26 Jun 2022 9 MIN READ
News and articles

What is ERP and how to get the most out of system implementation?

ERP (enterprise resource planning) is an enterprise resource planning software that helps you control internal processes and make important business development decisions in real time.

Prerequisites for creating ERP systems

For the first time, such systems appeared in the early 90s of the last century as a market response to complication of internal processes and the need for a balanced and integrated management of all company resources. Industrial enterprises were the first to use them, and soon, having proved their effectiveness, ERP systems began to be actively used in the service sector, government agencies and non-profit organizations.

More than 30 years have passed, ERP systems have become a key management tool and continue to be actively developed and used by tens of thousands of companies in various fields.

The volume of the global ERP software market per year is more than 25 billion US dollars and is growing by 10-20% annually. (source: G2)

Do ERP systems really play an important role in development of companies? Does your business need such a planning system? And how to get the most out of its implementation – let’s look into these issues further on.

 

How does an ERP work?

Overall, an ERP system is a set of individual modules that are linked and integrated with each other. Each of these modules is responsible for a specific area of business: finance, production, HR, marketing and sales, planning, purchases, logistics, and others – we will discuss the benefits of individual modules in more detail below.

ERP, like the central nervous system, collects signals and information from all parts of the body, that is, the enterprise. Moreover, the ERP system, like the central nervous system, is developing, and the functionality of its modules is constantly extending.

The Importance and Relevance of ERP Implementation

The basic principle of ERP is centralized collection of information. All data is in a single repository, which allows all users – from the CEO to accounting staff – to store, create and use the same up-to-date enterprise data. That is, if now a company uses separate databases for monitoring warehouse reporting, order processing and accounting while using a large number of unreliable spreadsheets, ERP would combine these processes into a single and understandable flow of information.

In today’s dynamic marketplace, having flexible and secure software that allows you to make quick decisions based on detailed analytics is essential.

It is also critical to understand: if your business is aimed at international business practices and convenient interaction with progressive market players, quitting the use of outdated and unreliable systems is the main step towards security and smart scaling of your business.

Main benefits for your business

  • Holistic view and deep understanding of the current situation: decision makers have a single and reliable source of information coming from all the “arteries” of your enterprise. AI-powered analytics will help you quickly get answers to critical questions, recognize warning signs in a timely manner, and look at every part of your business in as much detail as possible.
  • Increased productivity: Business process automation allows you to use the time saved by your employees for other tasks.
  • Better customer interaction: A centralized data warehouse provides all the necessary information about the customer base, which simplifies communication and reduces the time spent on customer service. Accurately collected and analyzed customer interaction data will help you optimize your strategy and be more accurate in forecasting demand.
  • Data security: A large number of separate systems for processing information carries great risks. A single, secure data center keeps your customers’ and employees’ personal data, as well as financial data, safe from unwanted threats.

Benefits for individual business components

ERP helps to break down barriers between individual sections of the enterprise and organize a single control and planning center. Below we will briefly describe what modules Microsoft Dynamics 365 Business Central (formerly Microsoft Dynamics NAV) includes:

  • Finance management

ERP automates the process of financial accounting in accordance with international and national standards. The system enables to plan budgets, control their implementation, as well as generate regulated and financial reporting.

  • Sales and marketing

ERP makes it possible to build a sales process, from managing prices and goods, to generation of documents on sales and shipment from a warehouse. In the marketing module, you can build personalized customer journeys based on the accumulated information about the customer and artificial intelligence tips.

  • Purchasing and payables

With regard to the purchasing process, an important emphasis is that the system allows you to plan the supply of goods in accordance with the needs of production and consumer demand.

  • Supply planning and availability

ERP offers functionality for planning routes and delivery times based on analysis of production needs, own consumption and sales forecasts.

  • Project management

Planning and accounting for project implementation, project resource planning.

  • Service management

Management of service requests, scheduled service, organizing work of field employees.

  • Warehouse management

Module for optimizing and automating warehouse management. The complex chain of goods distribution in the warehouse is broken down into smaller operations and tasks performed by specific users with control over the implementation of these operations.

  • Manufacturing

The main tasks of ERP in the production process are reasonable resource planning to meet current demand, control of the production process, quality management, optimization of production costs, as well as generation and calculation of the end-to-end cost of a product or service.

How do you know when it’s time to implement ERP?

With the development of the enterprise, its management processes become more complex, the amount of information that is the basis for decision-making is growing, and business processes that previously took a minimum of time require more attention and new progressive solutions. Based on the experience of global companies, we can highlight the main signals about the need to implement ERP:

You do not have enough data to make informed management decisions
The randomness and lack of information leads to erroneous decisions that result in financial losses.

You want to standardize your production processes
Due to standardization, production processes begin to work more correctly, which in turn affects the quality of the end product. Standardization of services makes them more accessible to the end user.

You are using outdated systems
The use of outdated and unreliable systems hinders the growth of your business and does not adequately protect your data. If you use spreadsheets, there is always a high possibility of human error. In the era of digitalization, this approach significantly hinders development.

How to get the most out of ERP implementation?

If a company has non-standard business processes that need customization, you should be ready for long-term ERP implementation (which may imply months).

According to a report by FinencesOnline, 69% of companies called the procedure for changing processes associated with the implementation of ERP difficult; 17% – neutral; 14% – very difficult; companies that found the procedure easy – 0%.

If we talk about the effectiveness and meeting expectations, the results of research by Panorama Group suggest the following data: approximately 53% of companies are completely satisfied with the ERP implementation process; 38% rate their experience as neutral; 7% are dissatisfied; 2% are very dissatisfied.

It is important to understand that implementation of ERP is a gradual, complex and cumbersome process, and the cost of ERP must be justified. Successful integration requires careful preparation, a detailed analysis of a specific business, and reasonable adjustment of each of the system modules to the company’s business processes.

Here are a few principles for a successful ERP implementation:

  • Expertise

Finding a reliable and competent partner is key to successful ERP integration. Experience, understanding of processes and implementation expertise for different businesses are what you should pay attention to when choosing a contractor. A good partner not only fulfills the customer’s requests, but also advises on organizing business processes based on the experience of hundreds of implementations.

  • Involvement

The emergence of an ERP system will lead to changes in all departments of the organization and will correct the already familiar processes. It is important to convey the purpose, benefits and necessity of these changes to each employee. By building a common understanding and communicating your vision, you will make the implementation process more efficient and clear to everyone.

  • Planning

It is important to plan a realistic and phased implementation schedule. ERP is too voluminous and covers so many aspects of the business that it is almost impossible to do everything in one go. So, for example, among a number of methodologies, Sure Step is distinguished as a comprehensive, transparent and phased implementation methodology.

  • Training

The big mistake with ERP integration is that not enough time and effort is dedicated to staff training. Adapting to a new system that completely changes processes is not an easy task. Take care of the necessary amount of resources for training your employees. And remember: it is better to make mistakes during training than while performing real tasks.

And most importantly, be patient and always remember that the hard work and energy expended on implementation of complex solutions will eventually be converted into additional profit and new opportunities for your business.

Summary

ERP is a powerful tool to intelligently plan and manage your company’s resources. The system automates and optimizes the main business processes, helps to make decisions based on detailed analytics and creates favorable conditions for enterprise scaling.

Implementation of ERP is a serious step that requires careful preparation and significant resources and will certainly bring the desired results with the right approach. And remember: none of your systems will tell you it’s time to replace it. Realizing that your business needs modern solutions and updates is half the way to implement them.

X

Please fill
in all the fields.