From finance to supply chain operations, explore the benefits and challenges of these transformative systems.
Like a conductor who leads an orchestra, enterprise resource planning (ERP) systems enable companies to manage and synchronize business functions. They create harmony between accounting, human resources, marketing and sales, supply chain operations, and more.
In the past, ERP systems ran on a network of physical servers. Now, digital transformation has brought most functions to the Cloud, leaving some companies in purgatory between physical and Cloud-based servers. As experts predict that late adopters will soon take the leap into enterprise SaaS solutions, this transition could create roadblocks to successful implementation. Such roadblocks could restrict the flow of data between systems, reducing the transparency and efficiency promised by these software systems.
Additionally, competing technologies arrive on the market regularly (and monoliths like Oracle, SAP, and Microsoft continue to iterate their platforms). Businesses today are overwhelmed by the choice, implementation, and management of ERP platforms.
Here’s where a managed IT services provider can help. Combining the business operations and technical expertise needed to implement automations and integrations, build custom software, and solve problems, they can help you achieve the efficiency and scalability that these systems promise—but that, when incorrectly managed, fail to deliver.
Let’s explore the purpose and benefits of a properly implemented ERP system, as well as the value of combining internal and external resources to manage these complex platforms.
Why You Need an ERP System
In an ideal scenario, an investment in ERP implementation yields 24/7 visibility into a company’s critical functions. The system collects, stores, and transfers data seamlessly, which enables better and faster decision-making, streamlines operations, and drives growth across business areas.
One of the world’s leading ERP systems, Oracle Netsuite, lists 13 common ERP modules that enable companies to manage enterprise functions:
Finance
Streamline financial processes by automating accounting, budgeting, and financial reporting, ensuring accuracy and compliance.
Procurement
Facilitates procurement through centralized vendor management, purchase order automation, and real-time tracking, optimizing the procurement lifecycle.
Manufacturing
Manages production schedules, resource allocation, and quality control, fostering efficiency and reducing operational costs.
Inventory Management
Offers real-time visibility into inventory levels, demand forecasting, and order fulfillment, minimizing stockouts and excess inventory.
Order Management
Coordinates order processing, from order entry to fulfillment, ensuring accuracy, reducing order-to-cash cycles, and enhancing customer satisfaction.
Warehouse Management
Optimizes warehouse operations by automating tasks, managing inventory movements, and providing insights for space utilization and order fulfillment.
Supply Chain Management
Integrates supply chain functions, offering end-to-end visibility, improving collaboration with suppliers, and enhancing overall supply chain efficiency.
Customer Relationship Management (CRM)
Centralizes customer data, streamlining sales, marketing, and customer service for a holistic view of customer interactions.
Project Management
Aids project management by tracking project timelines, resource allocation, and budgeting, ensuring successful project delivery.
Workforce Management
Assists in workforce management by automating HR processes, managing employee data, and optimizing workforce planning.
Human Resources Management
Centralizes HR functions, including payroll, benefits administration, and employee records, fostering HR efficiency and compliance.
E-commerce
Integrates e-commerce platforms, managing online orders, inventory, and customer data to provide a seamless online shopping experience.
Marketing Automation
Supports marketing efforts by integrating customer data, automating campaigns, and providing analytics for targeted and effective marketing strategies.
Think again of the conductor and their orchestra. They must be able to coordinate each section of instruments, including woodwinds, brass, strings, and percussion. Each section contributes something different to the performance. And, each musical note is a piece of data that, when played correctly, becomes a beautiful and harmonic product.
Similarly, when an ERP technology system is effectively managed, it connects different business operations, creating a full picture of what’s happening within the organization. Instead of musical harmony, the product of a successfully managed ERP is revenue.
Benefits of an ERP System
When successfully implemented, an ERP system can enable companies to achieve operational excellence. In fact, businesses cited reduced process time, increased collaboration, and centralized data as the top benefits of an ERP system. Additionally, an ERP system can reduce costs and improve data integrity across an organization.
Streamline Processes
On a high level and across business functions—including accounting, sales, supply chain operations, or human resources—ERP systems can streamline processes. This is measured through enhanced performance metrics and analytic capabilities, and improved efficiencies in business transactions.
The ERP itself reduces data fragmentation and improves data quality, enables task automation and real-time reporting, and delivers performance metrics and analytics. These benefits are so profound that a staggering 95% of businesses report that ERP implementation led to process improvement.
Reduce Costs
While ERPs are a necessity for modern businesses, they come at a cost. For companies with revenue up to $1B, the cost of owning a system is approximately 3-5% of annual revenue (AR) and takes 7 months to implement. For companies with revenue above $1B, that percentage decreases to 2-3% of AR, but the implementation timeline increases to 12 months.
Because an ERP is such a significant investment, the ROI of the system is top of mind for company leaders who are tasked with implementation. They need a solution with a relatively short time-to-market, that is scalable in the short and long term, and that can be a catalyst for company growth and performance.
It may seem counterintuitive to say that an ERP can save money when the cost to own it is significant. However, these systems can predominantly produce ROI in these three areas: Reduced IT costs, reduced inventory levels, and reduced cycle time.
Improve Data Integrity
ERP systems handle vast quantities of data and complex workflows by providing centralized databases, ensuring real-time data access, and optimizing workflows. This allows enterprises to efficiently collect information and extract insights, automate routine tasks, and enhance overall productivity. Additionally, the integration of artificial intelligence (AI) in ERP systems can further improve data quality through predictive analytics, automation of repetitive tasks, and intelligent insights.
Businesses benefit from data enrichment in their ERP system with improved customer experiences, streamlined operations, and targeted marketing. For example, a manufacturing company might leverage enriched data to optimize supply chain logistics, leading to cost savings and increased efficiency.
In an ERP system, data is collected from various departments and consolidated, which enables companies to standardize format and ensure data accuracy. This results in a unified and enriched dataset, providing valuable insights for informed decision-making.
This is most critical for large enterprises, as managing ERP operations for these companies creates complex challenges. These include extensive user requirements, governance and regulations, diverse modules, and integration with existing systems. Coordinating these aspects within a framework of scalability and flexibility adds new layers of intricacy for enterprise businesses.
How to Manage an ERP: Internal vs Outsourced Support
Successful implementation and management of an ERP system can be a costly effort, both financially and in human capital. With a single IT employee costing more than $100,000 per year in salary alone, companies whose budgets are stretched thin and projects are piling up may find that they aren’t able to prioritize and properly manage their ERP.
Additionally, while a team of engineers may have the technical expertise to manage an ERP, they may lack the knowledge of business processes needed to align the technology with business requirements.
Benefits of an ERP Solutions Provider
Managed IT services providers who offer consulting and professional services possess the business knowledge and technical expertise to support internal IT staff and implement ERP solutions that are strategically aligned with business needs.
Comprehensive Services
These providers typically offer end-to-end services, strong domain and digital migration expertise, and technical full-stack services for ERP platforms. They create custom software solutions and provide troubleshooting, support, and problem resolution, releasing the pressure companies feel to achieve a major technical lift with finite resources.
Better Outcomes
As a result, companies that combine internal IT resources with external consulting and support see better outcomes than those who rely on an internal team alone—which, in addition to sacrificing quality, can also lead those IT employees to burnout.
Cost Effectiveness
For companies that exceed their budget during ERP implementation, the primary reason is an unforeseen expansion of their initial project scope. Whether a company is undergoing a data migration from physical servers to Cloud software or simply customizing a few elements of its platform, project scopes can always evolve and grow. This is why it’s key to work with an external solutions provider that prioritizes transparency and flexibility in pricing.
The Future of ERP
ERP systems are growing faster than ever, and the longer companies wait to adopt and optimize these technologies, the greater the lift will be to create a successful solution. Cloud-based platforms, mobile accessibility, and modular architecture characterize modern ERP systems, providing flexibility and scalability for businesses that have made ERP a pillar of their growth strategy.
AI in ERP Systems
As the future of ERP technology unfolds, companies will likely see increased integration of artificial intelligence (AI) for predictive analytics, automation, and machine learning.
AI-driven insights will optimize decision-making processes, enhance user experiences, and refine workflows. The impact of AI on ERP is poised to revolutionize how businesses operate, which will only increase productivity and competitiveness.
Agility and ERP Maintenance
As companies maintain their ERP systems and adapt to changing business needs, updates to their technologies should never be a set-and-forget policy. Working with a trusted ERP solutions partner and augmenting internal IT staff can ensure compatibility, secure implementation, and access to new or customized features.
A Strategic Approach to ERP
By embracing continuous learning, technology adoption, and external IT support, companies can maximize the benefits of their ERP systems and increase operational efficiency, streamline processes, reduce costs, and improve data integrity across their business functions.
Boston SoftDesign is a managed IT services provider turning business challenges into digital solutions, built on tech and powered by professional expertise. We can help you navigate changes to your ERP system and translate your business needs into custom software solutions. Click here to learn more about our ERP Solutions.
