Before we share the key advantages and disadvantages of using an ERP system, we’d like to dispel some myths around ERP. Selecting and implementing a new ERP solution can confound even the most experienced IT professional. It is this confusion that leads to many of the myths and fallacies surrounding ERP software selection. Here’s a quick reality check as you embark on your ERP selection project:
1. ERP Cost is the Biggest Factor
If you are purchasing an ERP system, it’s to improve your business operations for years to come. It might be more cost effective to buy a comprehensive system with a bigger price tag than to “save” money on less-expensive software that doesn’t fit your company’s needs. Weigh what each ERP solution can offer against the goals you have set for your company. Your return on investment (ROI) will depend on the overall value derived from your ERP over time. The best ERP system is one that meets your anticipated requirements now and in the future—and it may not be the cheapest.
2. ERP is an IT Solution
Your IT team will most likely spend the most time conducting the ERP research and performing the implementation, but your entire company will reap the benefits. It’s imperative that your ERP selection team includes stakeholders from your key business operations as well as your IT department. Those in charge of your company’s most important functions need to play a big role in the selection process. Selecting an ERP solution may not seem like it needs much involvement from your executive team, but since they have the most insight into individual operations, it is crucial that they be part of the decision.
3. The More ERP Functionality, the Better
To understand why going for most ERP features might not be your best selection strategy, you want consider two important factors: what makes an ERP software company successful, and what drives success for your company. A software company can thrive by making software that meets the needs of their target market without overwhelming them with unneeded functionality. Likewise, many organization can become more successful by simply streamlining operations. The takeaway is not to be dazzled by software that has many capabilities. Instead, focus on the solution that addresses each of your business’ actual needs. Choosing a software that can do a lot of what you don’t need is never the right solution.
Jumpstart your ERP selection project. Get a professional ERP requirements template from SelectHub.
4. Have External ERP Experts Choose Your System
Using an external consultant can be a great idea to help with selecting and implementing the right software. Your internal IT team is probably taxed to the limit managing day to day operations. However, your IT department needs to play a leading role in the process–because their experience and insight on your operations can have a major impact on the success of the ERP implementation. A consultant might have a better understanding of the software and even your industry–but your own IT team plays a critical role by applying their knowledge of your company to ensure a successful ERP selection project.
Read more on choosing the right system: Technology Selection Boggles the Minds of CIOs — and Everyone Else
5. Pick the Solution That Checks all the Boxes
Your ERP software choice may seem like the perfect fit on paper—but will it meet your needs in the real world of your business environment. It’s always a good idea to get live demonstrations of your critical processes or a software trial before signing any long-term deal. Unfortunately, failed ERP implementations and buyer remorse are far too common.
The cost to your business in wasted resources and lost opportunity can be devastating. Ask each ERP vendor on your shortlist to provide a reasonable way for you to experience the software and the type of support, and expertise you can expect. Buying ERP software means having a long term relationship with vendor, including their customer service reps and technicians. It’s a good idea to give yourself time to observe and assess the relationships that come with your new software.
ERP advantages and disadvantages
Enterprise resource planning systems are an asset for almost any organization. ERP software allows businesses to better manage important information through total systems integration. To better understand how these systems work, below is a list of major advantages and possible disadvantages to implementing an ERP system within your company.
Whether your business is large or small, there are several advantages of enterprise resource planning software. Enterprise resource planning software, or ERP, is a suite of customizable applications that allow businesses to integrate and manage their most important processes. Below are five advantages of using ERP software for your business needs.
ERP allows total access to every important process in your business by making data from every department easily accessible to you and your senior management. Having all of your company’s information available in a centralized location also allows for increased collaboration and more streamlined completion of tasks.
This complete visibility also allows for more coherent workflows. ERP allows inter-departmental processes to be easily tracked with maximum efficiency.
Implementing a single ERP suite across departments means your organization now has a single, unified reporting system for every process. This software gives you the ability to analyze and compare functions across departments without the hassle of multiple spreadsheets and emails.
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 insight into their operations, as well as identify problem areas that need improvement.
One of the biggest advantages of ERP software is its modular makeup. Most ERP vendors offer multiple platforms, and each one contains several applications that can be implemented according to business needs. Each application is designed to be able to stand alone or integrate with the suite, so your company can pick and choose which components work best. This means that businesses are able to craft an interface tailored to their company’s needs. Most ERP implementations are designed with the ability to seamlessly integrate into the full suite or to be used as a standalone module.
Another aspect of customization involves how the software is implemented. The two major platforms 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 like NetSuite, the entire software bundle is handled completely off-site by an ERP provider.
Clients also receive benefits from the utilization of an ERP system. Because client information is centralized and streamlined, your sales team will be able to focus on building and maintaining customer relationships, both domestically and globally.
Most up-to-date ERP suites support e-commerce integration as well. This means your business will be better able to handle web-based order processing and client interactions.
One of the biggest advantages of an ERP system is data security. Both on-premise and cloud-based ERP offer your organization a higher degree of security. The database system that the ERP runs off of also enables centralized backup of all critical and sensitive data.
Cloud-based ERP systems offer an extra layer of security. Since all of your company’s data is managed through the cloud, they employ round-the-clock security experts to ensure their servers are protected.
Improved Collaboration and Workflows
ERP systems allow for simpler interdepartmental collaboration. Information from each department is being funneled into one centralized location, which allows for real-time project updates and better communication. The net effect on your business is increased efficiency and reduced operational costs associated with manual data tracking.
Most ERP vendors offer additional services for further integration of your business. A few examples include:
- E-commerce integration packages for web-based ordering
- Application Programming Interface systems that allow peripheral systems, like barcode readers, to be integrated into your existing system
- Business Intelligence functions that identify potential problem areas throughout the business
This is by far the biggest disadvantage to ERP software. The up-front cost of the entire implementation process can be prohibitively high, especially for small-to-medium-sized businesses. This includes the full process of planning, testing, configuring and customizing the software as well as the cost of actual implementation.
Financial cost is not the only associated expense with ERP implementation. Businesses must also take into account the opportunity cost of manpower and time necessary for a successful deployment. Planning out a realistic timetable will give you a better idea of whether or not the cost is worth it for your company.
While this is a potential advantage, it can just as easily become a disadvantage if handled incorrectly. This blog post by expert ERP consultant Eric Kimberling outlines potential problems as well as tips for avoiding the pitfalls of both over-customization and under-customization.
In summary, when making a decision about which platform is right for your business, it is important to consider potential disadvantages as well as advantages. Experts like Mr. Kimberling recommend making an honest assessment of your organization’s needs and problem areas and then seeking out an ERP system that will give your business the most potential to improve.
Further Considerations: Cloud ERP Benefits
From retail to manufacturing and beyond, cloud ERP offers distinct advantages to the majority of organizations. While ERP in any form is a valuable data-management tool, many businesses find that cloud ERP solutions meet their needs especially well.
Like standard ERP systems, cloud-based ERP offers data management for all stages of your organization. You can use cloud ERP for huge number of business-related tasks, from budgeting and payroll to customer care management, inventory tracking, sales analysis and complex manufacturing processes.
The flexibility, accessibility and mobility of cloud ERP sets it apart from other systems. Because it’s administered off site and delivered and accessed via the cloud, cloud ERP systems are typically easier to use and much faster to deploy than traditional options. When considering cloud ERP software, take into consideration the presence – or absence – of the following ERP software features.
1. Accounting and Financials
Cloud ERP helps you manage all of your business’s financial concerns. From payroll, purchasing, acquisitions, sales data and all phases of financial reconciliation, ERP provides a reliable, solid and intuitive framework through which employees can perform duties easily and thoroughly.
2. Human Capital Management
With ERP, you can optimize staffing levels, administer employee benefits, analyze individual performance and much more. This provides valuable information you can use to attract, build and maintain a strong team.
3. Sales and Inventory Management
Inventory management and sales analysis is among cloud-based ERP’s greatest advantages. ERP’s functionalities allow you to reduce expenses, maximize use of staff time, automate the majority of data-driven tracking processes, determine and maintain optimum inventory levels and more – all while ensuring flawless accuracy and thorough tracking of stock, as well as expense and profit management.
4. Supply Chain Management
ERP’s benefits also carry over to the supply chain. ERP allows you to easily order stock, schedule deliveries, track time spent from order to fulfillment and manage and minimize costs associated with the supply chain.
5. Customer Service Management
Many organizations take advantage of cloud ERP’s remarkably strong customer service tools. With ERP, you can set up and manage off-site call centers, create and deploy customer satisfaction metrics, devise customer-centric policies and measure customer satisfaction. These capabilities ensure your team meets the needs and exceeds the expectations of customers.
6. Integration Capabilities
Cloud ERP provides powerful integration capabilities. While all ERP systems integrate into your existing structure in order to properly collect, analyze and administer data solutions, cloud-based systems are particularly valuable. They provide faster, more seamless integration, which ultimately leads to a more intuitive system, better workflow and improved collaboration processes.
Another major advantage of cloud ERP solutions is the comprehensive tech support. With software in the cloud, business owners don’t have to worry about updates, patches, improvements or troubleshooting. The ERP provider includes system maintenance in your product. By eliminating these concerns, cloud ERP provides a significantly more reliable work platform.
8. Materials Management
Materials management is a vital component of the manufacturing process. With ERP, you can easily determine supply and demand needs, which gives you the information you need to find and maintain proper materials balance and ensure your processes are smooth, efficient and cost-effective.
9. Manufacturing and Distribution
ERP’s modules easily manage all facets of manufacturing and distribution. The system simplifies order management, invoicing, purchasing, product and inventory tracking and inventory control. It also allows you to schedule and manage manufacturing processes. This saves time, eliminates unnecessary staff hours and ultimately ensures a more productive environment.
With cloud ERP, you can streamline production, manage data and optimize all levels of your organization’s performance. The system ensures efficiency, targets and strengthens weak areas and ultimately gives you the information and tools you need to build a stronger business.
For most companies, the advantages often outweigh the disadvantages. The potential for totally streamlined business functions and boosts in productivity over the long-term makes finding the right ERP suite a worthwhile investment of time and resources.
Choosing and implementing an ERP system is no easy task, especially when there is so much misinformation. Jumpstart your ERP selection now, use this free ERP requirements template to better manage your organization’s specific needs.