Enterprise resource planning systems (or ERP software) have become popular enough that any professional should feel comfortable using one nowadays. Managers continue to embrace the idea of having business processes maintained and compiled in one comprehensive package; they’ll want employees who can navigate these systems with ease.
A 2019 report shows more than 50% of businesses plan to put in place or upgrade an ERP system this year. This explains why the enterprise resource planning software market continues to grow rapidly as more businesses continue to get on board. Research suggests that the ERP system market will grow at a CAGR of 8.5% and hit a market value of over $71.63 billion by 2026.
This article will help you understand what ERP Software is and how to use it so that you can keep up with these changes.
What Is An ERP System
An ERP system is software that controls, manages, and integrates business functions and processes through complementary and interconnected modules. Businesses use an enterprise resource planning system mainly to boost inter-departmental communication, optimize processes, and enhance reliable access to all business operations.
Key functions of ERP systems include inventory management, supply chain management, customer relationship management, accounting, shipping, delivery planning, sales, timesheets, and much more.
ERP systems integrate business processes, boost visibility in daily operations, and enhance decision-making.
For a deeper dive, here's our article about ERP systems and how they work.
What Are The Different Types Of ERP Systems?
Three main types of ERP implementations exist. These are on-premise, hybrid, and cloud-based systems. Each ERP implementation system comes with different pros and cons.
You install and run an on-premise ERP software system on in-house servers in locations under your control. It offers the control and security of using personal IT infrastructure that connects to your people, systems, and processes.
On-premise ERPs are easier to customize and change to your specific business needs. They are ideal for businesses that need to secure and supervise system data. You need specific integration with other systems for your daily business processes. You also need dedicated IT resources to handle application and server maintenance.
This is an ERP software solution hosted on a cloud computing platform, as opposed to on-premise systems that run on-site. It allows businesses to access services through the internet. Vendors host cloud ERP software and provide it to businesses. This eliminates negative factors like upfront licensing fees.
Demand for ERP cloud software continues to grow and according to GlobeNewswire, is expected to reach a CAGR of over 17 percent from 2020 to 2025. Demand growth comes from the capability to analyze and access data in real-time.
A hybrid ERP or two-tier model ERP suite combines both on-premise and cloud ERP functions and capabilities. It is a modular ERP application, a multi-sourced system for modern digital enterprises.
A two-tier model refers to a hybrid ERP architecture with ERP capabilities preserved in an on-premises solution and ERP applications deployed on the cloud. Your business uses the current on-premises ERP system to handle corporate functions and adds cloud ERP software to support small business units.
How To Use ERP Software
Purchasing an ERP system is a huge investment for any business so you have to make the best out of it. When fully utilized, ERP systems boost efficiency, quality, cut costs and errors, and improve your businesses’ performance, productivity, and profitability. Here’s how to use ERP software and get the most out of it.
Review Your Business Processes
It’s important to perform a process review of your business operations when selecting the best ERP system. This helps you track what processes need improvement (and how) so that you can measure them post-ERP launch to check for ROI.
This step can also help you decide which business processes need the most attention, as this will factor into what ERP software you end up buying. For example, do you need something with a robust accounting solution? Or is your focus more on the human resources side of things? If your answer is “all of the above”, then you know to look for a higher-priced solution that can cover all the bases.
Something you might want to look into: What Exactly Is Ethics And Compliance Software?
Invest In Training
You should never underestimate the value that comes from training your employees and any other end users of your ERP solution. Trained users get the most out of any software solution and can quickly adapt to updates and changes. Plus, a deep understanding of the ERP software can help them make informed business decisions more quickly.
Many businesses make the mistake of assuming that initial training is enough to get your users going. However, this isn’t the case. As ERP systems continue to advance, so should your employees and users. Working with your ERP provider to set up ongoing training programs allows users to level up their knowledge as the software becomes more advanced.
Focus On Data Quality
Your ERP system helps you manage the why, when, where, and how of data flow. This data has to be rich, accurate, and accessible or else there’s no point in having it. Take some time to design your standards of data entry, including naming conventions and how to handle document versioning. Make sure everyone at the company has access to data best practices that are unified across departments.
Additionally, leverage data audits and batch cleansing to do periodic spot checks on whether standards are being upheld. Cleaning incorrect data can waste countless hours of time so it’s much better to get it right the first time.
It may seem petty to harp on whether users are inputting the day or month first in the date field...but you’ll change your tune when you export into an Excel sheet and can’t easily identify actions performed in February VS actions performed on the 2nd of each month.
Customize Your ERP Platform
Most ERP software comes as a jack-of-all-trades solution developed to suit all types of businesses. Designing an out-of-the-box solution that fits your business needs is one way of ensuring you get the most out of your ERP software.
For the best results, ask your service provider to help you customize your system. Some of the customizations you can expect include concealing unnecessary fields, turning specific features on or off, adding required fields, and many more.
Additionally, you can customize your ERP platform to a lesser extent using integrations and plug-ins. Be sure to ask your ERP provider what options are available when it comes to connecting to other apps or implementing niche widgets.
Future-Proof Your ERP System
ERP systems, like any software niche, continue to develop day by day. The ERP software you employ today might look quite different in five, ten, or twenty years. Ask the ERP provider what their future roadmap looks like. To what extent do they invest in research and development? What additional features do they hope to implement? How often do they push updates through?
A good ERP system will not be a static monolith. It will be an evolving and changing ecosystem that adapts to new advancements in business technology.
Consider Integration Options
ERP integrations can help you improve your business’s operational efficiency by adding features to your toolkit. Integrations link two disparate applications and allow them to speak to one another. Some integrations are quite deep so that information entered into one can be seamlessly accessed in another.
Common ERP system integrations might cover things like manufacturing and design, customer relationship management (CRM), supply chain management (SCM), and warehouse management systems (WMS).
Leverage Mobile Apps
A modern ERP solution will probably come with a smart device app for iOS and/or Android. Tap into this, as it has many benefits for your users. Mobile apps provide heightened accessibility and increased visibility for your ERP systems.
Apps also allow your employees and users to easily access crucial information remotely. This is an easy way for everyone, no matter where they are located, to stay up-to-date with all business operations.
Consider The Total Cost of Ownership (TCO)
Investing in an ERP system is a huge investment for most businesses. A cost-conscious business setting up a system should look at the total cost of ownership to decide what kind of ERP they need. Software costs money—not to mention other investment factors like hardware purchasing, internal resource use, maintenance, and future upgrade costs. Take a look at the whole picture and compare it to the time and money you expect to be saving.
Check this out: 10 Best ERP Systems for Small Businesses On A Budget
Ensure Your Senior Management Is On Board
Senior management buy-in is a key predictor of how the implementation of your ERP system is going to go. It's not a must that your upper management gets involved in the implementation process. However, collaborating with them allows for proper resource planning, which is often a significant success factor during the implementation process.
Establish A Cross-Functional Team
For a smooth implementation process, set up an implementation team composed of individuals from different departments. This ensures that all key areas of your business are addressed and helps collect feedback from the different teams who expect to be using the system.
Ultimately, all organizational functions become integrated into your ERP system. Make sure that every department is represented in the launch process.
Measure Your System’s Lifespan
The ROI you get from your ERP system determines whether it was a viable decision for the business. It fluctuates over time and may need you to adjust and track your goals from time to time. The ideal system should offer you value for your money and an impressive ROI.
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Many businesses use ERP software but not all of them end up experiencing the full potential. Understanding the capabilities and functions of your chosen solution can help you get the most out of it. Your ERP system is a vital tool for the success of your business because it helps you increase efficiency, reduce errors, boost productivity, and ultimately improve profitability.
Many managers make the mistake of overlooking crucial considerations like establishing a diverse implementation team, bringing senior management on board, ignoring training, overlooking system upgrades, and failing to plan for the future.
While understanding how your ERP system works to allow you to get the most out of it, the way your employees and users leverage it determines its value. Though costly, the right ERP system should offer you impressive ROI in the long run.