For example, they’d run separate software each for accounting, payroll, manufacturing, inventory, and customer resource management. It made sense for these businesses to graduate to an ERP to bring these together. But ERPs were born in a time when businesses made huge investments in servers, PCs and networks. Additionally, ERPs were expensive to integrate and maintain. While these solutions have slowly moved to the cloud, do all businesses really need ERP?
At some point, your business may outgrow the technology you used to manage your system from the start. A lot of businesses in your shoes try ERP when they’re accounting software and inventory spreadsheets become too difficult to manage. They often regret it and look for a more cost-effective, integrated, easier to use solution. Why wouldn’t a business need ERP and what can they use when spreadsheets and accounting software aren’t enough?
The term ERP arose in the early 1990s, with a direct connection to manufacturing processes. Since then, big manufacturers and other large enterprises used ERPs to integrate a broad range of business processes. However, even many of these organizations find ERPs too complex to use. Thus, they return to spreadsheets to make their lives easier. According to the authors of one report, companies refer to ERP as “Excel Run Production”, with 88% of respondents reporting the use of spreadsheet due to “usability” issues. You certainly don’t need ERP and its complexity if, for example, you don’t have to manage complex, multi-step manufacturing. For light manufacturers and product-focused businesses, ERP simply isn’t suited to the task.
ERP solutions have a reputation for offering an inflexible solution to business problems. For one thing, ERPs were born in the server-based world, and the majority of companies that need ERP still run it as an on-premise solution. ERP providers offer cloud-based provision to lower a customer’s hardware costs. However, these solutions appear to be designed around specific businesses uses almost etched in stone. Thus, they do not reflect the kind of flexibility modern retailers and light manufacturers need to meet the challenges of an omnichannel world. Furthermore, the cost to implement and integrate an ERP for an SMB can reach up to $500,000 not including recurring maintenance, licensing and upgrades. Simply put, ERPs can be cost prohibitive for product-focused businesses that need flexibility to grow.
Big businesses may need ERP to manage much more extensive supply chains than smaller organizations manage. Accordingly, any change or addition to their supply chain requirements requires extensive adaptation. This means time, staff and third-party consultants.
Smaller product-driven organizations need to integrate new sales channels and fulfillment processes quickly and cost-effectively. Additionally, they must maintain complete visibility of their supply chain as they grow. This requires a solution that gives them control, automation, and product visibility as they expand. ERPs simply don’t provide a nimble solution for light manufacturers and small to medium-sized wholesalers and retailers.
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