ERP is a term that has really gained currency in today's digital enterprise environment. Every ERP software provider defines it differently with a view to promoting their own proprietary version. And yet almost every corporation worth its business is implementing ERP to become more efficient and flexible to change. What is ERP? How can it help a business? Is it a foolproof investment for an enterprise to make?
What is ERP?
ERP stands for Enterprise Resource Planning. In simple words, it is software that helps map and plan resources and processes across a business. A modern enterprise comprises several business units carrying out multiple functions like sales, accounting, finance, customer relationship management, human resources, inventory management, supply chain, etc.
ERP software helps integrate information across these functions to provide a centralised resource that simplifies data and helps in decision-making. In today's fast-paced business environment, there can be a lot of uncertainty due to global economics, cut-throat competition, increasing demand and very high customer expectations. A business that cannot constantly change and adapt is not likely to survive in such a complex and dynamic landscape.
This is where ERP can help by bringing together vital information from important business units and mapping a 360 degree view of the enterprise. There is no need for manual transferring or flow of data from one business unit to another. A 'dashboard' keeps stakeholders across the business on the same page and helps pull relevant data reports. This helps increase efficiency by saving time and effort, and aligning units and sites across geographies. For e.g. sales orders can be processed quickly without any manual transmission of data and finance departments can close faster. Also the business' performance on important parameters can be followed across the board. Planning and forecasting functions become simpler and decision-making is quicker. According to Gartner, the size of the global ERP software market in 2013 was $25.4 billion. The size of the on-premise ERP market in India was estimated at $178 million in 2013.
Benefits of ERP implementation
The first usage of the term ERP was from Gartner in the year 1990. It was used to describe an evolving concept that grew from material requirements planning, that later became manufacturing resource planning and then computer-integrated manufacturing. It was then extended to other functions like accounting, human resources, etc. A modern ERP system helps today's enterprises deal with the complexities of doing business in a globalised world.
How ERP can help a business:
1. Better control over business operations
As more specialised information is delivered from various business units, decision-makers can enjoy greater control. Comprehensive real-time data flowing in can improve business insight. Vital data like cash spent, cash received and how each unit is performing can be easily accessed. Better forecasting and decisions can help enterprises adapt and transform business functions to meet the market and have a finger on the pulse of customers' requirements.
2. Rationalised and simplified business processes
ERP helps streamline processes, thereby ensuring smoother workflow and better communication between departments. Automation ensures clear and error-free flow of information making processes simpler and more responsive. A repository of best-practices in the system can ensure better operational support and easier customisation.
3. Increased employee efficiency
ERP systems can provide employees with the right information at their fingertips that can empower their functions and increase productivity. They can have more time to devote to core jobs than having to search and organise information. Improved decision-making and more autonomy due to easier data access can enhance creativity and improve employee attitudes. Inter-departmental information can get them to view the larger picture and see how their functions have an overall impact.
4. An integrated ecosystem
An organisation can be better integrated when all its stakeholders are aligned to each other's needs and common objectives. ERP can bring together all the units of an ecosystem – alliance partners, support functions, vendors and customers. Better streamlining of the different units within the whole can only improve performance.
5. Be future ready
ERP systems can help a growing organisation adapt and be flexible to tomorrow's needs to keep growing. With better integration and work and information flow, businesses can be ready for challenges with better planning and control.
Cloud ERP
Moreover, with the advent of cloud-based ERP, these enterprise solutions are now becoming more affordable and easier to implement. This has largely been enabled by Software-as-a-Service (SaaS) solutions or 'cloud computing'. Companies across various industry sectors and sizes are now making the shift to cloud ERP from on-premise implementation.
Mere installation of ERP software, however, does not automatically make a business better. ERP implementations can also be risky and expensive. ERP can only enhance the potential of a business and help it perform better when there is a corresponding restructuring of the business. This would mean doing away with old systems, transforming operational structures and managing change. Good project management is the key to successfully implementing an ERP project. And once implemented, ERP can really enhance business performance.
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