If you were to ask 10 different people: what is Enterprise Resource Planning (ERP), you’d probably get 10 different answers. All of those answers would most likely be correct too. Which obviously means that an ERP does a lot. But that’s not very helpful.
In essence, an ERP is a database. It gives you the ability to record everything that happens in your business operations, it stores this data, and is able to output the information for people to be able to interpret it. If used correctly, it paints an accurate picture of what is going on, so you can take action, make informed decisions and back them up with reliable data.
A key component to what makes an ERP so important is that all the data is recorded in one place.This means the system is able to track your activities across all departments, whether it be procurement, order fulfillment, product management, warehouse logistics, manufacturing, supply chain, accounting, human resources, customer service, or any other department an organization needs to manage.
That sounds great in theory, but you’re probably wondering why you should consider an ERP for your business? This may seem like a tool that only large enterprises with complex processes need to use. Historically, that used to be the case. But times have changed, and so has ERP.
What can ERP do for your business?
Having a system that unifies your operations gives you three things: visibility, control and automation. When all your operations are unified under one centralized system, information is readily available and can be easily communicated across the organization.
Data is able to flow seamlessly without being limited by siloes or other barriers, which means less inconsistencies so you can ensure nothing falls through the cracks. And, with cloud-based software, this information is secure and accessible to users located anywhere in the world without having to install anything.
The benefit of unifying your operations under one centralized system is that you become more efficient. And why do you want to be more efficient? To save money, time and effort.
First and foremost, saving money increases your bottom line. This happens in two ways: by allowing you to more easily identify inefficiencies in your spending and by fulfilling orders faster.
Putting in less time and effort frees you from the shackles of managing day to day operations, so you can focus on growing and improving your business in the ways that matter most.
Lastly, reducing errors can mean happier customers and employees, which is a great foundation for brand loyalty. At the end of the day, no matter what size a company is, isn’t that what we all want?
Who can benefit from using ERP?
Once upon a time, ERPs were exclusive to the bigger players. They were considered too powerful, too complicated and too expensive for small and medium sized businesses. Today, they are more accessible, more affordable and many of them are even customizable to your business needs. They come in all shapes and sizes, so don’t let the name intimidate you.
Whether you’re just starting out, beginning to experience growing pains with increased volume, or a mature business, you can benefit from adopting a system to improve and streamline your operations. This doesn’t necessarily mean a full-blown ERP system with a tailored implementation project. Having a tool where you can enter orders, fulfill them, and track purchases while tying it all back to your inventory levels can be very useful for any business with stock.
Small and medium-sized businesses may feel like the effort to properly set up a system seems like too much upfront work and money. It’s true that some preliminary set up is needed for basic ERP functionality to ensure the necessary activities are being tracked properly
However, compare it to exporting orders from one place, fulfilling them in another logistics tool, manually updating your inventory levels and then managing formulas for purchasing - spreadsheet Olympics, anyone? You’ll quickly realize the amount of time needed for ongoing maintenance and the likelihood of human error can cost you sales and profitability.
These issues are further exacerbated when you start selling through different channels and need to be able to reserve inventory from orders coming in from different places. Growing your business means changes, such as an increase of SKUs and marketplaces, buying from different vendors, and so on. As your workflows become more complex, things change quickly and you need to be able to adapt to keep up.
With a bit of thought and effort when setting up your ERP, you can tailor it to behave exactly how you operate and to the degree of detail you require. In the case of a small business, for example, you could easily pull up your inventory levels and enter sales orders and POs, all the way to large enterprises that need complex custom workflows that function automatically when certain criteria are met. ERP can be both those things and everything in between.
All this to say, it’s never too early or too late to begin adopting a centralized system. No matter what stage your business is at, being able to rely on a single source of truth that is flexible enough to grow with you over time will put you in the driver’s seat, so you can scale your business with control.
Why are some people fearful of ERP?
Based on the benefits we’ve discussed so far, it’s clear that when you don’t have a system in place, you’re more focused on executing simple day to day operations and scrambling to put out the next fire.
We’ve shown how having some form of ERP in place is beneficial for any business regardless of size, industry or vertical. So, if it seems like a win all around, why doesn’t every business leverage the awesome power of ERP?
One common fear is that your ERP system will start to become a distraction itself, and you may end up spending more time wrestling with it than actually having it work for you. And, what if it stops working entirely, and you can’t receive incoming orders or ship your goods? Just like any other engine, your whole operation seizes.
Being completely honest, it’s true that, depending on your level of complexity and size, the benefits you get out of an ERP, such as time, money and reduced manual work, are the exact same things needed to successfully implement an ERP in the first place. For some companies, it’s just not worth the ROI. That’s why ERP often gets a bad rap. But times have changed and selecting and setting up an ERP doesn’t mean investing hundreds of thousands of dollars and months (or years) of work.
So, don’t let the naysayers deter you, because the things that can go wrong are even more likely to go wrong if you have no system at all. Rest assured that these risks can be mitigated.
Four things to keep in mind when adopting ERP
By now, we’ve probably convinced you of the benefits of ERP and hopefully made you seriously consider looking for one that fits your business needs. If so, there are some things you can do to ensure your transition to ERP is as smooth as possible.
Be prepared and know your requirements
Failing to be prepared and not understanding your workflow is what often leads ERP implementations to flop. Having a rock solid idea of your process and the decisions and actions to be taken at each stage will help you uncover your requirements so you can properly evaluate which ERP solution will be best for you.
For example, if you have one or two selling channels and a relatively standard workflow process, such as buying goods and selling them online, and you fulfill orders yourself, you'll have a lot of cloud-based options that come with a reasonable price tag and you’re likely able to do the setup yourself.
Some ERP tools allow you to start small and then grow with you. It’s important to remember that you don’t need to set up everything at once. By starting small, you’re able to gradually learn the new system and grasp the fundamentals. It’s also a nice bonus when there are online resources like orientation guides, videos, and documentation to help you learn the system at your pace.
Growing pains become much less painful when you can stay on the system you’re already comfortable with while continuing to add more complex automation, built-in controls, and custom workflows at your discretion. Want to automatically issue PO’s when your stock hits a certain level? Or automatically calculate the price to charge based on customer class? These are simple yet powerful automations that can save you time and mental effort.
Connections, connections, connections
If you’re already using tools to manage parts of your business like QuickBooks Online for your accounting or ecommerce platforms like Shopify, many ERPs have built-in connections to these valuable platforms.
Data migration is often half the battle when adopting a new system, so you can shave down a lot of your setup and configuration time by connecting to these platforms to pull in your data directly into the ERP. This means you can start using the software right away with data you are already familiar with, which helps a lot with the adoption of the software.
Sometimes you shouldn’t go it alone
The right ERP for you should be easy to use but sometimes a more complex business means a more complex transition process. If you need to do things like adding a large number of SKUs in different marketplaces, sub-contracting or production processes, buying and selling in different currencies and units of measurement or allocating inventory over multiple locations, having a dedicated team to ensure success is something you might want to consider. Hiring some outside consultation or professional services is ideal for a smooth transition to ERP. They will be able to help you analyze your workflow and tailor the system to behave exactly how you need it to run your business.
If the software you choose has an in-house support team that knows the system inside and out, that is something you’ll want to keep an eye out for. They can help familiarize and train you on the software, and if something does go wrong, there’s a team whose job it is to fix it as soon as possible.
A bonus “nice to have” in addition to these four things is granular internal controls that you might not get with simple apps or spreadsheets. Want your sales reps to be able to enter orders but not change their commission? Or, warehouse pickers only able to see the quantity of items but not their cost? Having a tight control over security as you hire more employees is crucial for a smooth operation.
Paragon’s product suite gives businesses the power to leverage ERP at any level. ParagonSMB’s friendly UI and flexibility invites small and medium sized businesses to adopt a new tool quickly and future-proof their operations as they grow. With ParagonERP, larger, more seasoned businesses can enjoy in-depth custom workflows and automations with the option to opt-in for support from our in-house professional services team.
Regardless of where you land on the ERP complexity spectrum, any business can benefit from having a centralized system in place that tracks your activities, records the data, and gives you detailed information on your operations. You’ll find you spend less time struggling with disconnected processes and you’ll have the data you need to back up your decisions. Most importantly, you’ll gain peace of mind knowing your operations are under control.
ERP does a lot. It keeps track of everything you do so you have an accurate picture of what is going on in your operations and you can rely on data to make informed decisions. This gives you control and efficiency while saving time and money so you can focus on what matters most to you.
ERP isn’t just for large enterprises anymore. Small and medium businesses also benefit from having a centralized system. There are a range of ERPs of varying complexity to match your needs and budget. Knowing your operational workflow is key when selecting an ERP, so you have a good idea of how to properly evaluate your options. It’s always helpful to check if the solution has built-in connections to platforms you’re already using to help with data transfer and centralization.
Starting out small can be very beneficial in the beginning as it’s less intimidating and overwhelming when getting started, and a good ERP will be able to adapt with you as you grow.