The idea behind enterprise resource planning (ERP) is to manage planning, purchasing, inventory management and other essential business functions more efficiently.
Since this is so complex, it’s usually done using what’s known as an ERP system — a powerful platform that aggregates and analyses data from across your business.
Benefits of ERP software
ERP software has a lot to offer businesses. From centralised cloud access to enhanced productivity and automation, there’s something here for every industry. Many ERP advantages also enhance each other, leading to a powerful snowball effect as you bring more of your organisation onboard with the ERP solution.
Centralised information and processes
One of the primary benefits of ERP systems is they effectively centralise the collection and storage of information on all manner of activities. So, instead of using and maintaining several separate systems and databases, an ERP system provides access to all your data on accounting, inventory, sales, supplies, customers, and production.
This simplified, centralised system in turn enables employees to work more efficiently. Everyone knows where to look for data, and most importantly, has access to the same data. This can drastically reduce errors and confusion in your organisation.
Access from anywhere
If you opt for a cloud-based ERP solution, you can access your data from anywhere in the world — no matter which employee needs it or what device they’re using. This enables faster response times and greater flexibility.
Imagine a scenario where a key player needs to work from home for a day to take care of a family obligation, but also needs to put together a data analysis for the company. Cloud access means this kind of unexpected scenario won’t put your organisation behind schedule.
Increased productivity
ERP software can increase productivity on multiple fronts. Between the centralised information and cloud access, employees will be able to find the data they need faster and from any location. Additionally, the automation of processes (more on this below) can free up hours of time for more impactful tasks.
More productive employees means increased output, of course, but it can also mean reduced stress for your staff. If they’re able to produce more work of a higher quality in the same amount of time, they’re more likely to meet or exceed quotas without needing to run up against deadlines.
Reduced overhead costs
The centralised, streamlined processes of your ERP system, combined with the increased productivity and efficiency it enables, can result in reduced overhead for your organisation. The reduced labor costs on menial tasks and hunting for data can be particularly nice. You may also be able to save on inventory by only storing what you actually need (thanks to improved data). Finally, these tools can help better forecast for the future and plan with more confidence, so less money is wasted.
Better inventory tracking
Enhanced transparency and more reliable data points come together to provide for better inventory tracking and management. This awareness and transparency in turn enables more effective forecasting and a leaner inventory, without excessive, unneeded products.
Maintaining inventory — both in terms of replenishment and organisation — can be one of the largest expenses for a business. And the less organised your inventory process is, the more you’re likely to lose product to accidents, theft, or age. Improving in this area can save your company a tremendous amount of money.
Automated business processes
ERP software can help automate tasks around data entry and analysis. These automated tasks can free up time for employees. Additionally, the data gleaned can then help power further automation across your business.
The right ERP solution will analyse information and track changes to provide more accurate forecasts — all without you needing to lift a finger. And automating menial tasks frees up time for people to do more strategic, impactful work, which can elevate your whole organisation.
Improved cross-department collaboration
Your company probably has several departments dedicated to different roles. However, these departments aren’t likely to operate in a vacuum — they probably depend on each other for a number of tasks. ERP software provides a unified system for your data and analysis.
The centralised nature of this system can greatly simplify cross-department work. This can be especially powerful for remote teams or those that are dispersed across multiple organisations within a company.
Improved supply chain management
Enhanced inventory tracking and management, combined with greater visibility into all aspects of your business, enables greatly improved supply chain management. The visibility, in particular, makes determining what supplies you need and when much more efficient and effective.
A well-designed ERP system improves your supply chain so you can:
Improve demand forecasting, inventory management, and procurement
Reduce manufacturing costs and develop exciting new products to give you a competitive edge
Reduce inventory and production overages and dramatically improve profitability.
Optimise stock levels through unified insights into sales, production and delivery schedules
Streamlined reporting and planning
ERP software provides a powerful data centre for your organisation. This enables you to collect, store, and work with information from across your entire organisation from one central location.
That centralised system also makes analytics, reporting, and ultimately planning much simpler. You can compare data across departments and keep tabs on multiple aspects of your business simultaneously, giving you powerful insights.
Improved quality control
The AI that powers most ERP systems can enhance quality control in several ways. It can watch for certain conditions and checks to be met, or limit who can sign off on various stages of production. You can also utilise automation to send notifications to relevant people as an item moves through production towards completion.
Improved quality control results in a better product and more satisfied customer. That, in turn, generally means more business for your company. This is a fantastic example of how a little investment up front can lead to large gains down the road.
Increased data security
Data security is critical in today’s world. While we wouldn’t necessarily say that companies don’t do enough to protect their data, the seemingly constant string of high-profile data breaches indicates that there’s still plenty of room for improvement.
ERP systems can greatly enhance data security with powerful built-in security controls, which can help keep customer data secure and protect your sensitive inside information.
Improved data reliability
Human error is inevitable — it simply can’t be avoided. As long as people are entering data and performing analysis, someone is bound to make a mistake. The automation and artificial intelligence packed into ERP software doesn’t suffer from this problem, though.
This enhanced reliability not only helps produce better forecasts, it can give decision-makers more confidence in their choices. If you can trust the numbers, you can use them to chart the course with confidence.
Improved risk management
ERP software improves risk management by reducing the likelihood of accounting and financial process errors and providing greater visibility and control over operational details. For example, with forecasting tools, you can see whether you'll need to hire more people to handle a busy time of year or increase production to meet growing demand.
With increasing industry and government regulations, companies must make certain they’re compliant or face hefty fines or penalties. A compliant ERP system lets you manage your finances accurately and legally with built-in auditing tools and reports.
Enhanced customer experience
When you take all of the above together, the end result is the ability to give your customers a far better experience. Your organisation will be more cohesive, productive, and efficient, leading to reduced costs and a higher-quality product. These benefits can then be passed on to your customers, further fuelling the bottom line.
Common challenges associated with ERP software
Despite all the benefits of ERP software, it’s also important to consider the drawbacks of implementing such a system. Here are the main disadvantages of implementing ERP software.
Requires executive buy-in
Any big transition, such as implementing an ERP system, has to start at the top. Getting approval and support from C-level executives, preferably the CEO or CFO, is challenging but critical to the success of the project. With top management on board, it’s easier to drive change through the organisation and secure the necessary funding and resources.
Comes with upfront and ongoing costs
Enterprise software solutions tend to be pricey, and ERP is no exception. Generally, these solutions more than pay for themselves over time, but the initial costs could be prohibitive for some businesses.
Licensing costs: You’ll need to purchase the actual software package itself, or a license for it. This varies with the vendor but can be thousands of dollars.
Implementation costs: You’ll need to consider the costs of rolling out the new software solution in your company. This process requires knowledgeable staff, time, and training.
Maintenance costs: ERP software needs to be kept up-to-date and maintained if you want to see any benefits from it, so you should factor that commitment into your cost analysis.
Requires system customisations
The nature of ERP software means you’ll need to invest time into customising the software to your specific business and needs. Ultimately, these customisations are beneficial, but the upfront costs in time or money (if outsourcing) add to an already-expensive process.
Requires onboarding and training
As with any new system, there’s going to be a bit of a bump in the road as you onboard your team and get everyone up to speed with the software. This process could take quite some time, depending on your team’s culture and history with similar software.
Take time to realise ROI
Finally, as with any major investment, it can take time to see the returns on ERP software. Even once the dust of initial setup has cleared and your team and organisation have settled in, the benefits can seem more intangible at first.
That said, we don’t think it will take long to realise the benefits if your business is in the right stage. As enterprises grow, the complexity of operations can become so great that any streamlining is a major advantage.
Questions to help determine if your business will benefit from an ERP system
If the benefits of ERP sound enticing, but you’re still on the fence, consider some of these questions. They can help you determine whether an ERP system is right for our business.
Is your company growing?
If so, you may already be running into issues with your existing systems. As businesses grow, they can quickly outpace their systems’ abilities to keep up. An ERP system can help ease these growing pains.
Do you need to streamline business processes?
If your processes and systems have become convoluted and clunky, it can eat into your productivity and cause unnecessary stress on your staff. If that sounds familiar, it might be time for an overhaul. ERP software can help centralise and streamline your systems.
Are you trying to reduce operational costs?
ERP software can have a massive ripple effect on operating costs by increasing efficiency in a variety of areas, including inventory planning and forecasting. It can also be useful for improving purchasing and freight spend and speeding up financial close.
Do you need access to accurate business data?
Let’s face it — you use your data to make all sorts of mission-critical decisions about your business. If it’s not accurate, how can you trust those decisions? ERP software helps you keep data as accurate and up-to-date as possible.
Are your business systems integrated?
If not, you’re adding unnecessary friction to your day-to-day processes. A company-wide ERP solution can help streamline work and improve efficiency by integrating all of your systems. This, in turn, can lead to better performance and less time spent on unproductive tasks.
Are you able to provide the best customer experience?
Inconsistencies with internal processes, combined with inaccurate or untrustworthy data, can trickle down to impact the customer experience. A better business internally can mean a better business for your customers to deal with.
Build a competitive advantage with ERP software
Growth is a major goal for many businesses, but it also comes with increased complexity and overhead. One of the best ways to handle this and help your business grow and compete is to use ERP software.
These solutions provide many tangible benefits across the entire organisation, from supply chain and inventory management to quality control and collaboration. The end result is a more efficient and streamlined organisation built on reliable data. While they can be expensive, ERP software benefits far outweigh the cons for most growing companies.
Speak to an expert today to learn how MYOB’s cloud ERP software can help push your business to the next stage of growth.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.