Welcome to part one in Wherefour’s new ERP mini-series. In these posts, we’re going to talk about what ERPs are and why they are an important part of growing businesses.
What is an ERP?
ERP stands for Enterprise Resource Planning. These systems are a type of software product that businesses use for the management and integration of many of their operational activities. These can range across manufacturing, supply chain and logistics, accounting, retail, compliance, sourcing and procurement, and beyond. There is no one size fits all approach to an ERP, as they are typically deeply customized for individual businesses, with modules that can be very specific to different units and teams. The design of their systems will vary based on the needs, but typical components will include finance, CRM, HR, inventory and logistics, and other operational modules.
What kinds of companies use ERP systems?
Many companies use an ERP system to coordinate their complex operations. This is especially true for manufacturing and distribution organizations, or e-commerce companies requiring inventory control. Regulations for industries have developed a much heavier focus on production and supply chain traceability more recently, so that has also become a key capability to consider. Outside of heavily regulated spaces like pharmaceuticals, these needs are also becoming more important in segments like food and beverage, chemicals, health products, electronics, and other consumer production.
How can an ERP system help?
An ERP can help companies become more organized and efficient in different ways:
- Serves as a “single source of truth” – everything, from inventory and compliance to vendors and sales, is managed in one place
- Standardizes workflow and business processes and makes it easiest to train new employees in how you want things done
- Provides deeper insight into the metrics of the business and makes it easier to gather data for financial, business or strategy needs
- Lets you know who did what, and when
- Provides ability to do faster recalls and inspections
- Provides backup capabilities and protection from natural disasters at a specific facility, especially compared to paper records
- Streamlines your business operations – getting processes in place that work for you
What types of ERP’s are available?
This one is going to need some further explanation, but the options can usually be considered based on several factors: the deployment method, size of your business, and scope of needs.
ERP Deployment Methods
This is how the systems are installed and accessed by your business. This can vary by the level of product, but they are considered to be cloud-based, on premise, or hybrid.
- Cloud-based: web-based applications that are hosted entirely online or in “the cloud” (or servers other than your own). This means that any ongoing updates and support come from the provider as part of an ongoing subscription (can be monthly, quarterly, annual, etc…)
- On-premise: ERP systems installed on your servers in your facilities.
- Hybrid: A combination of cloud-based and on-premise installations.
The types of products or solutions in the market are usually related to the size and scope of your organization. For example, you might be growing rapidly, but bringing in an enterprise level system for a company that could be less than 50 people would not be a wise investment, as it is far too much in both cost and time. Those are more reserved for your very large companies with highly complex operations.
For a small company, less than 100 employees, a product or suite that is approachable and largely self-serve is going to be the best option. For more complex installations, integration, or migrations, the option for a more hands on service (that isn’t terribly expensive) is also highly beneficial. This can help with more complex setup requirements or training, while remaining relatively cost effective. Cloud systems are almost certainly the most efficient deployment, reducing additional maintenance costs and bandwidth compared to on premise.
For a medium sized company (100 – 499 employees), the range of options becomes more broad, as the ability to take on more long term or complex implementations becomes feasible. A dedicated team or employee may be responsible for the ongoing administration of the ERP modules, but maybe it falls among their other responsibilities. Commitment to a longer term onboarding program and possible on premise deployments are more of an option as well.
For a large business (500+ employees), and especially into enterprise territory, the need for the most robust and complex systems is greater, often with lengthy training periods and implementation that can take up to a year or longer. These companies will often have dedicated administrators, sometimes for a full time role, as part of their larger IT operations. The systems will be customized in depth to manage operations that often span globally, with many business units or departments requiring specific capabilities and setup. Specialized requirements for deployment may play a role in the design of the system, and it may vary across cloud, on premise, or hybrid.
How do I know if I need one?
If you’re tired of pouring over spreadsheets and stacks of paper, or if you’ve outgrown your current business model, it might be time to consider an ERP to help. Perhaps you’ve recently gone through an audit and were asked to do a mock recall. That may have taken a lot more time than you would have liked. It can be particularly nerve racking if you have an auditor watching over your shoulder and you’re not sure where to look or even begin. With an ERP you can confidently run a recall or production trace report in a matter of seconds. It simply allows you to save time and focus on other things.
Signs that it may be time to implement an ERP system:
- Your business is growing quickly and you need to standardize processes
- Your company is ready to raise money and will have investors needing to vet inventory levels and financials
- You just landed a large customer (or are about to) who will stretch your safety, compliance and transaction capabilities beyond current capabilities
- You think your company may want to acquire another company, or be the target of an acquisition
- You have multiple facilities and need employees to maintain data in one place
How much does an ERP system cost?
This truly is the million dollar question, and for some companies, the answer at the same time. For most businesses in the small to medium category, a cloud subscription can range from several hundred per month for more self-serve options, into a few thousand, depending on needs and capabilities. For non-self-serve products, there is often a varying level of implementation and onboarding cost, which can be an upfront amount of a few thousand. These numbers obviously inflate heavily as complexity increases, and some predatory pricing practices can emerge from certain higher end options when it comes to longer term contracts and usage / licensing costs. More on that in a future post…
How do I start looking for an ERP?
The best place to start is by compiling a list of everything you both need help with or would like help with, when it comes to business challenges. This exercise may even inspire some ideas that you hadn’t been aware of before. Then, establishing both an ideal and hard budget range, will be helpful.
Even a quick Google search can be a tough place to start when you first look into options. A search for industry + ERP can be a helpful method, but even then you may be inundated with options that might not necessarily meet the pain points that you’re looking to alleviate. Fortunately, results pages often come with aggregated lists from review platforms, such as Capterra and G2, where you can get a more narrow view of features and benefits to each option.
Ultimately, it’s going to come down to meeting providers and sharing about your specific business criteria and challenges, and seeing if there is alignment. The best providers work with you to support your business, and will be able to quickly determine if there is a correct fit or not.
Curious to learn more about what to expect when implementing an ERP for your business? Check out part two, What should I expect while implementing an ERP solution?
If you’d like to chat about any challenges that your business may be facing, or would like a free inventory strategy session, let’s talk! You can book a meeting through the chat window on this page, or visit our contact page here.