ERP is a popular choice for many organizations. But what exactly does it mean? And what qualifies a company to implement ERP? ERP software has become a necessity for SMBs. But knowing that you need ERP is not the same as implementing ERP.
ERPs are characterized by a central database that allows for many different business functions, such as project management and supply chain, to be performed using a single system instead of several techniques, which have little to no communication.
Previously viewed as a tool only for large businesses, ERPs now offer a wide range of options to SMBs - from turnkey systems that are easy to implement and customize for business requirements. ERPs provide excellent opportunities for automating critical business processes and streamlining flows and functions to create a cohesive and unified system.
SMBs are now investing more in ERPs, especially cloud-based ones. Implementing an ERP system is a complicated undertaking that can affect many areas within the company. A carefully thought-out implementation plan is essential for any significant project. Increase your chances of success by dividing your project into clear phases with clear goals.
By contrast, rushing into an ERP project without establishing a clear scope, direction, and structure increases the risk of later encountering significant problems.
What is Enterprise Resource Planning?
ERP is the platform that companies use to integrate and manage their essential business functions. ERP applications can be critical for companies, combining all processes necessary to run the company into a single software system.
ERP systems can integrate many other functions, including planning, inventory management, sales and marketing, finance, and human resources.
Takeaways from the Key Notes
- ERP software integrates all the business processes required to run an organization.
- ERP systems have changed over time, with many now web-based solutions that can be accessed remotely.
- ERP benefits include a free flow of communications between departments, an integrated source of data, and real-time, accurate reporting.
- ERP software is available in hundreds of different versions, many of which can be tailored.
- It can prove ineffective if a business does not implement the ERP system carefully.
Understanding Enterprise Resource Planning (ERP)
An enterprise resource planning (ERP) system can be compared to the glue which binds the various computer systems of a large company. Each department would use its system, optimized to perform its tasks. Each department has its system with ERP software. However, all designs are accessible through a single application.
What Does It Do?
ERP evolved from the traditional software model that used physical client servers, manual entry systems, and cloud-based software to include remote web-based accessibility. The original company manages platforms, and clients rent services from the forum.
Business selects the applications that they wish to use. Hosting companies load the application onto the server that the client rents, then both parties work to integrate client processes and data.
All data collected by the system is stored on the server and can be accessed instantly by those with permission. Clients may need reports with graphs or metrics to help them determine the performance of their business. If the ERP system isn't implemented correctly, a company may experience cost overruns.
Why Is ERP Important?
ERP systems are often called the "central nervous system" of an organization. They provide automation, intelligence, and integration essential for running day-to-day operations. The ERP software system should contain all or most of an enterprise's data to create a single, accurate source of information.
Accounting requires ERP for a quick close of the books. ERP is needed to track all orders. ERP software is essential for delivering the correct products and services on time to customers. Accounting payable requires ERP to accurately and timely pay its suppliers.
To make informed decisions, management needs instant access to information about their company's performance. Banks and investors also require accurate records of financial transactions, and they rely on ERP systems to provide them with reliable data.
Growing adoption rates of ERP software show the importance to the business. G2 reports that "the global ERP software market will reach US$78.40 Billion by 2026. This grows at an annual CAGR of 10.2% between 2019 and 2026."
Enterprise Resource Planning: Benefits
Businesses use enterprise resource planning for a variety of reasons. These include expanding their business, cutting costs, and improving operational efficiency. The benefits sought by companies and the benefits they realize may vary, but some are important.
Increases Accuracy and Productivity
Integration and automation of business processes reduce redundant work and increase accuracy and productivity. Departments with connected functions can synchronize their work and achieve better results.
Better Reporting
Some companies benefit from real-time reporting of data from a single system. Accurate and comprehensive reporting helps companies plan effectively, create budgets, make forecasts, and accurately communicate their operations and state to other parties, such as investors.
Increased Efficiency
Businesses can quickly gain access to the information they need for their clients, suppliers, and partners. It also leads to increased employee and customer satisfaction, faster response times, and greater accuracy.
As the business operates more efficiently, costs are often reduced. ERP software provides real-time visibility, allowing management to make decisions based on the data.
Collaboration Increases
A newly synergized team can increase productivity and improve employee satisfaction, as they can see each group's contribution to the business's vision and mission. Eliminating menial tasks and manual work allows employees to spend time on more critical activities.
What is an ERP Implementation?
ERP systems integrate many business functions, including financial management, HR, sales, and manufacturing. This integration can lead to increased efficiency and productivity. ERP implementation is the planning, configuration, and deployment of an ERP. It is a complex process that takes a few weeks to complete. An ERP system automates and supports many functions.
For a successful ERP implementation, an organization must carefully define its requirements, decide how to redesign existing processes to maximize the benefits of the ERP, configure the ERP to accommodate these processes, and test the ERP thoroughly before it is deployed to the users. Careful planning is needed to navigate all of these steps within the required timeframe successfully. A structured and phased approach to implementation will also help.
What are the Phases of an ERP Implementation Plan?
ERP plans can typically be broken down into six distinct phases, with each stage having a specific objective. The phases can vary from company to company and may even overlap. The lifecycle of ERP phase implementation includes six steps: discovery, planning, development, testing, deployment, and support.
1. Discovery & Planning
What is the initial phase of ERP? It involves selecting and researching a system, establishing a team, defining system requirements, and setting up the project.
Project team members will be responsible for a wide range of implementation-related tasks. These include laying out a project plan, setting target dates, allocating resources, making decisions about product design, and managing day-to-day operations.
A typical ERP team consists of an executive sponsor, a project leader, and representatives from departments who will be using the system. Senior management involvement is crucial to ensure that the project receives the necessary resources and support to introduce change throughout the company.
The team may also hire an ERP partner or external consultant to help design and configure the system. The team should include all internal experts involved in implementing the plan-for example, a member from IT or a writer for customized reports.
The team will have as one of its first goals to understand existing issues thoroughly. This includes process inefficiency and the requirements of an ERP system. The organization may have defined the broad issues, goals, and objectives for implementation if it has developed an ERP Business Case.
These may include a quicker financial close, better insight into the operations, or preparing to go public. They can also be used for more in-depth analysis and documentation and to guide the development of the new system.
As the team understands their requirements, they may choose and purchase an ERP system. The decision to run an ERP on-premises or in the cloud is a major one. In an on-premises ERP system, hardware and software are installed in your company's data center. Cloud-based ERP, on the other hand, is usually accessed through an internet subscription. It can therefore be implemented faster and require fewer IT resources.
2. You can also Design Your Own
Design phase: Based on detailed requirements, and knowledge of existing workflows, a design is developed for the new ERP. It includes creating new workflows that are more efficient and developing other business processes to take full advantage of the ERP system. Users are the best people to have in designing a new system, as they know the current methods the best. By involving them in the process, you can ensure they will embrace the system and make the most of its features.
The gap analysis tool can help identify unique processes and quirks that may need ERP software customizations. It could also require changes in workflows or functions more aligned with the ERP. It is possible to present these gaps to the implementation partner and supplier to ask for potential solutions.
3. The Development of the Developing Countries
The development phase begins once the design specifications are precise. If necessary, the software must be configured and customized to accommodate the new processes. Integration with existing applications may be required. Installing the hardware and software is essential if you use an ERP system on-premises.
Parallel to software development, the group should create training materials to help users adapt to the new system. The team should also begin to plan data migration. This can be complicated because it involves extracting, transforming, and loading data into multiple systems. Each system may have different formats or contain duplicate information. In this phase, the project team must decide which historical data should be migrated. This is to avoid a blanket migration that would likely result in irrelevant data. See below for more information on data migration.
4. Testing
Tests and development can be done simultaneously. The project team, for example, may test specific modules or features, make adjustments based on the results and then retest. It may also test one ERP module while the other is being developed.
The initial testing should include the basics of the software, followed by thorough testing to ensure that the entire system is working. This includes allowing employees to use the system in their daily activities. The testing phase must also include the testing of migrated data and introductory training for end users.
Many vendors will provide pre-and post-deployment training tools. In addition to the vendor's support, organizations should also use training materials developed during the development phase. Resources tailored to your users' daily tasks can be precious.
5. Deployment
You've worked hard to get here: The day the system is launched. Prepare for possible issues. There may be many moving parts, and some employees might be confused despite your efforts to prepare them for the changes. Project team members should always be available to help answer any questions and to explain the new system to users.
They can also try to resolve issues. If necessary, your implementation partner can assist with any troubleshooting. Users may need time to adjust to the new system before achieving productivity gains. Some information can be moved ahead of time. Still, other data- such as current transactions- should be transferred immediately before going live.
Depending on the organization, some deploy the ERP modules simultaneously. In contrast, others concentrate on a few high-priority modules or processes before adding others in phases. Some organizations run their older systems alongside the ERP system for a while to minimize the risk. However, this may increase the project costs and decrease user productivity.
6. Support and Updates
After deployment, you can satisfy your users and ensure the company gets the benefits it wants. While the project team will still maintain the ERP system, its primary focus during this phase is to listen to user feedback and adjust the system as necessary. As new system features are introduced, additional configuration and development may be required. The system will need to be taught to new staff.
You may need to update your hardware and install software periodically using an ERP system on-premises. Your vendor might update your ERP software automatically if you use a cloud-based system.
Read More: Best Practices of ERP Implementation for Successful Deployment
ERP Best Practices
A phased approach to implementation is not enough to guarantee success. In each phase, adhering to the best ERP implementation practices is essential. Best practices in general include:
Do Not Underestimate the Planning Phase: It is tempting to jump into development and design as quickly as possible, but you should not rush through your initial planning phase. The goal of this phase is to create the foundations for the whole implementation process by ensuring high-level support, a clearly defined plan, and adequate resources.
Support and Training are Important: Some project team members may believe that the date for deployment is the endpoint and not pay enough attention to the next steps. For the system users, however, deployment is only the first step. What happens afterward is crucial to the success and sustainability of the project. Planning and allocating adequate resources are essential for technical support, fixing issues, and updating. The end user's training also plays a significant role in this.
The employees must be comfortable with the new system and be familiarized with all of its workflows. This is especially important if there are no outside consultants to assist. Your organization will reap the benefits of your system if you take the time to work on these aspects.
Carefully Plan Data Migration: Organisations often make the error of migrating historical data into the new system. Some of the data in old methods could be outdated or unneeded. Are 10-year-old order records instrumental? Is every company on your list still in existence? It's essential to create a plan to rationalize and clean your organization's data before you transition to an ERP. You should carefully review legacy data, eliminating old customer accounts and checking data accuracy.
Communication: It is important to communicate throughout the entire implementation process. The team must regularly speak to all employees in the company about the reason for ERP implementation. They should also explain the benefits and goals of the project, as well as what they can expect during each phase. Communication is essential in both directions: the project team must listen to users' concerns before and after implementation.
Implementing an ERP system is one of the most significant investments in time, money, and other resources your business can make. It will be only as good as the way you implement it. After your ERP goes live, continue reviewing and optimizing your business processes. This, along with adding new features and functionality as you progress, will allow you to achieve an ERP product that is successful in the long run.
Top Signs that Your Company is Ready to Implement an ERP System
The reconciliation of financials is taking longer at the end of each month. You're relying more on assumptions than actual figures to make sales projections. You are having difficulty keeping up with your order volume; consequently, customer satisfaction has dropped. It isn't easy to know how much stock you have stored in your warehouse. This may sound like you or your company.
There is no one indicator to say, "You must have ERP right now," because every business is different. ERP is an excellent solution for companies that face the same problems. Are you facing similar issues in your company? Discover the five top signs your business is ready to implement ERP.
1. There Are Many Different Software Programs for Various Processes
Think about the way your employees record, track and manage information. Accounting staff uses one system to track receivables & payables while sales enter customer orders using another. Does the manual work involved in taking orders, fulfilling them, and entering them into your accounting system take a lot of time? Are your employees using a different technique to track the shipping and receipt of goods?
It can be a nightmare for your business if you have separate front and back-end systems. Inventory management can suffer without accurate sales data. Not having up-to-date accounting information may harm marketing budgets or payroll.
ERP software integrates all these systems so that each business function can rely on one database. ERP software breaks down information jams by providing accurate real-time information. It also helps employees make faster decisions and gives them more time to focus on high-value tasks like growing the business.
2. The Information You Need to Run Your Business is Not Easily Accessible
How long would it take to figure out your average sales margin if someone asked? How about key performance indicators like sales per month or orders every day? It could take a while for companies who rely on spreadsheets and siloed software that must be updated manually and constantly.
Business is moving faster now than it ever has, so employees need to have immediate access. An ERP system allows executives to get an overview of the company at any given time while giving other employees access to information that will help them do their job more efficiently. Sales representatives, for example, should be able to see a client's complete transaction history. This will help them improve their renewal rate and increase upsell and cross-sell opportunities.
3. Accountancy is More Difficult and Takes Longer
Accounting departments are often the first to notice that ERP software is needed. Consider how much time your staff wastes manually inputting invoices, sales orders, and other documents into accounting systems and sales software.
ERP solutions can have a significant impact on financial reporting. Suppose it takes a long time to reconcile or consolidate financial data across multiple systems and via countless spreadsheets. In that case, an ERP system will make a difference. Accounting staff will not have to waste hours manually cross-posting, rekeying, or reconciling financial data. Accounting staff can be more efficient, allowing them to produce critical reports on time and without frustration.
4. The Customer Experience and Sales are Suffering
Inventory management is one of the biggest challenges companies face as they grow. It is vital to business operations to have the correct product amount at the appropriate location and time.
Separately maintaining sales, customer, and inventory data can cause severe issues for your business. Sales will drop if you are out of stock on a product. If a client calls your company to ask about an order, and you can't find out if the product has been delivered or if there is even a stock of it, it will hurt your reputation as a reliable and efficient service provider.
An ERP system will allow all departments to have the latest information. Reps who deal with customers should be able to answer questions from them about the status of their orders, shipping, payments, and service without needing to call another department. Customers should also be able to view their status online. The warehouse manager can see when stock levels are low and reorder.
5. It's Too Complicated and Time-consuming
The IT management of multiple systems can be an absolute nightmare. It can be costly, time-consuming, and complex to customize and maintain these systems.
Upgrades can cause more problems than they are worth if your legacy software is on-premise. These updates are not only expensive, but they can also be time-consuming. They may undo any customizations made by the IT department. Unsurprisingly, 2/3 of medium-sized businesses run outdated versions of business software.
ERP software can help you respond quickly to business changes rather than adding complexity and more software to an inefficient system. It's essential to choose a cloud ERP solution like Arion ERP.
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Bottom Line
ERP implementation is not easy, but it's necessary for businesses today. Many people who attempt to implement ERP solutions are disappointed in their initial attempts, often due to poor preparation or unrealistic expectations. Get the help you need to start the process and understand your needs.
You can customize ERP software to meet your specific needs without spending money on unnecessary modules. Your expectations and your budget are realistic. Good partners should provide ERP implementation planning and budgeting. If you work with the right team, you will have fewer obstacles to overcome.
