As a company grows, so does the number of processes, data and interdependencies, which are difficult to manage manually. It is at this point that the need arises to implement an ERP system – a tool that streamlines resource management and integrates key areas of the company’s operations.
What is ERP?
This is software designed to manage a business. It is intended to assist with – and, in fact, to a certain extent automate – the use of resources. It is a vast database comprising all the company’s data. What is important is that it is an integrated tool. It will contain data from all areas of the business – from marketing and sales to accounts and logistics. All staff will also operate using this system. It is therefore a highly advanced piece of software which, in effect, combines many applications that are often used separately. However, thanks to this integration, it is possible to save a great deal of time. No one needs to switch between different programmes to obtain specific information, and the ERP system also facilitates communication between individual departments.
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ERP’s story
It was only with the advent of highly advanced information technology that such systems could be developed, although their precursors were already in use after the Second World War. They were known as MRP, short for Material Requirements Planning. Such a system, which was, of course, analogue, covered to a large extent all the logistics processes within a company, from order volumes and demand, through production itself, to delivery logistics. The advent of computers expanded the capabilities of such systems, meaning that human intervention was no longer required at every stage of the system’s operation. Computers replaced human input in most processes; increased computing power, together with the development of new techniques for creating such applications, enabled the creation of highly complex, multi-functional ‘ERP’ systems.
See also: ERP programmes – examples of software available on the market ERP
What can ERP be used for?
It all depends on the type of business in which the system is used. In reality, it can be very effective in any business; of course, it is important to use it properly. In a manufacturing company, the system can be used to optimise production costs by minimising expenses, increasing automation, efficiently calculating material requirements, further automating processes, and better coordinating machine changeovers, amongst many other areas. Such a programme will also serve to improve efficiency in terms of the company’s financial management. Above all, this is achieved once again by increasing the automation of certain processes. Automation is not merely about replacing human tasks with a suitable computer system; it also means fewer errors and, consequently, reduced costs. Better supply chain management, including warehouse management, is a benefit that is particularly utilised in various types of warehousing and e-commerce operations. Timely deliveries and accurate forecasting of demand for a given product help minimise the time goods are held in stock, thereby reducing the associated costs. However, the ERP system need not be used solely for processes directly related to a company’s internal operations. Among other things, it can also facilitate better customer service. This is because such a system will contain all the necessary information regarding the company’s customers. Every sales representative, marketing specialist or member of the debt collection team will be able to access the necessary information quickly and easily. This enables better – and more systematic – customer service. The system may contain information about a specific customer, including their contact details, a record of all interactions with them, and their orders. All of this significantly raises the standard of customer service.
See also: ERP and CRM – how do they differ?
When should you start using the ERP system?
In fact, the ideal time is when you first start your business. That is when it will be the least time-consuming and resource-intensive. You can enter all the information into the system right from the start, thereby avoiding the risk of anything being overlooked during migration from a number of other programmes. Entering all the information as you go along will also mean you do not have to commit additional resources to implementing such a system. Unfortunately, implementing it whilst the business is already up and running involves either hiring an external firm or working overtime, as it will be difficult to deal with day-to-day matters whilst also transferring all the data to this advanced system. However, such ideal situations are very rare, which is why the reasons why companies decide to implement the ERP system vary greatly.
Outdated software
Unfortunately, not all manufacturers update their software, which means that as the company grows, the software continues to offer the same functionality, which eventually becomes insufficient. This is also often linked to the fact that this software runs on limited systems which can no longer be developed in any way, or where doing so would require resources that are disproportionate to the profits.
A wide range of programmes
The amount of software used within a company can be a problem. The more programmes used, the greater the problems associated with this. Firstly, it takes considerably longer to train new staff, and the process is much more complicated, as instead of explaining how a single system works, you have to explain several. Sometimes it is necessary to export data from one system to another; this cannot always be done automatically, so it causes frustration amongst the team and unnecessarily ties up vital resources.
High storage or production costs
A good system, such as ERP, helps to reduce both of these. More accurate calculations of the required quantities of materials or goods help to avoid unnecessary stockpiling. Calculating the time when they will be needed also reduces stockpiling. More ergonomic storage of items in warehouses also has an impact on costs. Better machine management and measures to reduce energy consumption help to influence monthly running costs. Such a system can effectively monitor stock levels, analyse consumption over different periods, assess the usage of individual pieces of equipment or even specific areas of the warehouse, and thereby increase efficiency.
Manual processes
Unfortunately, many businesses still carry out certain processes manually, although this could be significantly reduced. Such manual work primarily results in the same process taking considerably longer than when carried out by a system. People make mistakes, so carrying out processes manually can also lead to errors, which may, to some extent, affect the company’s costs or efficiency.
Difficulty in finding information
Often, the use of many different programmes or a lack of organisation in certain processes leads to enormous chaos within a company. The consequence of this is a lack of knowledge as to where specific information can be found. As a result, staff have to contact one another every time they need to obtain certain data. The ERP system is a single platform, making it easy to find everything within it; it doesn’t take long to search, so certain processes can be speeded up.
Inefficient software
This is a very common problem, which is often directly linked to the previous point, namely outdated software. The volume of data in such a system grows as the company expands. At some point, therefore, the system may find itself unable to cope with such a volume of data. Of course, it will usually still be usable, but it may, for example, run much more slowly, which affects the ease and speed of work. So rather than making work easier, it will simply be a source of frustration.
Implementation of the ERP system
This is an extremely important stage – in fact, the most important one – as it comprises many elements. To begin with, a proper analysis of the company’s needs is required in order to select a system capable of meeting them. You simply need to know what processes are carried out within the company and what sort of data it collects. All of this will enable you to choose the right system ERP. The next stage is to select the system features that will be required. If a particular feature is not currently being used within the company, it is better to disable it and only implement it when it proves necessary. The next stage involves the actual launch of the implementation and the migration of all data. Depending on the systems involved, this can be a very laborious process. However, it is essential to carry it out meticulously to ensure that all data is transferred to the new system. The next stage involves familiarising users with the system, which means providing appropriate training and assigning them roles. Just because there will be 100 users in the system does not mean that they all need to have the same permissions; each user may have access to a different part of the system. It is a good idea to restrict access so that everyone can only operate within those areas that are essential for their work. This will help to avoid misunderstandings and reduce the time needed to roll out the system. It is also important to carry out an audit following such an implementation, as well as to ensure appropriate IT support from the company responsible for the entire process.
Offline or online: locally or in the cloud
It’s actually difficult to answer that. It depends to a large extent on the nature of the business. If it has a well-established IT department, a local server managed by that department could be a good solution. If, however, the business does not have such a department and outsources all its IT services, a cloud-based solution would be the better option.
Summary
The ERP system integrates key business processes into a single environment. It simplifies data management, automates operations and supports decision-making in companies of all sizes.
The ERP system offers a range of benefits for businesses. It enables efficient business management by reducing costs, automating processes and speeding them up. It is a good solution for companies where the software is outdated, there is too much of it, it is inefficient, or simply where some processes are carried out manually. In each of these cases, it will significantly improve working conditions, as well as speed and efficiency. A single system also means fewer errors and faster access to information. The key is simply to tailor the system to the company’s needs or to select a solution such as ERP that offers the appropriate functionality.
Questions and Answers
What does the abbreviation ‘ERP’ stand for?
ERP This stands for Enterprise Resource Planning, or enterprise resource planning.
What areas does the ‘ERP’ scheme cover?
Most commonly, sales, warehousing, finance, accountancy and production.
Is the ‘ERP’ system needed on B2B?
Yes, particularly where there are a large number of orders and business partners.