The True Value of ERP

Enterprise Resource Planning (ERP) solutions have gained popularity in the past decade as companies begin to realize the benefits of a single, integrated software system to manage their core business functions. ERP systems today attempt to incorporate some if not all of the following key disciplines: Manufacturing (Engineering, BOM, Scheduling, Workflow Mgmt, Quality, Cost Management), Supply Chain (Inventory, Order-to-Cash, Scheduling), Financials (AR, AP, GL, Cash Management, Fixed Assets), Human Resources (Benefits Administration, Talent & Performance Management, Time & Labor, Payroll), and more recently, Customer Service (CRM), Sales (SFA), Projects, Warehouse Management, Product Lifecycle Management, and Business Intelligence.

A modern ERP solution enables a company to eliminate disparate software applications, or point solutions, that may not only be obsolete and costly to maintain, but are run in virtual silos, so that individual departments cannot easily link communication or workflow to other departments. Often times there are manual, paper-based processes or spreadsheets for departmental interactions, which are not only time-consuming and burdensome to maintain, leaving you more susceptible to errors, but are also more dependent on internal staff that understand the idiosyncrasies and “work-arounds” of the current system.

Consider a wholesaler taking an order from a retailer. If the wholesaler has an order entry system from a point solution it may be effective in capturing that initial order, and generating a shipping order for the warehouse, or an invoice for billing, but if it’s not integrated with the supply chain system, they won’t be able to determine how much inventory is left w/out contacting the warehouse, or checking a report. And if it’s not integrated with the financial system, they won’t be able to verify the credit worthiness of a particular client, and see if there are any outstanding invoices. Additionally, they may fail to promote excess inventory identified for discounts under promotion. Such disconnected work environments promote departmental silos. Lapses in the system become the problem of another department, and ultimately hurt the competiveness of the enterprise because they lack common goals or a shared vision.

The process of implementing an ERP solution enables a company to examine their internal processes, re-engineering them for enhanced efficiency, and improved workflow. It’s an opportunity to eliminate manual processes and spreadsheets, and streamline interactions between departments. It further blends and integrates the responsibilities of each department so that they are working in tandem, empowering individuals while enforcing accountability, and facilitating the core competency of the business. An integrated ERP system’s main value, therefore, is not just the ability to streamline the transactional functions, but more importantly, to improve communication and accountability between departments, making educated businesspeople out of the staff, who can now be armed with individual and department goals that raise the competiveness of the entire enterprise.

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