ERP SOFTWARE: AN ESSENTIAL CATALYST FOR GROWTH

ERP implementations are world-renowned for their inherent implementation challenges, technological complexities, and escalating costs during implementation. Analysts often debate the benefits of ERP system over the amount of effort and cost an ERP implementation requires.

Despite some odds against ERP, due to numerous tangible and intangible benefits of ERP software (even with slightly high costs), not only large companies but even small and medium-sized companies invest in ERP system implementation.

Managing Information – The New Big Business Challenge

Until long after their establishment, companies often work on paper-based management systems such as books or records, Microsoft Excel or, in extreme cases, some locally developed custom standalone software, which often costs a penny compared to the cost. of ERP software. For a small business or start-up, this is effective both in terms of cost and management needs. However, as businesses grow and expand to new locations, units, or subsidiaries, these low-cost arsenals often refuse to solve the new information management problems that come with economies of scale.

In real life, the daily struggle of an adult company is mostly centered around managing monstrously growing information, whether it’s financial transaction data, inventory data, production information, supplier data, employee database, or even emails. Mismanagement of this information can have serious business implications; how incorrect invoices lead to delays in customer payments or tax issues; wrong stock levels lead to problems in production bays; excess inventory blocks much-needed working capital; Inadequate production schedules lead to wasted man-hours, production and delivery delays degrade customer satisfaction levels, etc. – each of them undermines customer confidence and the company’s market position.

The extended business is a huge integrated mass of information about man, machine and material, where each function is interdependent on the information and support of other functions. On large scales, seemingly simple tasks like generating correct invoices become strenuous, say – 1500 invoices a week based on 500 purchase orders with 10,000 items with multiple pricing strategy – isn’t that too complex?

Companies trying to meet this new challenge posed by business expansion with age-old techniques like increasing manpower realize much sooner that not only has this cost them dearly, but the problem has reached a dangerous level.

ERP software – an effective solution for information management

This is where enterprise resource planning software – ERP comes into play. The benefit of ERP is that it solves two basic problems of magnitude – one, handling very and very complex data with ease and two, integrating the fragmented information to build a meaningful and manageable mass, which becomes the basis of strategic analysis and decision.

Petra Schubert, Center for Applied Information and Communication Technologies (CAICT), Copenhagen Business School, Denmark, and Susan P. Williams, Information Systems Research Institute, Germany, conducted an empirical study on the benefits of current ERP. Some concrete findings are provided below, for the rest of the case study visit here. [Source: http://www.bledconference.org/]

1. Two e-commerce companies LeShop and Digitec were able to guarantee just-in-time deliveries efficiently only after the introduction of the new version of their ERP system.
2. At Weiss + Appetito all information is centrally available for all subsidiaries. eltromat has access to accurate and current information to assist in the decision-making process for management. The quality of the data is particularly praised in this case.
3. At the functional level, benefits in the form of improved business intelligence are clearly in the foreground. The generation of analysis and reports for corporate management, eg. Key performance indicators (KPI), cockpit management (ad-hoc analyses) or the monitoring of contracts, purchase orders and shipments are mentioned here.

Another study, conducted on ebizframe ERP system customers in India, revealed that customers benefited financially by improving efficiency. The ERP system allowed for the automation of streamlined tasks, such as preparing customer quotes, multi-tax invoices, account reconciliations, etc. improved within a few weeks, which resulted in collections being reduced by more than three weeks in some cases, benefiting operating cash flows and reducing the need for overdrafts or high-interest business loans.

These studies conclude that “Business Process Acceleration” and “Transparency in Business Transactions” are the two most important benefits of ERP software that impact every corner of the business. An ERP system also benefits the business by detecting errors in a timely manner and triggering the alert long before it affects business continuity or incurs high error correction costs.

Simple but significant question: is ERP expensive?

Senior management often cites that ERP system implementation is often a costly affair for the company. This used to be true a few years ago, but not anymore.

Due to many innovative technologies developed in the recent past, ERP systems now offer more configuration options, robust technology for reduced support, and use open source components to lower the license fee for customers. These factors allowed vendors to lower the base cost of ERP software.

However, the biggest cost factor in any ERP implementation is the cost of customization. While most modern ERP systems have extensive customization options and specific vertical variations to suit business needs, companies in their zeal (often for greater employee acceptance) require vendors to customize ERP to match their business processes. exact (which may not necessarily be best practices). Heavy customization greatly increases the cost of ERP and also increases implementation time, causing delays and frustrations. The fact is that much of the customization can be avoided by training employees to adapt to the business process available in the ERP.

If a company can adapt ERP software with just essential customization, it can not only benefit from the global practices built into the system, but also save a lot of money and time. Therefore, the cost of an ERP depends on management’s willingness to go with the ERP or the degree of customization it needs.

Can you live without ERP software?

For a company with a lot of day-to-day transactions, software is more than a necessity. In today’s competitive landscape, companies cannot operate without effective business software. Whether that software will be ERP or a suite of custom applications remains a matter of choice and available budgets.

Companies that don’t choose integrated software like ERP often juggle multiple software applications for different functions, i.e. one for finance, one for sales, one for production, etc. While it solves some problems, it creates another set of business problems: integration issues between multiple applications, more IT workforce software maintenance, and most of all, lack of an integrated decision-making system. These intangible costs and missed opportunities are often overlooked, costing far more than the price of ERP implementation over time. Businesses from 10 years ago could be managed without ERP. But no more!

Now, employees, suppliers and management demand speed and accuracy of information. Customers are much more demanding in terms of product prices, delivery times, customer service levels and company brand equity. Only an integrated business solution such as an ERP system can provide the competitive edge needed by growing companies.

With all its pros and cons together, ERP software remains an essential catalyst for growth.