Today, with the
advancement in science and technology, when all the businesses are looking for expansion,
ERP is in major demand and is gaining importance due to its multiple abilities
to deal with complex problems and provide solutions at one go. Reduced cost is
inversely proportional to the revenue and the profitability of a firm. Tasks
become tedious and time consuming if performed daily. Cloud based ERP systems
can be used to access information, automate the tasks, can make use of a
subscription model that can divide the cost into small chunks, can provide a
single database and thus can give a holistic view of the business operations at
any time to the employees.
Many companies are gaining a competitive advantage with the
implementation of ERP systems. The top 3 ERP vendors include SAP, Oracle and
‘Talking Rain’ – a beverage distributor is expanding and
generating a double-digit growth with its ERP Solution – Microsoft Dynamics NAV
and has the entire company information in a single system rather than in
‘Colgate Palmolive’ has
adopted SAP ERP system and has implemented various modules such as supply chain
management, human resource management, order processing, and production
management and employee information.
‘Accenture’ runs on SAP and is now providing SAP Cloud based
services (IaaS, PaaS) bridging from the SAP core technologies to the cloud.
Similarly, ‘Oracle’ and ‘GE’ run on Oracle Apps and have
implemented various SCM, CRM and Finance modules and are now moving towards
All these competitors have gained huge advantage and have
seen rapid growth after engaging with ERP systems and in order to survive and
grow in this highly competitive environment, it has become a necessity to
include ERP in the business.
The growth of a business depends on all the segments and not
just one, be it sales, operations, inventory, marketing, human resources,
finance or IT. Managing each and every segment separately becomes a tough task
and lacks synchronization which leads to inconsistency. A system is needed
which can integrate all of these into one and can prove out to be advantageous
for the employees as well as for the business. Employees will have access to
the up-to-date information, can alter or correct inconsistent data, can help
customer solve their queries, automate various repeating tasks, can ease down
the accounting and financial reporting. Cost reduction will happen by the use
of a single software instead of using different softwares for different
purposes. Also, there will be an increase in the sales along with a positive
customer experience. High performance will lead to high productivity which in
turn will help the business to grow.
To determine whether the business is ready for ERP, we
analysed various situations a business faces and how ERP will help overcome
these issues. Below are some major factors a business must consider before
planning to implement ERP in the business.
1. A business may have a
tough time accessing its information
may hinder its strategic and tactical decision-making abilities. Companies
would need information to make the decision such as Approve capital budgeting,
decide Long-Term Goals, Decide Marketing Plan and departmental budget. ERP
would essentially help in integrating ESS, DSS, and MIS and provide a central
data stream to provide real-time bird view of an organization. Management would
need Periodic Scheduled Reports, Exception Reports, Demand and Response
Reports, Push Reports all the reports would be easily provided if the company
has implemented ERP System.
time spent looking for critical information would be not be lost and a
dashboard would be available to the managers with specific information rights
which would provide them the required info at their position in the company.
2. Business may be
entering a growth phase
can grow in terms of sales, marketing budget, human resource. The resources
required to manage the change also increases as the old processes would not be
sufficient enough or else would take more time to provide the output. What this
means is when a business is growing from small to medium and medium to large
ERP is need of the hour. Through implementing ERP the business would be able to
accelerate the growth and could reduce the time for multiple processes. If the
processes and systems are not managed centrally the business may lose its
growth rate due to excessive and unmanaged data.
implementing ERP, a business may re-engineer its processes or do a vanilla
implementation. Irrespective of that the implementation would help a business
manage all the processes and centrally and through their corporate head office.
ERP is essential for a business to have a healthy growth.
Databases may contain
double entries and errors
In a business,
if each department will use independent softwares for keeping track of
information, it becomes difficult to manage and make sure that all the
softwares contain accurate and updated information. All the departments will
have a high level of redundant data which can be eliminated by the use of an
ERP system. Different information in different department will also lead to a
lot of errors. These errors and their correction time can lead to decrease in
productivity and hence increase the cost for the business. ERP implementation
will lead to ensuring that correct and updated information is being accessed by
all. Thus, implementing ERP will eliminate the need for data redundancy in
every department and help perform transactions smoothly.
need access to key data
Data needs to
be updated as and when required, also its important that this update needs to
be made available to all the respective employees. For e.g., Sales person
should have updates of the inventory at the warehouse, sales margin, company
policies, if you need to manually update and collect data it would result in a
long wait. Considering the rate and increase in the pace of business staff must
have immediate access to key data. “A perfect example of this would be a sales
representative should be able to see a customer’s order history giving them the
opportunity to upsell and cross-sell opportunities.”
There may be
numerous processes being carried out on different systems
independent information systems can lead to carrying out single process on
multiple systems. This will lead to an increased costing for the business and reduce
its profits. ERP integrates all the systems under one umbrella, thus
eliminating the need to carry out single process multiple times. Using
traditional independent systems may require you to buy new licenses each time a
new employee needs to be added. But with ERP the same can be done at a very low
monthly cost or no cost at all.
systems may not be able to connect to all departments
resource planning (ERP) software attempts to integrate all departments and
functions across a company onto a single system. If your company’s work
requires interaction of various departments/accounts to complete a job, for
example: An automobile manufacturing company requires dependency of each of the
department to complete its final product. If such is the case, ERP can help you
to communicate internally as well as externally with the suppliers,
distributors and stockist, so at any point of time you will not run out of
stock and hence will be able to complete orders on time.
may not be accurate and reliable
report may require verification or a double-check before you can trust it
and use it to make important business decisions. It can be avoided by using
Enterprise resource planning (ERP). ERP allows you to make live updates that
are visible to others. The same input is
visible to every person/department integrated with ERP that helps a company to
save a lot of time and effort that goes in verification of the data. All of
your important data is managed using one software, including supply chain,
financials, inventory, and more. Because all of your teams are using the
same software, the same data is shared between teams and used by managers for
decision making. Setting the desirable edit/read rights ensures that the data
is secured and is only reaching the desired person. The reports hence become
more accurate and reliable.
Your customers may
not be as happy as they should be
It is a known
fact that retaining an old customer is easier than to keep an existing
one. If your company cannot easily
answer to customer’s queries such as pending invoices, inventory, shipping and
others, the relationship with will start failing, until they finally decide to
stop buying with you and go to your competitors. It costs almost five times to
attract a new customer or to re-establish trust of the old customer. Hence it
would be a wise choice to implement ERP in your organisation if you feel you
are getting too many complaints or you are losing customers frequently.
There may arise
a need for technological advancement
Any software is
prone to an inevitable degradation in performance. Sometimes, when such a
situation arises companies tend to look at ERP as an all-round solution. This
may lead to implementing ERP at a very high cost. Instead of implementing ERP a
better idea for the business would be to analyse their software weaknesses and
upgrade them accordingly. Lack of employee training may lead to the same
situation. If the company skips over employee training, it finds that the
employees are not performing up to their potential. Thus, it is important to
review the existing systems before planning to implement ERP. If it is found
that all the factors have been dealt with satisfactorily and yet the
performance is not as expected the business can implement ERP which will
enhance the system efficiency and thus contribute towards the profits of the
business. Before implementing ERP, we need to:
evaluating the present system, company needs to take into account its future
plan. Strategy and aggressiveness of a company needs to be assessed if the
process or technology is not capable enough to meet company goals new
technology or software needs to be used. It is a long-time decision; hence all
the future possibilities need to be thought of and a long-term decision needs
to be taken. Based on company’s future strategic plan, ERP needs to be tested
on the capabilities of the system.
to Wei (2008), the main reasons
why a company should analyse the performance of their ERP systems are:
ERP systems are more complex than any traditional
information system (IS). The installation of an ERP system requires high
investments of money, time and energy.
All of an organization’s business processes are involved
with ERP systems. The ERP system used will influence all business operations
and strategies in the future.
ERP systems are created on the basis of procedural and
generic business rules. Implementing an ERP system requires customization and
the adaptation of work processes based on the company’s business practices.
Many of today’s business processes can suffer reengineering and change.”
evaluation of ERP, cost to implement the project needs to be calculated, these
costs will include all the major & minor costs along with the training and
implementation. Financial impacts of the problem identified for the ERP needs
to be calculated. Thorough check needs to be made whether the problem or the
future expectations can be met by revamping the existing systems. There is no
compulsion; a big business may just do fine without ERP similarly a small
business may find that they could not function without implementing one.
Before implementing ERP the readiness assessment studies are
very important. It is necessary that the organizations perform these studies
before ERP implementation so that they come to know about the feasibility of
implementing the system. The organization must be aware of the consequences of
implementing an ERP system.