ERP (Enterprise Resource Planning) is a set of integrated applications that a company uses to aggregate its activity across its different services, so that everyone works with the same data and the same processes.
Businesses use ERP to streamline and improve the efficiency of their operations, saving time and money. As part of an ERP deployment, they can also standardize and automate many business processes, eliminating the time and effort associated with manual intervention.
The ERP tools a company selects often depend on the specific processes they want to improve, but also on what they sell: products or services.
Companies that market products often have manufacturing, supply chain and distribution functions that an ERP system will manage. In the case of service providers, specific ERP capabilities are particularly important. This will be the case of a project management dedicated to the degree of involvement in the services, or the support of on-site services and commercial operations.
The most common ERP components
Although business needs vary widely, they all want the same set of core ERP components:
To record, track and consolidate business and operational information within a centralized accounting system. Financial ERP software offers this possibility through the following centralized systems: general ledger, accounts payable, accounts receivable and payroll management.
ERP software provides a centralized human resources (HR) management system. It tracks employees’ work time and company-wide performance assessments, as well as managing the various social benefits, staffing and talent development.
Purchasing / Procurement
A purchasing module streamlines the procurement process, from issuing purchase orders and managing suppliers to payments and reporting. In addition, purchase ERP software automatically escalates purchase order approvals and payments to the relevant decision makers in the enterprise.
Increasingly, companies are demanding analytic solutions that enable them to evaluate and manipulate business information. To do this, ERP vendors provide predefined reports that companies use to evaluate their business and operational activities, and that allow for data mining and custom reporting.
Customer Relationship Management (CRM)
The ERP CRM Brick is a central repository of customer information that business-wide departments have access to and can leverage. This repository includes information on the interactions between the company, its partners, customers and prospects. It also tracks all of these interactions across customer-facing services, such as marketing, sales, and services. CRM ERP includes sales force reporting, monitoring and automation, marketing, services and support.
ERP for the product-oriented enterprise
While the components below remain fundamental, they are more relevant to the specific needs of some companies, including product-oriented companies.
By encompassing not only the internal operations of the enterprise, but also those related to business partners and supply chain suppliers required for the production of goods (raw materials, stock and supplies), an ERP system for production offers to the company a particularly desirable visibility on its manufacturing processes.
Distribution / warehouse management
ERP distribution and warehouse management systems use automation. This allows the company’s sales force to integrate customer orders and quotations directly into back-end accounting, processing and inventory management systems. The company is thus guaranteed to see the orders processed on time.
Many ERP distribution systems also include comprehensive warehouse management functions. These ensure that the stock of these is optimized to meet the requirements of the company’s supply chain.
An inventory management system optimizes inventory consumption and storage. It provides both manual and automatic inventory forecasts. Companies can set ordering policies for both assemblies and separate parts.
The software also generates reports on inventory exceptions and potential over-supply situations. It also makes it possible to follow the inventory at the scale of several sites.
ERP for service management (and one-time projects)
Another type of ERP candidate is service management firms – or ad hoc project managers. Some fundamental components also focus on their own characteristics.
Management of ad hoc projects
ERP project management software includes a comprehensive dedicated function that supports contracts, tenders, resource planning and multi-level job distribution structures.
This type of software also provides visibility into all resources consumed by the project (for example, assets, inventory, materials, and labor). It allows accurate and timely billing of project costs across the lifecycle of the project. Companies can track the profitability of the project and control margins running. Managers optimize project performance and ensure that Key Performance Indicators (KPIs) are met.
An ERP solution for services optimizes, tracks and manages on-site intervention functions are billable, or by professional service providers. This type of solution can also be used to evaluate customer satisfaction levels and service level agreements, as well as the guarantee and performance of a contract.
ERP marketing methods
Companies can acquire ERP as a complete family of solutions, or a smaller family of solutions, which can then encompass only financial systems – or just financial systems and dedicated to manufacturing.
Companies can also purchase a full ERP, specifically tailored to the needs of a given vertical sector, such as the building or food industry.
ERP is also available in different implementation styles.
A company can buy ERP software; then it’s up to the IT department to run it on site in the company’s datacenter. Alternatively, a company can subscribe to an ERP solution that the provider runs as a service in its Cloud (SaaS). The company may also choose to have an ERP system hosted by the provider or partner, but on which its IT department will retain some control (Hybrid Cloud).
In other cases, companies take a “hybrid” approach to ERP, choosing for this purpose to have some systems internally and others in the cloud.
What current companies expect from ERP
Recognizing that an ERP system provides a single repository for enterprise-wide, publicly accessible data, it mitigates the risk of operating with disparate systems and data; for example, potential errors or duplicate business functions in different services.
Large companies in particular have many different systems installed independently by separate services. They therefore want to implement a single ERP system that will replace these existing systems, and take advantage of them to eliminate the delays and operational inefficiency that have developed over the years.
If mid-sized companies also claim these benefits, they also want a way to level the playing field they face their larger competitors. These companies may tend to retain an ERP system that can evolve to cover more business processes as they grow.
With cloud offerings, even small businesses can afford an ERP system that will make their business processes instantly more efficient; a type of system that they often have difficulty putting in place due to lack of resources and internal expertise.
Finally, many companies, regardless of their size, are looking for an ERP system specifically tailored to the needs and requirements of their respective sectors. Several ERP providers offer this vertical specialization by sector.
The challenges of ERP implementation
The challenge for companies implementing ERP software is to select from the wide variety of options on the market the system best suited to their business needs and user expectations.
An ERP must integrate effectively with the systems and operations already in place in the enterprise. It must also deliver the promise of key performance and profitability targets inaccessible to existing systems. And the challenge is daunting.
This is also why ERP has a higher failure rate than any other software. If the installation does not go as planned, an ERP project can end the careers of many managers.
Whether it’s an internal ERP champion / user, a CFO, an operations manager, a manufacturing vice-president, or anyone else, it’s important for the decision-maker ERP to find a partner of the domain able to work with him to the provision of this new system in terms of installation, integration, consultation, training and support.