4 Steps Companies Should Take Before Investing in ERP
4 Steps Companies Should Take Before Investing in ERP
Digital transformation has gone from buzz word to best practice to baseline, especially during these uncertain times. As businesses continue to struggle with the challenges of the COVID-19 pandemic, digital transformation can be a new tool for enabling decentralized, autonomous decision-making by bringing people, processes, and products together in an entirely new way. The core tenants of digital transformation, optimizing processes and driving efficiencies, ultimately depend on integrating data with physical processes across the entire value chain.
Data integration is where Enterprise Resource Planning (ERP) comes in. ERP is a system for integrating a company’s data from all core business components into a single place to automate decisions and streamline operations. Before COVID-19 hit, ERP projects were considered the first step in embracing a digital transformation journey because of the system’s power to improve customer experience and increase productivity. Since the onset of the pandemic, many industries have been investing more in ERP systems and overall digital transformation because of economic and societal shifts. Consequently, certain industries are either currently benefiting from, or expect to be better positioned coming out of the pandemic.
The question for organizations isn’t whether they have an ERP system in place, but whether their ERP system is compatible with the way they use information now and the way they want to use information in the future. Can your ERP software capture information from third-party systems? Can it process and contextualize data in real time? Can you easily add new features when you add new applications or business processes?
The answers to these questions aren’t one-size-fits-all. Most companies can orient themselves on a process maturity continuum. ERP software strategy should align with where the company falls along that spectrum and where it wants to go, informing the level of technological sophistication required in the software and the level of discipline in planning.
For middle-market businesses, investing in an ERP system can help manage resources, drive efficiencies and position them to more effectively compete with larger players with more resources. ERP may not be as “cutting-edge” as artificial intelligence or robotics—but it’s a necessary precursor to embarking on any digital transformation journey.
Here are four steps organizations should take to maximize their investment in an ERP system:
Balance risk and reward along the complexity continuum
Businesses with complex processes have the most to gain from implementing an ERP system because it can eliminate redundancies, streamline operations, and benefit the bottom line. Organizations that don’t properly integrate their functions can experience painful financial and operational consequences.
Understand what functionalities you need
ERP software can provide many benefits, including:
Enabling more efficient and meaningful reporting
Improving management decision-making
Improving customer service
Managing compliance and regulatory requirements
Increasing on-time deliveries
Enabling a paperless organization
Increasing inventory accuracy and materials planning
While even the smallest organizations can achieve all these benefits, it’s important to consider how ERP needs to work for your business and which vendor’s software will best position you to achieve your goals. ERP can empower companies to understand how they’ve historically delivered value to customers, as well as how they can repeat cost-effective processes and drive efficiencies across the entire enterprise.
Master the basics
The flashier and more sophisticated ERP software gets, the more companies will need to be mindful of how the tool can help them solve a specific organizational problem, or their investment could risk going to waste. Before investing in an advanced supply chain planning tool, for example, organizations need to master the basic modules. Mastery of the basics will be more critical than ever as we look toward the next technological advances—things like widespread adoption of the Internet of Things, and more data-driven business intelligence.
Clean up your data
Successful adoption of advanced technologies is predicated on a disciplined process, clean data and organized teams. At the core of ERP strategy and implementation is the integrity of an organization’s data. There are more opportunities for errors when machines cooperate autonomously with one another based on flawed data.
Because digital transformation fundamentally changes the role of the operator, building systems that maintain the integrity of certain production processes without the same level of human oversight remains one of the main challenges to implementation. If the underlying data or data analysis has errors, the automated decision-making based on that data will be riddled with errors too. This means it’s critical to ensure data is clean, accurate and accessible as part of an overall information governance strategy.
Just as a contractor wouldn’t build over a cracked foundation, organizations should not build their ERP systems with incorrect data. Companies that embrace technological advancements without the fundamental of information governance, IT strategy, and analytical capabilities could experience flawed execution.
With these fundamentals in place, ERP can be a useful tool for middle market businesses to save time and costs and drive enterprise-wide efficiencies. As digital transformation and technology enablement becomes commonplace, more organizations can leverage the benefits of a smart, strategic ERP system to maintain their competitive edge.