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What is ERP? Meaning, definition, and examples

What is ERP? Meaning, definition, and examples

Enterprise Resource Planning: An Introduction

As companies grow bigger, there arises a need to efficiently manage all the information collected by various departments for better synchronization. However, this is easier said than done!

Data management becomes a challenge for growing companies, especially in organizations that have silos. Anyone who has started a company from scratch and then scaled it up into a large organization has faced this issue.

An ERP or Enterprise Resource Planning software becomes your biggest ally in organizing and streamlining all the data collected by various departments. However, it’s still a bit of an enigma what ERP software actually consists of.

This guide aims to answer some of the most important and common questions about ERP systems.

What is an ERP System?

The acronym ERP stands for Enterprise Resource Planning. The definition of ERP is that,

it is a software that unifies and integrates various arms of an organization and helps the company automate most of its operations.

Additionally, ERP can also help with highly advanced technical forecasting.

In the world that we live in today, a lot of data gets generated and garnered on a daily basis. However, making sense of this data and churning out helpful information from it can be a bit of a hassle, especially when it is stored in silos across an organization.

ERP systems compile all the information in systematic formats and store it on a centralized database. Management can have a look at all of this data instantly and even make decisions by applying many analytical operations on that data.

The data as well as the reports can be accessed by all the departments like human resources, sales and marketing, supply chain at the appropriate level of seniority, and are naturally visible to the topmost management as well.

ERP systems provide a smart, scalable solution to the connectivity, coordination and integration woes of many businesses. There’s no need to manually dig up the data and extract information out of it- the software does it for you.

History of ERP

The concept of ERP may just be only a few decades old but the idea behind it originated way back in the 1940’s and 50’s with the invention of MRP or Material requirements planning. With the help of MRP, companies fed the details from the bill of materials for a particular product into a mainframe computer and used the information to send out purchase orders for raw materials.

As more and more companies started adopting this technology, MRP evolved into MRP II or manufacturing resource planning. MRP II was the precursor for the ERP that we use today, as it aimed to use the computer technology to connect various arms of an organization to one another and form a business enterprise.

Eventually, it was the 1990’s when the world first heard about the term ERP, and since then, the concept has undergone massive revolutions, the latest being cloud ERP.

What is Cloud ERP?

Historically, ERP has been almost exclusively adopted by medium and large sized companies. In recent years, this trend has rapidly changed, thanks to cloud based ERPs that can scale up and down rapidly depending on the requirements.

Cloud ERP software offers a seamless ERP solution to companies who want to save themselves the trouble of setting up an on-site ERP system and manage it round the clock. Thanks to lightning fast internet connectivity across the world, now companies can access the entire ERP software that is stored remotely on the cloud.

All of this comes at a fraction of the cost of setting up an on-site ERP and maintaining it, which has contributed significantly to its popularity.

Enterprise Software: Definition

An enterprise software, or Enterprise Application Software, is defined as a software that plays a pivotal role in storing and maintaining information in a company. It provides features such as seamless payments and billing as well as account keeping.

How does ERP work?

The workings of an ERP system are quite simplistic in theory. It is a software that unifies a company by storing all of its data in one place. Depending on the seniority of an individual, they can access this information fully or in part, with the help of a sophisticated dashboard and can generate reports from it.

All the departments feed data into the ERP software in predetermined formats. This data is stored in a centralized database where the software performs various analytical functions on it.

If the leadership wants to check the quality of leads provided by the marketing department, they can do so with just a few clicks. If the HR wants to keep a tab on the attrition rate, ERP helps them generate monthly reports for each team.

An ERP system is a group of tightly interfaced modules that act in cascading layers to facilitate business processes.” 

The data is sourced from each module and stored at a centralized location, eliminating work duplication and errors completely.

It is also shared with other modules of the ERP and third-party integrated apps to facilitate smooth operations. The users can access all information and projected progress rates from unified dashboards to make quick decisions and troubleshooting.

Let us understand it using an example:

When a customer drops an inquiry for bulk order, the details are synchronized with the production, inventory management, warehousing, and shipping partners to verify the fulfillment capabilities.

It also checks the human resources availability and taxation estimates to calculate the order price. The proforma invoice is generated on the basis of these calculations, and the sales team may forward the data to the prospect accordingly.

If they choose to move ahead, a detailed bifurcation of the activities involved, materials, and human resource requirements are then forwarded to the respective departments through their respective modules.

The entire process is monitored, and necessary adjustments are made to keep the production and dispatch on track with the help of inputs generated by the ERP system. This data (progress reports) may also be made available to the sales team if required by the business model.

The modules are purchased as per the organizational needs and business models to streamline all processes through automation in data entry, computation, analytics, and generating preemptive insights.

Uses of ERP Solutions

Generally, ERP systems are implemented when an organization’s growth starts exceeding its managerial staff’s capability to coordinate and execute day-to-day tasks. The uses of all ERP modules as a collective can be summarized in the below list:

  • Information collection from multiple touchpoints through manual data entry, peripheral software, and integrated hardware devices.
  • Automate workflows to delegate responsibilities for executing various processes in a coordinated manner.
  • Real-time monitoring of various processes as well as external dependencies.
  • Generate progress reports and suggest contingency planning strategies in case of deviations.
  • Help evaluate the loss of efficiency at each phase and in building an effective framework to minimize them.
  • Implement governance, risk management, and compliance (GRC) through all modules used in the form of guidelines for various tasks of the operating model.

In the absence of an ERP suite, it becomes extremely difficult to coordinate the functions of different departments, and the overall efficiency starts dropping below unsustainable levels. This is due to the fact that reporting work and verifying it manually on a large scale consumes a lot of time while also leaving ample room for human error.

The trouble amplifies when a business operates from multiple locations and ultimately leads to a situation where there is little to no visibility of how the operations are being carried out. This can cause huge potential damages to the firm, both financial and strategic, which can ultimately cause existential threats.

An ERP solution is used to unify coordination of all processes, automate workflow management, expedite data flow within the organization through gated access and reduce work reporting to bare minimum levels. It gives the user a comprehensive overview of the operations and ensures that all stakeholders of the organization work in close coordination with each other to achieve common goals and objectives in a timely manner.

Types of ERP

The classification of ERP suites is done mainly on the basis of their architecture. The type of ERP implemented plays a major role in organizational success and optimized the business processes. Let us have a look at them below:

On-Premise/Legacy ERPs

On-Premise ERPs, also known as legacy/monolithic ERPs, are installed in the organization’s hardware present at their facilities. This requires the user to install all required hardware devices and look after their operating conditions as well. This also includes having an in-house IT team that looks after its maintenance and minor troubleshooting.

In case of an update or major issue, the organization needs to wait for the vendor’s team to arrive at their facility and make the system start functioning again, which derails their day-to-day activities.

Cloud-Based ERPs

Cloud-based ERPs use the software as a service architecture model where all the data storage and processing power is installed at a single location for every client organization under a multi-tenant architecture. This requires state-of-the-art security provisions since the data is stored outside the client premises, and it may contain business secrets and intellectual properties.

The cloud-based ERP solutions are comparatively more affordable as they can be used at multiple locations under a single license. Also, the updates are rolled out on the server-side, and it is reflected on the ERP users’ systems instantly. The maintenance and troubleshooting are also carried out at the vendor’s end, making the process simple, less time-consuming, and cost-effective for both parties involved.

Hybrid ERPs

Hybrid ERPs are becoming increasingly popular as they help address data security concerns of cloud-based ERP solutions. Here, the confidential data is stored on the servers present on the server, and the rest of the datasets are synchronized with the cloud servers.

The architecture is thus distributed between the two infrastructures, but the users can control and manage the Hybrid ERP centrally.

ERP Modules

Each ERP system comes with built-in modules, and additional modules are available to add on. Many ERP solutions offer a wide range of sophisticated, tailored modules as per the requirements of their clients.

In this section, we will have a look at different ERP modules that pull off the business process by working in synergy with each other:

Inventory Management

This module covers both in-stock and pipeline inventory, their details like current location, consumption rate, lead times, vendor details, the ideal storage period for maintaining fitness for consumption, and interoperability details.

Warehouse And Shipping Management

The warehousing and shipping management module allows the user to visualize all items stored and available space. It also helps in coordinating the inward and outward movement of inventory. The warehouse in charge is also provided with auto-generated reports for order picking, packaging, and clerical forms required.

Production Planning And Coordination

The PPC module fetches data from all other modules to establish production capacity for the plant and the human resources to give production schedule estimates. It also coordinates the processes undertaken by various departments, helps identify and eliminate any bottlenecks to ensure smooth operations.

Production Management

This module helps manage production processes, and some of its major functions include facilitating periodic maintenance, ensuring the availability of the consumables, coordinating production processes as per designed order and working conditions, and implementing quality control.

Procurement, Accounting, And Finance

This module covers purchase, inward shipping, along with all accounting and compliance functions. This module aids in eliminating errors caused due to inaccurate data and proves to be extremely useful for organizations operating from more than one location. They can process payroll, reimbursements and manage benefits administration from their central facility. Finances are also managed from the central office as well.

Sales And Marketing

As the name indicates, this module is used to coordinate sales and marketing activities and provide feedback to the production and QA departments regarding the demand and product quality.

Human Resources Management

The HRM module generates the data required by the payroll and employee benefits system and provides the organization with comprehensive insights regarding their employees, including performance, traveling history, and punctuality which can be useful for multiple purposes like internal job placements.

Top Benefits of ERP

Assists in boosting efficiency

One of the important advantages of ERP systems lies in boosting the efficiency of your business. Using ERP software, you will be able to eradicate repetitive tasks and processes. Also, it reduces the need for manual tasks. The ERP software can streamline business processes and make the whole data collection work efficient and more manageable for every department.

Offers real-time information and data

To have up-to-date information about your business instantly is the need of the hour. Every business needs a system that helps in  streamlined flow of business data and easy information access for all organization departments. With the best ERP system, you will get real-time information to help you make better decisions for your business. It will also ensure that all the information and data you receive are up-to-date and to the point. Use of ERP in business helps to get real-time data that keeps your business stay on the front-line in the competitive market.

Full visibility

Total visibility is the best advantage of ERP that is considered the most significant selling point for various software. With the correct use of ERP software, you can have complete visibility and accessibility to your business’s necessary process. Each person can access all the data in the department without much effort.

You can understand it more easily by taking this example – you can regularly monitor inventory levels that cover the future consignments that are not yet received and the inventories in transit. Knowing this information, you will be able to control the overall working capital accurately.

Proper forecasting

ERP system and its benefits are helping businesses to strive hard and keep their firm place in the giant competitive world. ERP software provides users and managers with tools and resources that are needed for creating proper forecasting. When the businesses receive correct information within ERP, they will make more realistic estimations and effective forecasts.

Better productivity

The importance of ERP lies in increasing the overall productivity of your business. ERP software is capable of eradicating repetitive tasks, manual entries, and possibilities of errors. It helps streamline all your business processes and enhance efforts by following the ERP software implementation. It will help you save time and focus on other business operations and processes wherever is the scope of enhancement.

Unified information

Have you ever thought, why do we use ERP? The answer is simple: it is software that acts as a central hub for the essential information required for your business and departments for managing daily operations.

ERP software helps keep all the information under one location, avoiding all the issues with data spread on diverse databases. With these flexibilities that ERP Software offers, you can easily integrate different platforms with your ERP software, which will help keep your data consistent, unique, and accurate.

Rapid turnaround time

The other name of enterprise resource planning is efficiency and productivity. Having a robust ERP system integrated with your business workflow process makes it much easier to have real-time insights into all your business aspects. Knowing all of the business information, you can opt for taking a right and required decision-based on stats metrics. All these will help in increasing the efficiency and more faster turnaround time important for keeping the competitive advantage.

Saving Cost

Every business owner keeps a strict eye on their finance area and tries to avoid making any mistake that will cost them high and wreck their business. You have to be very smart with your spendings and should know every detail of it.

The role of the ERP system in saving the cost of your business is huge as it will guide you to spend smartly and save your money. Having the correct source of information in a real-time scenario, ERP software helps lessen admin and operational costs. This way, you can spend the money on other much-needed areas of your business. Hence, we can say, saving cost is one of the top benefits of ERP.

Enhanced customer service

Enterprise resource planning systems come with customer relationship management applications with financials, sales, and front-office functions. The function of CRM in ERP is an essential part of staying competitive in your business area. The crucial thing that helps in the survival of your business is retaining customers, which offers huge profits. The best CRM app in your ERP system results in better communication with your customers and enhancing relationships faster, accurate access to all customers’ information and history.

Reliable data

ERP offers reliable data that you can access for multiple locations if you had implemented it in the cloud and also through various devices like smartphones and tablets. Apart from updating data in real-time, ERP software helps to upgrade data consistency and accuracy. Having all this information, users can make complete surety on the data and analytics, like whether they are safe to use or not, avoiding all the risk of any errors. ERP software has enhanced security features that entirely eradicate all the risk of getting the business information into the wrong hands.

ERP Implementation Steps

Once a company decides the type of ERP they wish to implement, they can follow the following stepwise guide to ensure a seamless implementation.

Putting together a Task Force

First up, you’re going to need a team of highly efficient go-getters who will stop at nothing to implement the system within the stipulated time. Once you’ve rounded up your best, you must empower them with the necessary tools and resources to make their jobs simpler.

Usually, an ERP task force will have the following resources:

  • A project lead
  • Data Analyst(s)
  • Developer(s)
  • QA engineer(s)

Apart from these, make sure that you have representatives from all the departments regularly checking all the updates, since the software is going to be used across the organization.

Transition Planning

ERP implementation can often be a slightly tardy process at times. Sensitize your organization about the possible system downtimes and other snags that may occur once the implementation begins.

It’s also advisable to put in place alternative mechanisms in case of a prolonged breakdown, so that the company doesn’t have to suffer massively. Planning the releases during the least productive hours can be a great way to mitigate such risks.

Budget Allocation

As the thumb rule goes, the total budget allocation for implementing ERP should be roughly 1% of your annual revenue. This however varies when you take into account various factors like size of your company, functionalities and modules in the software, type of deployment model, etc.

Data Priming and Migration

Your organization must have collected heaps of data prior to implementation of ERP. All of this data has to be fed into the system but in a certain format. For this, you may need to tweak and rearrange your data and prime it for migration into the new software.

An analyst would be a great fit for this role, as they can quickly visualize raw data and fine tune it to suit the requirements of the ERP system.

Training Modules

Before getting started on the ERP, your employees will require a thorough understanding of the system and its functionalities. For this, you can design a week-long training program that guides the users through the software and explains all of its components.

You can conduct these training sessions online where people can take them from their desks, or you can conduct group training sessions in a conference room with the help of a trainer.

Testing and Roll-out

Since ERP softwares are often massive and consist of multiple modules, many companies plan phase wise testing and roll-outs. However, if you’re not building the software from scratch and have paid for a third party ERP product, you’re likely to get your hands on the entire software in one go.

Another good practice to follow is to go for a beta test before the final roll-out. Simply gather around the key members from every department and give them a demo of the software before you roll it out for the entire organization. They must have a keen sense of observation and imagination, and should be able to identify any issues that their department may face.

Once the beta tests have been concluded, have faith in the software you’ve built by toiling for months, and send out that email informing all the employees about the roll-out.

Post-Deployment Assessment

Once you’ve spent a considerable amount of time on the new system, you should check your performance against the benchmarks like productivity, efficiency, profitability, carbon footprints reduction, etc. This will help you determine if you’re achieving what you had aimed to achieve by implementing the software.

If the results are positive, you have made a good call. And if they’re negative, an ERP software worth its salt will help you zero in on the issues that you can fix.

Post-Deployment Support

Upon successfully implementing an ERP software, a support team should be set up that helps the employees in case they find themselves getting stuck while operating it. Additionally, the support team should also be able to fix any bugs that are reported by the users.

As a whole, ERP implementation is a gigantic process. However, it gets much simpler once you break it down into smaller, action packed steps.

Types of ERP Deployment Models

On-Site/On-Premise

On-site ERP deployment means that the company buys the software and installs it on servers that are present on their premises. Hence, the company owns both- the servers as well as the software.

Hosted

Here, a company builds their own ERP software from scratch or licenses it from a vendor. However, they do not install any servers on their premises, and rent server space from a third party service provider. So while the company owns the software, the software is installed on a remote server that the company has rented by paying a monthly or annual fee.

Cloud ERP

Cloud ERP is a type of ERP solution that the company neither owns nor hosts on their premise. They simply pay a recurring fee for using the service while the vendor owns the software as well as the servers.

How Does AI work in ERP

Artificial Intelligence (AI) is a technology which is simulating human intelligence. It is like machine learning or natural language processing under which technology is learning from data and knowledge to understand human voice commands. You might be familiar with this technology on the smartphone when you call out Siri or Alexa.

However, AI now has wider scope and implications for the manufacturing industry and, more specifically, ERPs as well. AI technology is built directly into the ERP systems from which you can learn and then assist them in automating routine processes and building enhanced user experience.

With the use of AI-enabled ERP systems, you can expedite the adoption of chatbots for responding to all of the customers’ queries and comments. This provides special attention to customer service so that they will be able to see what are the queries of customers in real-time. The virtual assistants are present to answer all the questions of customers.

ERP for Small Business

Although ERP started out as a tool that was adopted mostly by large companies, it has slowly evolved into an extremely flexible and scalable business software for companies of all sizes and shapes.

Today, small and medium sized businesses around the world continue to implement ERP across their organization and reap enormous rewards. ERP helps small businesses transition towards much more efficient, lean and profitable operations.

Here are some of the primary reasons why small businesses are increasingly choosing to implement ERP systems.

ERP Cost for Small Businesses

If you’re heading a small company and get thrown off reading exorbitant ERP implementation costs, you should take a closer look. Many large companies need a range of functionalities in their ERP software that smaller ones simply don’t. Hence, the costs for implementing ERP across a small business differs from that of implementing ERP in much larger organizations.

Here are a few factors that play an important role in determining the cost of ERP implementation:

  • Functionalities
  • Number of active users
  • Server space and bandwidth
  • Number of integrations like CRM & HRMS

ERP Integration: Strategies and Benefits

What is ERP Integration?

ERP integration refers to the process of integrating ERP software with other systems like the CRM (Customer Relationship Management) and HRMS (Human Resource Management System). By doing so, companies ensure that no system operates as a stand alone and that the information is transferred across the organization and across the softwares seamlessly.

This innovative approach has become a huge hit among companies of all sizes. Vendors today offer systems that are highly compatible with a range of other applications and can be integrated seamlessly with one another.

This gives companies the freedom to choose the best individual softwares, connect them to one another and build an ERP ecosystem of their own, one that’s tailored to meet their requirements.

Benefits of ERP Integration

All Data in one place

One of the biggest challenges of running a business effectively is unifying the data collected across various departments and streamlining it into useful information. This isn’t possible unless a centralized database is created that stores all the information in one single place.

ERP helps businesses achieve this by creating an accessible database for storing all the data that are fed into the system by various departments such as sales and marketing, purchasing, supply chain, accounting, etc.

Process Automation

Automating helps businesses use their resources wisely. When you automate the processes that require very little human intervention, you free up a lot of manpower that you can then utilize for other tasks that are difficult to automate.

Tasks such as data entry, creating invoices and purchase orders, sending confirmations via emails and SMSs, etc. can be easily automated by using appropriate triggers in the ERP system.

Doing this greatly improves the efficiency of your workforce and helps you run your business in a lean manner.

Increased Operational Efficiency

The end goal of deploying any software across an organization is to improve its efficiency. ERP systems have been known to deliver just this, along with so much more.

When you successfully implement an ERP software, you notice a significant decrease in failures due to human errors. This directly translates into a sharp increase in operational efficiency and gives you an advantage over your competitors.

How AI will impact ERP systems

Manufacturers and industry owners are looking for innovative technologies and AI to give them a competitive edge. Machine learning, as well as intelligent manufacturing, are assisting manufacturers in enhancing overall business efficiency. Understanding this scenario through an example is regarding quality checks and maintenance.

Let’ see some of the leveraging points of AI’s work in ERP

Broader insights into your data

Under the provided data set, like the enormous data sets found in an ERP, the patterns and correlations present are not visible to the human eye. With artificial intelligence, small and midsize businesses can know the trends and then make proper inferences regarding the particular operations that permit correct forecasting and apprised decision-making.

Robotize daily routine processes

When humans perform some task in the ERP system, they follow some predefined rules that command all the actions and processes. All such behavioral tasks are expressed in mathematical terms and are programmed into the software. These apply to the set of rules for a particular data set and quickly make more informed and intelligent decisions. It helps manage the daily routine work like accounts, payroll administration, more effortless with just a click on the button.

Enhances user experience via communication

The software prioritizes the search results based on the history of users’ communication. AI elements of artificial intelligence are responsible for making intelligent decisions based on human inputs that turn to make the app fast and more useful for every individual user. Huffman has given the example of information searching in the NetSuite and continuous communication with some defined set of record types like customer data and product catalog data.

Smart data processing

ERP systems offer access to enormous data. These are not capable of processing the actual data which is available to the company. AI-powered ERP systems make use of data from diverse modules for undertaking responsive measures with less human involvement. Also, it performs ominous analysis and offers complete clarity in the decision-making process.

Boosting process efficiency

ERP systems assist in automating all the back-office processes by lessening the requirement of manual data entry. Also, it will eradicate the peoples’ need to perform computational tasks, canceling the chances of false calculations and their unwanted outcomes. ERP systems assist all businesses in reducing the necessity for human resources for handling the daily tasks that will save a massive amount of time.

Difference Between ERP Vs. CRM

When it comes to CRMs and ERPs, a lot of people use these terms interchangeably, but they have completely different applications despite a few overlapping areas. Simply put, CRMs focus more on the customer end operations while the ERPs lean towards the core business activities and their financial aspects.

What Is A CRM Software

A CRM software helps manage customer service interactions from a unified platform and automates client servicing workflows. It is designed to assist your sales in scheduling and monitoring marketing activities, lead acquisition and qualification, lead warming, follow-ups, and closure.

They also allow sharing documents. A CRM tool helps your customer service representatives in tracking and executing service requests. All communication channels, including telephone, email, chat, and video calls, are covered under a central dashboard.

What Is An ERP Software

An ERP solution consists of a group of tightly knit modules that help facilitate operations in different departments like inventory and warehousing, PPC, production, accounts and finance, HR, and supply chain management.

These modules store their data on a centralized server to eliminate work duplication and inaccuracies. Each of these modules helps an organization to synchronize the efforts made by various departments and work towards achieving a common goal.

Generally, smaller businesses use accounting solutions like Tally, but as they grow in size and their headcount starts increasing rapidly, they switch to ERPs to create a robust system for managing their resources, operations, and decision making.

ERP solutions can have a dedicated module for client relationship management as well, and you can also integrate the CRM of your choice.

Unlike ERPs, CRMs cannot store and retrieve transactional data like historical sales figures or generate future sales trends. This makes ERP software solutions more complex, and their learning curve is also significantly higher.

CRMs use the Software-as-a-Service (SaaS) model, while the ERP solutions may use either SaaS or hybrid architecture as the legacy solutions phase-out.

Which One Should You Buy: ERP Or CRM

The short answer is both. Any growing organization will require using both of these solutions as they cater to their two fundamental needs: manage existing business and bring new business.

A CRM helps simplify all client-facing interactions, and the ERP ensures that your operations run smoothly. However, you may go for a single platform to further ease the operations.

ERP systems cost a fortune, and thus, the businesses that deal in high volumes with decent bottom lines may prefer going with the ERP first.

On the other hand, a business with a large number of customers with small ticket sizes and frequent transactions may find it more sensible to go for a CRM first.

Role of ERP in Supply Chain Management

Supply chain management (SCM) is one of the key operational areas of a company. By implementing an ERP to their supply chain management, companies can increase their productivity, improve the quality of their products and bring down their costs substantially.

Supply chain management deals with activities such as procurement of raw materials, ensuring that the production takes place consistently as per the requirements, maintaining the machinery, etc. All of these activities require a lot of resources and are critical to the success of the organization.

Integrating ERP with SCM, companies can automate many of their SCM activities. Automation helps them reduce human errors and also frees up a lot of human resources that can be deployed elsewhere.

ERP in Supply Chain Management: Benefits

Here are some of the advantages of integrating ERP with supply chain management of your organization:

  • Automates your redundant tasks.
  • Reduces human error.
  • Allows you to maneuver your resources smartly.
  • Helps reduce wastage.
  • Brings down the production and operation costs.
  • Enables you to produce high quality products.
  • Helps you manage the data efficiently.
  • Boosts your brand by improving the customer experience.
  • Removes the silos between various departments and truly integrates your SCM with the rest of the organization.
  • Makes your operations a lot more flexible and scalable.
  • Enables you to take timely and precise decisions by running an analysis on your data and creating regular reports.

ERP Implementation Failure

A lot goes into implementing an ERP software across an organization. Months of toil, a range of resources and quite a lot of funds.

However, the process isn’t full-proof and at times is prone to errors that result in a partial or a complete failure in implementing ERP.

Here are some of the reasons that lead to ERP implementation failures.

Reasons for ERP Implementation Failure

Scarcity of resources

Resource allocation and timely dispensation is one of the key factors that contribute to the success of ERP implementation. Make sure that you plan comprehensively for all kinds of contingencies and have the required resources available all the time.

Lack of experience in the leadership

While implementing ERP, it’s always a good idea to have someone on the team who knows what they’re doing. If nobody from the team has been a part of an ERP implementation team previously, you can always hire external consultants who can guide you through the entire process.

Haywire Project Management

Success of the voyage depends on the captain more than the crew. Sure, the crew does most of the work but to no avail if the captain steers the ship into an iceberg. Make sure that the ERP team is led by a project manager who is not just skilled, but also level headed and committed to the project.

An experienced project manager with an inexperienced team is any day better than an inexperienced project manager with a stellar team.

How to Avoid ERP Implementation Failure?

There are multiple things that a company can do to ensure that the ERP implementation is successfully carried out.

Pool in your best resources

While putting together a team for ERP implementation, make sure you select the right candidates for each role. Keep in mind that this is perhaps the most important project for your company’s survival and growth, and create a team of your best henchmen.

Communicate Clearly

A software of such great importance across the company can not be implemented without keeping all the stakeholders constantly. The team should consist of senior representatives from all the departments and they should be in unison about the actions as well as the goals.

Use Automation to your Advantage

One of the biggest advantages of automation is that it significantly reduces human error. Manually migrating your database can often lead to a lot of inaccuracy.

However, you can easily automate your data transfer once you’ve set the parameters of migration. This will save up a lot of time and make your database a lot more efficient.

Test, Test, Test

We can’t stress this enough! If there is one road to a successful ERP implementation, it’s through rigorous testing.

Test your modules for a variety of scenarios and in different environments. Keep track of all the bugs and crashes and fix them on the go. Even after implementing the ERP, ask the users to provide you the feedback and keep fixing the bugs that they encounter.

It’s only by exhaustive testing that you can make your ERP implementation near perfect.

Best Practices in ERP

No matter the size of your business, implementing ERP in your business is crucial. ERP implementation will help your business to streamline diverse processes. It will act as an individual source of truth that will enable the best report and the best decision making and enhanced collaboration overall in your business area.

All these practices will incorporate all the stages of ERP implementation, i.e., from introducing all the requirements to the training and offering support. Implementing ERP will ensure that you meet your business objectives, reduce the risk of delays, cost overruns, and allow all the employees to utilize the system efficiently. Also, by following ERP data conversion best practices, there remains no fear of missing any goals or deadline and budget.

Here are some best practices in ERP implementation

Strong project team

Building a solid project team is the first and foremost step while implementing ERP in your business. Usually, the ERP implementation team has an executive sponsor, a project manager, and spokespeople of different business groups in the project. An executive sponsor is responsible for adjusting all the business priorities and arranging additional resources as per the requirement for achieving success.

On the other hand, the team’s responsibility involves setting top-level goals, needs, KPIs (Key Performance Indicators), directing daily project activities, making complete surety on the project completion date and budget, and measuring results.

Picking the best methodology

Choosing the suitable methodology for your ERP implementation is an essential step. There are currently two utterly diverse implementation methodologies: the first one is the traditional method, and the second one is the turnkey method. Understanding both ways is essential to decide which one is suitable for your business.

The traditional method includes the ERP implementation team working with the vendor consultant for planning, educating the team, designing and configuring, setting up the system, new business processing, managing conference room pilots that are needed to go live, and supporting the go-live.

On the other hand, the turnkey method is more related to the vendor-led. The vendor consultant role is enormous in the planning and constructing the project and setting it up and configuring all things, prototyping the review and education, conferencing room pilots, and training and support activities.

Spending time in providing training

ERP software implementation manages your business processes and systems smoothly. Also, they can handle all the daily activities of the people effortlessly who are using the system. Providing proper training to your employees about using the software will help them satisfy users and acquire huge ROI from the tool.

Migrating data

Data migration to an ERP system is challenging in the implementation process that required complete preparation and proper planning. There is always a risk of data loss when you are consolidating or standardizing data from different apps.

ERP implementation helps in transferring data both ways, i.e., manually or automatically. Whether you are making manual entries or taking automation assistance, it is essential to validate data after migration. It will ensure that the data was transferred into the new system correctly.

List of 5 Best ERP Softwares

ERP software comprises applications’ set for Enterprise Resource Management. The process involves the collection and organization of business data with the help of an integrated software suite.

“Around 95% of companies enhanced their business processes just by implementing ERP software solutions.”

Here’s the list of top 5 ERP Softwares

DEAR Systems

It is a cloud-based ERP solution specially designed for small to mid-level retailers, manufacturers, wholesalers, and e-commerce operators. Dear Systems is a complete solution covering different modules like purchasing, e-commerce, manufacturing, accounting, inventory management, and sales. With this solution, businesses can integrate DEAR inventory for building, planning, and tracking every stage of the buying process.

Also, the solutions remind all their users to reorder the stock before it gets out of stock. Businesses will keep an eye on all the purchase orders with the reports for pending purchase orders and purchase cost analysis. The manufacturing module can track raw materials and labor costs and build a multilevel bill of subassemblies and materials.

SAP

SAP (Systems, Applications, and Products in Data Processing) offers powerful instruments for assisting companies in organizing their logistics, human resources, financials, and diverse business areas. SAP originated in the world 40 years ago and is based in Waldorf, Germany that builds enterprise software for assisting businesses to make their management processes simpler.

SAP’s ERP software offers various standard features that present optional modules for the boosted functionality and copious integrations, and extra add-ons for all industries. SAP’s ERP software allows clients to manage the overall inventory, place supply orders, monitor security, handle warehouses, manage to ship, and more. All these will help your business to become more efficient and well-organized.

Oracle

Oracle offers a hub of core applications and industry-related apps that can benefit in primary and advanced ways. NetSuite acquired Oracle in 2016, and then an app was originated in the cloud and offers solutions for all sizes of businesses and industries. The most recommended Oracle systems cover Oracle ERP Cloud and Oracle NetSuite.

The ERP software provides credit-to-cash, in-memory financial allocations, finance controlling and reporting, and positions analyzer, expense management, and add-on apps that are useful for any industry area but especially for the financial industry as well as for the public sector.

Microsoft Dynamics AX

Microsoft was founded in 1975 in New Mexico, leading computer software and hardware, and provides multiple Windows PC and offline services for different firms and consumers globally. MS dynamics create CRM and various software solutions for the sales and marketing purpose of the business functions like ERP, accounting, and supply chain management.

Microsoft is developing different data centers for supporting the cloud capabilities that cover Dynamics 365 suite. Microsoft Dynamics AX supports all the operational and administrative functions of your businesses that offer diverse management solutions for different divisions.

Netsuite

Netsuite originated in 2007 and created solutions that integrate the clients’ customer relationship management, e-commerce, ERP, and inventory management requirements in an individual platform. It is regarding the contributor to the software-as-a-service ERP software industry. Netsuite ERP comprises functionality behind the traditional accounting software.

The solution gives a complete set of apps to remove expensive integrations and smoothen all types of business processes. Companies use NetSuite’s ERP software to function fast order-to-cash processes, efficient workforce productivity enhancements, and shorter financial close.