?
ERP systems vary in scale, scope, and functionality depending upon various factors. However, there are some general characteristics and features ERP systems have.
An ERP process is well-integrated from start to end across all business units and departments. Everything is synchronized in it, making it a go-to system for any and every department. For example, when a sale is made, the amount of profit is also recorded and even the inventory check is made along with generating shipping and invoice.
Tracks real-time operations
The operations are tracked by the software in real-time. Real-time tracking helps in understanding the required action and any setback immediately. For example, if a customer has placed an order. You can immediately check if the stock is available or not. This real-time tracking helps in identifying problems quickly.
Consistent user interface
Any system that has constant upgrades and updates becomes tedious to handle in a business. This is because everyone who is handling this system has got used to its user interface. Constant changes incur further training costs. Most ERP vendors offer a consistent user interface. Their system has a consistent look and feel.
A common database
There are different departments in a business but they all use the same common database. Every department is accessing the same database and using the same data. Some ERP systems opt for separating the physical database to improve performance.
How will my business benefit from having an ERP system?
As an entrepreneur, you may wonder if it is worth investing in such a system. Especially, if everything in your organisation seems to be functioning well as it is. Knowing how your business will benefit from having an ERP system will give you a better understanding of whether it is worth your money or not. Some key benefits of having this system include:
Eliminate struggles associated with data management
One of the biggest advantages of having it is that it improves data management big time! It automatically tracks and processes your data. You no more need to spend hours logging data whether it be of sales, accounts, or anything. It automates everything saving a bunch of time and also eliminates the chances of errors that may occur while physically logging any data.
Your employees will not be wasting time balancing the book. They know the system will handle it all. The same time then can be used for other important tasks due in the business. ERP systems save time and increase the overall productivity of the organisation.
Promoting transparency by tracking all financial transactions
Financial discrepancies can cause problems in the best of businesses. It can hamper the environment of a business and disrupt its overall functioning. We as humans tend to make mistakes, no matter how diligently we work. Errors can occur while calculating the revenue, stock evaluation, tallying the accounts. The use of ERP will eliminate all possibilities of human errors. To avoid all this, the best is to have an automated system in place. It rules out the probability of transactions being missed out or data discrepancies in any manner. The system will automate your data and create an interlink amongst the different departments in your business. You can get a real-time financial report of your business and there are no chances of inaccuracies and errors.
Providing a business overview to identify opportunities and setbacks
The system is tracking your overall business in real-time. It is constantly checking about how different departments are doing and also, how the overall business is functioning. It helps in finding any setbacks or problems immediately with real-time tracking. You will know promptly what stock is reducing, what is barely selling, what needs to be manufactured more, how much profit you are creating, and so on.
Helps in boosting customer experience
Customer is the King. This statement is not a mere exaggeration but a definitive reality in today’s world. To survive in any business, you need to keep your customers happy and satisfied. There are several other options available for anything and everything these days. Your customer service can either be your USP or your setback. It is up to you. It helps in boosting the customer experience by providing data metrics. This will help you to understand the wants and needs of your customers. Knowing which products customers are leaning towards more and which they are not buying will help you further form sales and marketing strategies.
Keeps a track of the regulatory compliance
Every business has a set of rules and regulations to comply with be it any industry. It is a time-consuming process to keep a track of the regulatory compliance of your business. Having to make spreadsheets and do all the paperwork. Even after all these efforts, there can be irregularities. The system will automatically update and regulate all the legal requirements of your business. Configure your ERP system with the regulations of different departments and you are good to go.
The advance of technology is based on making it fit in so that you don't really even notice it, so it's part of everyday life.
- Bill Gates
How can I implement an ERP system in business?
There are several vendors available out there. If you have decided to establish an ERP system, then you can go about implementing it by:
Map out the different divisions of your organization
When you have decided to implement an ERP system, the first step will involve determining the different departments and sectors in your organisation that will be using it. Every organisation functions differently. Mapping out the different sectors will help in narrowing your choices from the several ERP vendors available.
Examine and document the process, know where you are struggling
There are complexities involved in examining and bringing-in all the data of a business together. Have a list of all the documents needed before establishing an ERP system. Though this process may sound saturating as it may take several days. In the end, it is all worth it as you will have everything compiled and in one place.
Assess the technical fit
Depending upon what your business needs, you may need an ERP system that is specifically designed for your industry. Usually, an ERP solution is scalable and can easily handle an increase in data and number of users. Ensure that the ERP system you choose is well-aligned with your company’s current IT structure.
Estimate the true total cost involved in owning an ERP system
Getting a system in place for your business is a long-term financial investment. There are several costs involved in ERP pricing like licensing, upgrades, fees for add-on services, and maintenance. You need to determine which of these are one-time costs and which are the recurring ones. Have an estimate of how much you will be annually spent on the recurring costs.
Consider various vendors and choose the best for your business
Choosing the right ERP vendor is a critical step in choosing the best software for your business. While selecting a vendor, go through their track record and performance history in your specific industry. Check if they are well-equipped with resources to handle the implementation of ERP in your business. Conduct extensive research and comparison before selecting your ERP vendor.
Create a plan on how you are going to implement the system
After you have selected your vendor, the final step would be creating a plan on how you are going to implement the ERP system. This would include having the resources needed and training the staff. The employee who will be handling the ERP system should know how it works. As ERP is a huge commitment required by every department of your company, an effective plan of its implementation is a must.
ERP is one of the most convenient business systems out there. It has become an integral part of most businesses. With so many vendors out there, remember that there is no ‘best’ ERP system. The “one size fits all” does not apply while choosing an ERP system. Every business has its own unique needs and manner of functioning. With the advent of technology, businesses have transformed digitally over the past few years. Read our article on ‘digital transformation’ to know more about the impact of technology on businesses.