You probably know what enterprise resource planning software is if you are a finance manager or business owner. It is a single database that integrates financial, supply chain, and customer service data. ERP implementations often deliver a quick return on investment through insights and efficiency gains that can save money.
But How can companies use these various ERP modules to reap the benefits? How does the ERP system help businesses succeed? We will discuss common ERP use cases and explain how each module helps different aspects of a business.
1. Inventory Management
Before: The operations team at a retailer relies on physical counts to determine current inventory levels. This spreadsheet is kept by the team. Warehouse workers lack confidence in this information and products are frequently out of stock as the company orders more products when shelves are almost empty. Because warehouse workers often have difficulty finding the items they need, fulfillment is slow and inefficient.
After: A module for inventory management is added by the retailer. This displays inventory levels in real-time and provides updates on stock being shipped to the warehouse. An operations manager can compare inventory levels to sales data every morning to decide whether or not to place purchase orders (POs) for the business. The inventory management software shows all the items' exact locations so that the warehouse team can fulfill more orders every day.
Manufacturers spend too much time searching for suppliers and getting quotes for raw materials. A worker must manually send out quotations, compare them, choose a winner, and then submit a PO. The process can be slowed down further by staff forgetting to update the list of approved vendors and contact information.
A purchasing module allows the manufacturer to automate requests for quotes, store all responses in one place, and send POs in just a few clicks. This saves a lot of time. The module's purchasing (or procurement), keeps track of the status of any outstanding POs and maintains a current list of all suppliers.
3. Marketing and Sales
An experienced sales team from a distributor of mid-sized products has become increasingly frustrated by the effort required to create sales orders and quotes. Reps have difficulty keeping track of which prospects are currently in the pipeline and which customers need to be reordered. Although the business wants to reach more potential buyers, it doesn't have the ability to manage its marketing email contacts or digital ads.
An ERP application for sales or marketing allows reps to quickly convert quotes into sales orders and send customers system-generated invoices. Sales and marketing teams can view where each customer is at any stage of the sales cycle so they can determine the best next steps. The distributor can import prospects and target them with email and ads through multiple channels using marketing tools. This leads to an increase of 10% in annual revenue.
A small manufacturer used spreadsheets and paper to track available raw materials and production numbers for its first few years. As the business grew, these manual methods became a major obstacle. It lost production time due to running out of raw materials and can't calculate current manufacturing capacity.
The manufacturer can view the planned production over the next few months, and compare it against the available and on-order supplies. The module allows the manufacturer to track output against this plan and, should demand increase, can scale up by ordering additional materials or bringing in more employees.
5. Financial Management
A direct-to-consumer brand (D2C), which focuses on customer service, has a customer relationship management (CRM), and marketing automation platform. However, it still relies upon online banking tools and a variety of spreadsheets to manage its finances. Not only is it time-consuming but also a poor way to gain insight, which has led to the company being in difficult financial situations several times.
The brand purchased a financial management module to automatically record all AR and AP transactions and manage the general ledger. The company now has better control over cash flow and expenditure. This module simplifies the job of the accountant by creating key financial documents such as balance sheets, cash flow statements, and payment receipts. The system uses artificial intelligence (AI), specifically machine learning, to flag possible errors and fraudulent orders by comparing transactions with thousands of similar entries.
6. Customer Relationship Management (CRM).
An industrial distributor experiences revenue stagnation as it faces increasing competition. The distributor wants to find new clients and upsell potential with its existing clients. However, data is inconsistent and incomplete on these groups.
A CRM ERP module is purchased by the distributor. The CRM generates a notification to allow sales reps to follow up with prospects or customers who fill out forms on the website. The CRM consolidates all customer purchase history, which allows the business to target customers with relevant products. Customer service agents can quickly resolve issues or questions customers may have about a product because they can view all interactions with them.
7. Supply Chain Management (SCM).
The retailer is experiencing rapid growth and struggles to keep up with an increasing volume of orders. Items often ship late and there are many returns. The company does have order management and inventory solutions but it is becoming increasingly difficult to track all POs, orders from customers, and shipments.
The retailer can use a supply chain management module (SCM) to organize their purchase orders, track current production and compare it against demand. Orders can also be prioritized based on when they were received by the warehouse. The SCM application allows customers to return their products by scanning them, recording the condition, and initiating an exchange. As sales increase, the business is better positioned to scale.
8. Human Resources Management (HRM).
The company started out as a small family business and has seen its headcount double in the past three years. Although the company uses a basic system to allow employees to clock in and leave, the owners now dread paying payroll as it is so time-consuming. Some of the employee information is out-of-date and is stored in a spreadsheet.
A small business buys an HRM ERP module. The module automatically generates paychecks every 2 weeks. The owner only needs to check them for accuracy. This makes payroll easier and faster. It stores all employee records, including contact information and tax documents. The software also guides employees and managers through the annual performance review process. HRM software allows you to personalize training and onboarding for new employees to help them get up to speed quickly.
Five Key Components to HRM Success
Here are some ways to get the most out of your purchase of a human resource management system.
If your IT philosophy is forward-looking, you should look into systems that can use predictive analytics and machine learning now. The faster you feed the system data, then the better.
Different HRM systems are different in their ability to excel in specific areas. Are you experiencing a lot of turnover in your organization? Look closely at your candidate management abilities. Are you managing a multi-state workforce or a national one? You need to ensure that the system is capable of handling complex payroll situations.
For a full ROI calculation, you need to focus on more than just the day-to-day functions. You should also consider how the system will help retain talent and free up HR staff for value-added tasks.
Self-service is a must. An HR specialist doesn't have to help a manager with the routine update of hours worked or assist employees in accessing forms such as W-2s.
Use the human capital management (HRM) and development capabilities to their fullest extent. An HRM can help HR create a learning curriculum, career paths, and mentorships.
9. Project Management
Although a small consulting company has a basic accounting system in place, tracking the costs and resources of individual projects is becoming more difficult with increasing clientele. It is not an easy task to find all of this information. Consultants end up helping calculate project costs. Customers discover errors in bills or bill payments are sent late. This can cause cash flow problems and a lack of confidence.
This information is tracked by the company's project management ERP module. The module not only shows the status of the projects but also tracks the hours worked, travel expenses, and communications with clients. The project management software automatically generates a bill for a project that has reached a milestone and sends it off to the client.
10. Compliance Monitoring
A manufacturer employs a two-person accountant team. However, the company soon realizes that it will not be able to comply with a new accounting standard in six months. Soon, the company realizes that this is a large project and it will require more work than the small accounting team can handle. So they hire an outside firm. The audit process is still a touchy-feely affair.
In the next year, the manufacturer will trade in its entry-level accounting software for a more robust system that includes compliance monitoring. The software keeps the business updated about changes to industry or local regulations, as well as new international standards like IFRS 15. It links all transactions to relevant records, making it much easier to prepare for an audit.
11. Asset Management
Major funding round has just been completed by a technology startup, allowing it to hire more people and expand its office. This means that the company will need more furniture and monitors, computers, and other equipment to accommodate each employee.
The startup can manage their physical assets throughout their lifecycle, from purchase orders through depreciation and retirement. It maintains records that track the cost of IT equipment and office supplies over time, for reporting and compliance purposes. It is responsible for lease payments, amortization, and other reporting in order to meet lease accounting and tax standards.
A B2B distributor who has been selling exclusively to retailers for many years realizes the potential of D2C eCommerce. A few employees are asked by the company to create a strategy for D2C and decide which products they will sell online.
To transform its informational website into an online shop that can accept transactions, the distributor adds an e-commerce ERP module. It has user-friendly tools that enable the marketing team to quickly list new products, modify product content, jump on e-commerce trends, and update the site's appearance. An e-commerce platform that is integrated with the ERP eliminates the need to integrate third-party solutions such as order and inventory management software or CRM. All order, customer, and payment information flow directly into the ERP.
13. Business Intelligence
Software companies use an ERP system to manage their accounting, marketing, sales, customer service, and human resources. This data is extremely valuable, but the company must be able to present and manipulate the information in order to raise new funding.
Software vendors add a business intelligence module to their software that converts data into charts and graphs, making it more accessible for potential investors and executives. This tool can help identify the most profitable industries for its software or to understand the market potential for a new product it is considering. Business intelligence applications can use AI to predict future financial performance using both internal and external data.
14. Multiplier Effects
A company that integrates multiple modules can gain automated reporting and IT optimization advantages greater than the sum of its parts. If CRM and e-commerce can be connected, an e-commerce site might show personalized product recommendations or even a personalized homepage based on the visitors browsing or purchase history. This could improve conversion rates and average order value. Integrated HRM and SCM modules can be used to track how many orders each employee fulfills per hour or day. This data could be pulled up by the employee's manager as she prepares to present her performance review. She can then show her department head that the employee is exceeding expectations and why she deserves a raise.
Many companies are aware that their warehouses are not efficient or that closing the books takes too much time, but they don't know what the problem is. Reporting can often help leaders identify the root causes of problems, such as inefficient business processes.
The more ERP modules that are used, the more data available and the stronger the insights. Each module should be able to report on the specific aspect of the business such as HR and supply chain. Reports can be very broad (How did expenses in March compare with those in April?) You can also be very specific (What was the average order price of Texas customers last week?) Make sure that reporting is easy to customize and simple when you are looking for an ERP solution.
Companies that have disparate systems across different business functions and departments struggle daily with manual work, duplicate and inconsistent data, and other inefficiencies. This visibility is gained when organizations adopt multiple ERP modules that plug into a single database. Leaders can see a complete picture of the company's current status. A unified system reduces IT staff pressure, eliminates data accuracy problems, and allows your company to scale without increasing headcount.
Disconnected systems and entry-level employees also reduce visibility within the organization. The operations department is not able to find out about a marketing promotion that will cause a spike in order.
Multi-systems can also make it difficult to keep users and IT informed about all technologies. This increases IT operational costs. Upgrades can also be a hassle. If one app is "connected", it can have a domino effect on other apps that may need to be updated.
15. ERP System Benefits
Businesses of any size and in all industries can save time and money by using an ERP system. Because it eliminates manual tasks, automation is a key source of time and cost savings. This allows employees to concentrate on their work and saves them money. Employees can spot potential errors and fix them early, allowing them to avoid bigger problems later.
Although ERPs can't automate certain tasks, the system provides comprehensive information to decision-makers that allows them to make faster and more informed decisions and improve business processes. Employees can access all the data and reports they need, from basic financial information like customer records to more sophisticated tools that use AI to optimize production and demand planning, so that they can make better and more informed decisions.
The software also ensures compliance with all local, national, and international regulations. This is crucial for a company's long-term success.
Cloud ERP is a great option for companies looking to grow their business. It offers many benefits and advantages that are unmatched by on-premises systems. Cloud ERP handles all maintenance and updates, which are included in the annual subscription fees. The system also scales easily as the company grows.
It is crucial that every employee has access to accurate information from an ERP. It is a must-have tool in today's highly competitive environment.