Deciding which technologies your businesses should and shouldn’t invest in is difficult, to say the least. On the one hand, you want to be the one responsible for innovation and growth within your company. But you also don’t want to be the one to pull the trigger on a failed project. So, is an ERP software investment worth the risk? To find out, you need to weigh the benefits of ERP, specifically how ERP system advantages and disadvantages breakdown when compared against each other.
Whether your business is large or small, there are several ERP benefits your company could gain. Enterprise resource planning software (ERP) is a suite of customizable applications that allow businesses to integrate and manage their most important processes. Although there are plenty of advantages, it’s not all smooth sailing; ERP has its disadvantages, too.
Advantages
Now that we’ve covered the basics and cleared up some misconceptions, it’s time to move onto why companies all around the globe are implementing ERP software.
ERP systems are an asset for many organizations. They make your business run smoother by unifying and protecting your information, automating processes, and producing easy-to-understand reports. With these and many more capabilities, the benefits of ERP systems in an organization make your day-to-day operations and long-term planning more efficient. Below are several of the biggest ERP benefits when implementing this type of software:
1. Focused IT Costs
Although ERP software is often a large investment, it can unify your IT costs and improve efficiency. Instead of spending resources on multiple systems that all need dedicated staff, infrastructure, support teams and licenses, you can focus all these costs into one ERP system.
Additionally, if you spend more on disparate systems than you would on a centralized ERP, you might even save on IT costs overall. Using a single system also reduces training requirements for end-users, since they only need to learn one system rather than interacting with numerous individual applications.
While an ERP can include numerous functional areas such as customer resource management (CRM), accounting, HR management and supply chain management, the design of the system is to be modular. This lets you use only the pieces that align to your needs. At the core, an ERP is the glue that binds other systems and their data together. Some ERPs let you integrate numerous third-party systems into a unified whole.
2. Total Visibility
This benefit of ERP is one of the biggest selling points for the software. ERP software allows total access to every important process in your business by making data from every department easily accessible to you and your senior management.
For example, you can monitor inventory levels on a daily basis, including future consignments that are yet to be received and inventory currently in transit. By knowing precisely where you stand regarding inventory levels, you can control your working capital on a more precise level.
In addition, the availability of all of your company’s information in a centralized location allows for increased collaboration and more streamlined completion of tasks. This complete visibility provides more coherent workflows and allows inter-departmental processes to be easily tracked with maximum efficiency. All of this makes it possible to make quick decisions in confidence, as you can rest assured that you’re seeing the full, complete picture at any given moment.
3. Improved Reporting and Planning
Along with improved visibility, better insight is a major advantage of ERP software. Implementing an ERP suite across departments means your organization has a single, unified reporting system for every process. By having a single source of truth, an ERP system can readily generate useful reports and analytics at any time. This software gives you the ability to analyze and compare functions across departments, without the hassle of multiple spreadsheets and emails.
One of the most popular reports involves finances (go figure). Standard financial reports such as income and cash flow statements generally are built-in, and custom reports can be quickly generated without IT intervention.
In addition to this, many ERP vendors also offer business intelligence services with their software. This BI functionality allows businesses to gain a deeper level of analytical insight into their operations. These insights aid in corporate planning by identifying both operational strengths and problem areas that need improvement. Providing this kind of detailed view into a company’s data gives ERP users the ability to make better-informed decisions based on trends and metrics.
4. Flexible Modularity
One of the biggest advantages of enterprise resource planning software in the present day is its modular makeup. Most ERP vendors offer several applications that can be implemented together according to business needs. Barring a few exceptions, each application is designed to be able to stand alone or integrate with the larger suite. This way, your company can pick and choose which components work best and can leave out what you don’t need.
Another aspect involves how the software is implemented. The two major deployments are on-premise and through the cloud. With an on-premise system, physical software must be purchased and installed on all company computers and servers. With a cloud-based system the entire software bundle is handled completely off-site by an ERP provider. Cloud-based ERP software has been on the rise in recent years and is projected to become even more popular. In fact, the ERP global market growth is expected to rise at a CAGR of over 10.2% through 2026.
5. Improved Efficiency
Along with reduced IT and training costs, an ERP can reduce the time and effort required by your workforce to carry out their daily activities. On average an ERP system can reduce operational costs by 23% and overall administrative costs by 22%. That’s a significant amount of savings over a period of time. Properly implemented, an ERP solution can greatly reduce or eliminate repetitive manual processes, thus freeing up team members to focus on revenue-affecting tasks. The system likewise can aid in the adoption and enforcement of industry best-practice processes, aligning all actions across the enterprise.
6. Customer Service
Your company’s clients also receive ERP system benefits, even if they don’t know it. Because client information is centralized and streamlined, your sales team will be able to focus on building and maintaining customer relationships instead of maintaining spreadsheets. At the end of the day, the number one thing a business should be concerned about is customer acquisition and retention. Through the end-to-end tracking and insight offered by an ERP system, you can provide better customer interaction from marketing automation all the way through late-phase customer service.
Most up-to-date ERP suites also support e-commerce integration. This means your business will be better able to handle web-based order processing and client interactions. According to the data listed on Forbes website, 62% of U.S shoppers say they shop more online now, during the pandemic, than they did ever before. Thus, it is imperative for your ERP solution to support e-commerce integration.
7. Data Security and Quality
One of the biggest advantages of an ERP system is data security. After all, at the heart of the ERP concept is data. Sharing data across functional silos such as customer service, sales, marketing and business development enhances collaboration throughout a company. The other side to widespread data access is controlling who can see and edit the information. ERP solutions have intrinsic controls to ensure the security of your data.
Further, what helps ERP platforms maintain a high level of data security is that they provide a single input system. Merging information from multiple systems often causes conflicts between sources, but having a single repository of information helps improve the accuracy, consistency and security of your company’s data.
Both on-premise and cloud-based ERP systems offer your organization a higher degree of security. The database system the ERP software runs off of also enables centralized backups of your critical and sensitive data. Cloud-based ERP systems, despite what many people think, can offer an extra layer of security. Since all of your company’s data is managed through the cloud, many vendors employ round-the-clock security experts to ensure their servers are protected. This makes it far more difficult for hackers to run test attacks like they would on a private server.
8. Improved Collaboration and Workflows
Collaboration is an essential part of a thriving business. But more often than not, companies find their teams working in silos simply because collaboration requires more time and effort. However, ERP software makes collaboration a piece of cake. An ERP platform streamlines the process of collaborating with others by providing employees with access to the data they need when they need it. They do this by providing an interdepartmental database, where information from each department is funneled into one centralized location.
This allows for real-time project updates and better communication across the whole company. With an ERP system in place, every employee has on-demand access to the entire company’s wealth of data, which allows them to see the big picture. In turn, this gives your employees the tools they need to make proactive decisions while making them feel more valued. The net effect on your business is increased efficiency and reduced operational costs associated with manual data tracking, as well as higher employee engagement.
9. Standardized Business Processes
Most ERP systems are developed according to industry best practices. These tried-and-true processes bring major benefits to the table for businesses of all sizes. It also allows businesses to standardize their own processes and systems, which further enhances productivity and efficiency.
These processes deliver consistent results that allow you to continually improve the way in which you operate your organization. And because many processes are automated, errors and costs are greatly reduced. As a result, there’s less friction and improved synergy between departments.
10. Facilitated Regulatory Compliance
One of the most difficult ongoing tasks for businesses is meeting compliance requirements. Maintaining perfect accuracy within your financial records isn’t exactly easy, but needs to be done nevertheless. ERPs aid in regulatory compliance by virtue of secure and validated data, combined with built-in reports. These reports can also be automated to reduce the cost of continual audits. Additionally, many ERP vendors take specific regulations into account such as the Sarbanes–Oxley Act (SOX) and the Federal Information Security Management Act (FISMA).
11. Improved Supply Chain Management
For companies that deal with the moving of physical inventory and production, an ERP system bolsters supply chain management in a variety of ways. This improvement results in shortened lead times, more on-time deliveries and many other benefits that enhance the overall operation and success of your business. Through a well-designed ERP platform, your supply chain can become better and more responsive via improved demand forecasting, inventory management, procurement and more. A streamlined supply chain also facilitates manufacturing innovations, which can help you reduce costs and develop exciting new products that give your business the competitive edge it needs to stay ahead.
In addition, an ERP system can dramatically improve profitability and reduce overages involving inventory and production. Unified insight into sales, production and delivery schedules permit stock levels to be optimized rather than relying on “best guess” estimates for upcoming volumes.
12. Superior Scalability
To ensure the ongoing success of your business, you have to keep an eye on the future. All too often, businesses fail to plan properly and experience serious growing pains that pose serious roadblocks to whatever progress they’re enjoying. Having a system in place that can elegantly and efficiently accommodate your company’s growth is of the utmost importance, and the right ERP system makes it easy.
Whether you’re expanding your customer base; entering new markets; rolling out new processes, departments or products; or are otherwise growing your business, adding new functionality to an ERP platform is easy with the right software vendor.
Just make sure that when you’re speaking to vendors they understand your intentions for growth in the future.