Is Enterprise Resource Planning the right fit for my business
We are a team of businesses and consultants that get sucked into various software engagements, for various industries, for friends and associates. In this website, we try to summarize our experience and the results of our research (so we do not forget about it!).
During most of our initial assessments, the first "must" question that business owners asked is: Is Enterprise Resource Planning the right fit for my business? It is like anyone out there wants to install or invest into an ERP system and for obvious reasons:
(1) Accounting and financial requirements push business to present up-to-date reporting and stats.
(2) Organizational workflows are under tremendous pressure to deliver fast, on-time and on-budget. Process automation is a key requirement.
(3) Businesses want to improve operational efficiencies, centralize information and monitor inventory and employee performance.
There are of course other soft reasons such as increase sales; but an ERP will not necessarily equal to more revenue; actually an ERP implementation will mean: additional ongoing operation costs to keep maintaining the system up-to-date and future business constraints (as not everything is supported within an ERP system). The moment you provide an unconventional service or product, your business breaks the ERP framework; which equals a very painful software implementation.
And, Is ERP really for your business? Unfortunately the answer is not an easy one, it depends on various factors:
(a) Do you consider yourself a start-up? Are all your business processes and divisions well outlined? Do people understand what they have to do and have done it many times already?
(b) Does your organization follow a structured decision process when it comes to planning and executing on your main activities and goals? Is your organization so dynamic that things just fly based on individual efforts?
(c) Do you produce goods? Or provide services? Or you are a mix bag of various income sources?
If you are indeed a startup, best thing to do is get your feet wet: install an accounting software package and monitor how it goes with it. Accounting software will support your requirements as you go from zero to your first 1 million dollars in sales revenue. Once you are over that amount then the question will come back to hunt you again.
For businesses well above the million dollars of sales; then you got to think where do you fit: are you manufacturing? Services? Supply chain? Warehouse management? Project-based?
Enterprise Resource Planning (ERP) software was designed to support organizations in automating the thought process of assembly operations: how many different parts do I require to build a car. If you have the recipe to build a car, then ERP will use that bill of materials and estimate all of the purchase orders based on the current inventory levels to produce a particular amount of car units for the following 90 days. Confused? Welcome to the ERP world!
Depending on the state of your business and the market you serve, you first must answer this question: Is there any ERP software that maps my business requirements? Of course to obtain such answer, you have to outline what do you expect from ERP? What are your specific software needs? What processes do you want to automate? And how do you want to automate them? Is your team in agreement on the automation process?
Many companies engage into an ERP search well before they are able to outline their needs. This leads to inconsistent project timeline, lack of internal buy-in and business pressure to skip the requirements definition phase. Prior to start an ERP search; think first: what do you what to achieve? And answer this question first: is my business the right fit for ERP?
Posted on June 24, 2013