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What is Enterprise Resource Planning (ERP)?

In simple terms, ERP refers to a software package or solution used in the manufacturing or corporate data management sector. The software serves as a business management tool. It lets virtually any business manage and execute processes related to sales, accounting and customer management. The software usually includes several modules to help the company complete these processes. In the past ERPs have been out-of-the-box software solution, but more and more ERP providers are moving these software solutions to the web with the implementation of sophisticated cloud computing technology. But most ERPs typically run on any combination of hardware and network database systems.

ERP Advantages

One of the main positive function of a well-implemented ERP system is consolidation. Many small businesses and large corporations alike, may be using individual software solutions that don’t function well together. Effective ERPs consolidate all types of business management applications into one place so processes are fluid. One of the most effective advantages of ERP systems has to do with accounting. Good ERPs let you consolidate your accounting efforts so you can easily track and integrate cost, profit and revenue information for your company’s sales channels. This makes business-related processes run smoothly, and ultimately improve your company’s overall efficiency.

ERP Disadvantages

For companies considering whether to integrate ERP systems into their workflow, the main concern is cost. Incidentally, this is also one of the biggest disadvantages to consolidating your software solutions into an ERP system. ERPs, especially the most widely used and effective systems, are expensive to purchase. This can leave many small, or mid-sized organizations without a solid ERP system in place, when implementing an ERP would greatly improve a smaller company’s efficiency. Also, some ERPs may require that your IT team undergo JD Edwards training.

How to Find the Best ERP?

Sometimes it’s not as important to find the best ERP as it is to find the right ERP. This largely depends on your business structure, and how much your company can realistically spend on a software solutions upgrade. The best way to determine this is to figure out where your organization is hurting the most in productivity. For instance, if your biggest problem area is in logistics, you should shop for ERP solutions that are known for their strength in improving logistics and human resources processes.

Top ERP Companies

Some of the biggest players in the ERP space include SAP (who just purchased the multi-billion dollar cloud-based capital management company, SuccessFactors), Oracle, PeopleSoft and Invensys. Many of these top companies are moving their ERP systems into the cloud. This is likely to transform and improve enterprise-level software solutions even further.

ERP Alternatives for Small Business

The reality is that for many small businesses, ERP implementation is not always a viable option. ERPs are expensive, and not many small, or mid-sized companies are in a position to upgrade their enterprise software solutions to an ERP system. Fortunately there are a few options for small businesses.

1. Research ERP systems by major vendors in the international market.
2. Find ERP systems that operate on a more open-source framework.
3. Search for smaller, cloud-based ERP solutions.

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Maximising efficiency whilst minimising cost is vital in tough economic times, spending needs to be reigned in and maximum value for your money needs to be achieved.

Fixed costs, or overheads, are those that a business must pay for regardless of sales made and include wages, rent, and rates such as electricity.  Savings can sometimes be made in these areas, although it is important to carefully manage your relationships with suppliers and employees.

For example, if you need to reduce staff costs, it may be an option to take on part-time employees or make redundancies.  Speaking to your bank about minimising costs associated with your business account and getting the cheapest credit possible is also an option.

Variable costs depend on how many sales are made or products produced and include transportation, materials, and packaging.  Again, savings can be made here by negotiating with suppliers.

Managing cash flow helps businesses to anticipate any possible cash flow problems and find solutions.  A cash flow forecast shows the sales you think your business will make as well as profit and loss, which therefore allows you to identify any possible problem areas where extra funds may be needed.  This foresight gives you chance to make necessary arrangements for these hard times, such as securing a bank loan or other funding.

Some steps businesses can take in order to keep their cash flow healthy include reducing the amount of stock they have, so that they only carry what they actually need at any one time.  This avoids having to pay suppliers for stock that will not sell on for months to come.  Minimising your (variable) costs and maximising the volume of sales will allow you to increase your margins.  Effective document management can also significantly reduce costs.

Other ways to improve your company’s cash flow include recovering outstanding debt, selling off any assets that are not essential to your operations and reviewing credit arrangements with any creditors.  It is also important to be vigilant when awarding credit to others, be sure to always check credit history and stay on top of chasing invoices as soon as they are payable.

One way to encourage individuals and businesses to stick to their payment terms is to offer incentives for paying early and charging interest on payments that are overdue.  Debt factoring is a practice whereby companies sell their invoices to a third party, who will instantly pay them a percentage of the money they are owed, then chase, and process the invoices themselves.

Limit the risks and maximise on opportunities for your business by forecasting worse and best case scenarios, whether they are due to general economic conditions or are industry specific.  Efficiently deal with issues such as losing a big client with effective risk management.  Considering the worst that can happen before it does and putting a strategy in place to deal with these issues will help your business be prepared and minimise any losses.

Equally, consider any opportunities that may arise which you could take advantage of, for example servicing the customers of a competitor should they go out of business.  If your company is not prepared for these opportunities then you could lose out by not having sufficient levels of stock or not being able to react quickly enough.

One area where processes can be streamlined and savings made that is often underestimated is document management.  The average business, in fact any business, produces massive volumes of documents every year.  If these documents are not properly organised then a great amount of time and money can be wasted by employees searching for information that does not exist, not finding information, and recreating information that is already present.

Using a third party hosted solution such as Iron Mountain Document management will help to quickly improve your business’s capability to manage information without having to invest in a costly in-house solution and staff training.

Investing in document management from Iron Mountain will save your business both time and money in the end.  Often companies react to challenges with information management on an ad hoc basis, hastily patching together a solution that ultimately results in duplications, inefficiencies, and non-standard methods.  Both legal and operational risks can be minimised by using a supplier who has special knowledge and expertise in document management.

Whatever the external market conditions, your business goals always need to be realistic if you want to succeed.  Therefore, when times are tough, it is important to go back to your business plan and reset targets once you have considered all the influencing factors both internally and externally.

Attracting new customers during difficult economic times can be hard due to increased competition and reduced spending, but it can also be expensive.  Developing a strategy for looking after your existing customers and developing your relationship with them is key to survival.

Looking after your employees as well as your customers is also important in times of hardship.  Morale can often sink as people see others losing their jobs, so be sure to recognise and reward good performance and achievements as well as setting targets and monitoring progress.

As an employer, you will need to work harder than usual at inspiring confidence in your business and encouraging teamwork as well as demonstrating strong leadership in order to motivate others.  Although it may seem like an unnecessary expenditure, it is also vital to continue investing in training and skills improvement in your workforce, as you will need to keep and improve your competitive edge.