Benefits of ERP: Advantages, Disadvantages & Selecting an Enterprise Resource Planning System

Organizations from a variety of industries benefit from Enterprise Resource Planning (ERP) software, but, there are certain types of businesses that see more benefits of ERP.

Here, we will talk to some key trends that suggest when it’s time for a business to implement or upgrade their ERP system, which include:

1. Times of Growth
   • The organization is growing, has grown or is planning to grow significantly
2. Issues with Operations
   • The organization needs enterprise software to better manage processes
3. Mergers or Acquisitions
   • For example, the parent organization needs to streamline systems across companies
4. Old Legacy Systems
   • The organization’s current system is outdated and not available for upgrades, or no longer serves the business and users adequately
5. Strategic Roadmapping
   • Organizations with forward-thinking executives have outlined a business technology roadmap that includes a new enterprise solution

While many factors indicate the need for implementing an ERP system, companies in certain industries stand to gain the most from making the move.

Benefits Of ERP

What are the key business benefits of ERP software?

1. Enhanced Business Reporting:
   • Better reporting tools with real-time information
   • A single source of truth – one integrated database for all business processes
2. Better customer service:
   • Better access to customer information
   • Faster response times
   • Improved on-time delivery
   • Improved order accuracy
3. Improved Inventory Costs:
   • Only carry as much inventory as needed, avoid these common issues
     • Too much inventory, and higher overhead costs
     • Too little inventory, and longer customer fulfillment times
4. Boosted Cash Flow:
   • Better invoicing and better collections tools to bring cash in faster
   • Faster cash means more cash on-hand for the business
5. Cost Savings:
   • Improved inventory planning
   • Better procurement management
   • Better customer service
   • Improved vendor relationship management
6. Better Data & Cloud Security:
   • Dedicated security resources
   • Avoid installing malicious software
   • Data distributed across multiple servers
7. Business Process Improvements:
   • Automate manual or routine tasks
   • Implement smarter workflows
   • Gain efficiency
8. Supply Chain Management:

• Effective demand forecasting and lean inventory
• Reduce production bottlenecks
• Transparency through the business

Cons of ERP – Important Factors & Disadvantages

1. Costs of an ERP Software
   • Third-party software add-ins
   • Implementation costs
   • Maintenance
   • Initial and continuous training
2. Complex Data Conversion
   • Developing a solid data conversion strategy can be difficult
   • You have to define, examine and analyze data sources
   • Bad data conversion will cause delays and increased costs
3. Requires thorough training
   • Training needs to cover all of the ERP system’s features.
   • ERP training sessions need to be in line with business processes
   • IT users need to be trained for the technical aspects of the ERP System

ERP projects are an investment of time and money and the most successful ERP software implementations require:

• Alignment between the business and IT
• Executive sponsorship and support
• Internal team leaders
• Trusted external partners (consulting and software vendors)

ERP software is like any business technology – the tool on its own doesn’t cause failure or success. The business environment, leadership, and end-users determine the ROI of an ERP system – along with the project planning, methodology, and implementation.

What can cause an ERP implementation failure?

• Data conversion
  • One of the biggest issues during an ERP project is data conversion – moving data from the old system and mapping it into the new ERP.
• Integrations
  • Early in the project, you need to start thinking about what other systems need to integrate with your ERP system and have a solid plan for integrations.
• People
  • An executive needs to be involved in the ERP project, and other key business leaders need to be included. Having a communication plan is also key.
• Training
  • Training needs to be an integral part of the ERP project. Internal teams and end-users have to be comfortable with the new software.
• Project planning
  • Planning is crucial to ERP implementation success. Following a methodology is also fundamental to avoiding failure.

For Reference

• Outsourcing DevOps: An Introduction to How It Benefits Your Business
• RFP Response Guide: How to Draft an RFP Response That Wins Clients
• What is an RFP? [A 2022 Guide]

What types of businesses that benefit the most from ERP software?

The versatile nature of ERP software allows companies in a variety of industries implement solutions based on their business needs. Major industries that use ERP include:

• Manufacturing
• Distribution
• Professional Services
• Construction
• Industrial Services
• Service Business
• Healthcare
• And more

How does ERP software improve business processes?

ERP systems solve many problems you may be facing, including a need for:

• One source of truth as one master system of record for all important company data
• Automating manual processes, such as invoice creation, routine communications, financial report generation, product and service delivery and material requirements planning
• Better visibility into all aspects of the supply chain, increased efficiencies and improved productivity
• Improved business data security, whether stored on-premise or in the cloud.