I have been working with ERP softwares for more then 10 years. I have been supporting users using them, implementing them as a consultant, developing them, building integrations into them, doing pre-sale demos to customers to sell them. I have both experience as a business consultant trying to fit customer business into the ERP and as a developer doing extentsions, add-ons etc. to the ERP.
So here’s some of my thoughts on the subject of ERP.
What it is and what its not
ERP (Enterprise Resource Planning) software is essential to almost all businesses from a certain size. It helps to manage the companies core business processes such as accounting, controlling, logistics and manufacturing and many more. There are the usual large vendors such as SAP, Oracle, Microsoft and many other smaller ones.
ERP is a software that contains set of standard processes to manage business activities. Emhpazise is on the standard.
ERP is not a tailor made software for some particular company but its a fit-for-all solution. It contains or atleats should contain industries best practises in its processes and it should be customizable to some extent. But this means that rather then taking the ERP and trying to make it fit for the companies processes by changing it you should consider rethinking your companies existing processes and try to fit these into the ERP and change them if needed.
The perfect scenario with ERP
In theory ERP software is great since it should integrate every process and every person in the company into one unified system.
When a customer comes to companies website and fill’s out a contact form with her details then a lead and a sales opportunity is created in the ERP system’s CRM(Customer Relationship Management) module. From the the sales representive can take the lead and contact them and and create a quote and submit it to them. If things go well then the quote can be converted into a Sales Order.
After the creation of the Sales Order MRP(Material Resource Planning) calculation process is triggered and system calculates of how much and when to produce and how much and when to purchase to be able to produce on time.
Then the Purchasing people will get purchase requests and can combine them and create RFQ’s(Request for Quotes) and send them to suppliers. Quotes will be compared and Purchase Orders sent to the selected supplier(s).
Finance department will benefit from many automations that comes with this kind of integrated system.
When one piece of raw material is taken from the warehouse bin to be used in manufacturing process then the warehouse value is credited by the cost of the raw material and work in progress warehouse value is debited by the value of the raw material. When the finished goods is finally produced the system takes into account all the raw material costs and the labour costs and tell exactly how much this piece of product cost to produce.
All the financial and other data is in one place, one source of truth and accessible when needed by who ever needs it.
The above is the perfect scenario where everything works together well. This is probably the situation where companies implementing ERP systems strive to. But its not that easy to accomplish.
Why to implement ERP
The exacts reasons why business choose to implement an ERP is always different but I think the below points are some of the common’s that usually make businesses to realize the need.
- Get rid of many different softwares and replace them with single software
- Consolidate and digitalize all business processes under one umbrella
- Be audible
- Collect business data
- Get insights from data
- Standardize proccesses across the company
- Make processes more efficient
Problems with ERP’s
Most if not all ERP systems are well designed and can accomplish everything and much more that is described above. But still its well known fact that actually implementing and using an ERP is pain and the projects ofter fail and it does not deliver the value expected.
In my experience the main problems with implementing ERP systems are not understanding exactly what it is and what its not, why to implement it and how to implement it.
Key to successful implementation of an ERP
The key to successful ERP implementation is the company management or owners to sell the idea to the all key people in the company and have them on board. Having everybody agreed on the need to implement ERP and commit to the success of the project is more important then the selected software, the implementation partner and so on.
If the head of accounting is not hundred percent commited then the project will not be successful no matter how hard everybody else will try.
If the production manager doesn’t see value coming from an integrated system then it will be very difficult to implement manufacturing processes in the ERP and without manufacturing processes all other connected areas are also more or less useless.