What is an ERP?
By David Schripsema
Architecting your tech stack around a single source of truth is good for business, and an Enterprise Resource Planning (ERP) can help you do just that.
Intentionally architecting your tech stack around a single source of truth is good for business, and an Enterprise Resource Planning (ERP) solution can help you do just that. An ERP decreases time-to-market, reduces wasted time by ensuring that everyone knows where to go for the most up-to-date information, and it can increase net income through a combination of more efficient operations, reduced inventory shrink, and more reliable order and inventory management.
Do you have a single source of truth?
A customer of ours came to us with a problem. Their shipping program wasn’t integrating with their tech stack. They were manually matching orders to shipping labels, resulting in a lot of errors. The problem? Their tech stack didn’t have one single source of truth. What is a single source of truth when it comes to your tech stack? Well it’s what keeps all your data connected and in sync, ensuring each system is talking to the other and that your systems aren’t creating duplicate data so that, at the end of the day, you’ll be able to use the data collected from across your channels to make informed decisions about your business. And we think an ERP is a great solution to this problem.
What’s an ERP?
An ERP focuses on encompassing customer experience that exceeds expectations, supply chain management that will be delivered on time at a profit, and business intelligence including accounting, tracking expenses, customer lifetime value, customer acquisition costs, cost of goods sold, and net income. These systems originated from Material Requirements Planning (MRP) in the 1960s as production companies were expanding and required additional structuring, organizing, and tracking methods. Before these systems, businesses would use excel, plain old pen and paper, and other basic methods that often would lead to duplicate data and slow communication. You can imagine how processes were hindered through these techniques—and still can be today for those who use them.
Rather than having multiple systems of data, ERPs architect a coherent, single source of truth. While this is not hard, it does require intentionality in order to be successful.
How does an ERP work?
By noting key products and their whereabouts, companies are much more effective in delivering products accurately and on time. When manufacturing companies started growing more to handle sales and customer service, for example, the functionality of MRP expanded for various uses. Rather than hiring someone to manage and make productivity decisions in each sector, in 1990, ERPs were adopted by large and small businesses to curate unified data across the company. We like to call this data a single source of truth.
Rather than having multiple systems of data, ERPs architect a coherent, single source of truth. While this is not hard, it does require intentionality in order to be successful. You have to set up which system owns which data and make sure that you have the right data in the right place. Oftentimes, people don’t take that into consideration and end up with disparate systems and multiple sources of information. Don’t worry though, we’ll get into steps on how to avoid challenges and achieve the best results.
How to adopt an ERP
First, we want to reiterate why this system is important. Business and business processes change over time. Keeping track of current data and utilizing it for your future moves, in an effective manner, is difficult enough. Yet, with your company growing and facing natural staff attrition, the challenge to manage data and keep everyone on the same page becomes even more of a headache. With a little initial effort and continued monitoring, an ERP system will provide you with holistic and adaptable information to best drive your business decisions. Though this also means that you and your employees must be willing to accept and adapt to change as well.
In general, this includes leveraging data audits and batch cleansing for periodic spot checks and ensuring standards are upheld. Cleaning incorrect data can waste countless hours of time so it’s much better to get it right the first time. For example, small details like whether to input the day or month first are highly important as later when exporting files, you will regret the lack of deciphering. Minor details will help manage the who, what, where, when, and how of your data flow. Though it may be scary—especially for smaller companies—this tech automation process will accommodate your business strategies and accomplish your long-term goals.
Once you have accepted the responsibility to align this engine toward your values and have committed your employees to trust in the process, you are ready to select your preferred platform. There are three main differentiations within ERP: On-Premise, Cloud, and Hybrid.
On-premise ERPs are manually installed in-house where your business functions on local servers and computers. This option offers full control for frontend users and may be right for you if you have an IT team or outsourcing option for the task of security and maintenance. Your company will have full control of software flexibility and data, rather than any ERP vendor. While this option requires a fairly spendy upfront cost, there are often little expenses after that.
Cloud ERPs are very common as it allows access to information anytime and anywhere, especially as mobile devices, working from home, and working internationally have become frequently accepted in the business world. Mobile ERP apps provide increased visibility and heightened accessibility. This is ideal for smaller companies or businesses that work remotely and require access to information but do not need as much control over information. It also allows for better adaptability as it can consistently be updated and improved. This option requires lower upfront costs but generally involves a monthly subscription fee.
If you are feeling you may want some of each of these options, you likely would benefit from a hybrid ERP. This system allows you to have significant control over your information but still have access to remote, updated, revolutionary cloud technology. Also referred to as a two-tier model, this uses current on-premise ERP functionalities to handle corporate functions while incorporating cloud ERP software to support small business units. This is a great option to test cloud abilities before fully committing and is less expensive than implementing a single on-premise solution throughout the entire infrastructure.
Finding the right ERP for you
Some of the main programs we recommend for retailers include Oodo or DEAR for third party logistics integrations. There are many options out there, so be sure to conduct further research, though we are always here to help. Working with a team that has a good understanding of the space and can balance your needs against the capabilities of platforms under review is a great way to go through the selection process. A key consideration when selecting an ERP is the post-purchase process. Making sure that your partner will provide training and user support will streamline onboarding and deliver value much more quickly than one that leaves you on your own.
Now that you know a little bit more about ERPs, here are a few tips to help you get started:
- Ensure leaders are on board and marching to the beat of the same drummer as you begin rolling out your ERP.
- Communicate with your staff about these changes and define implementation stages (especially if you are testing different versions).
- Create a project plan and timeline to value.
- Hold training sessions so everyone is fully equipped to navigate and work with the ERP, as well as gather feedback about any areas that need improvement before achieving full adoption.
- Check-in regularly with your teams to gauge satisfaction and address any concerns as your business changes and adapts to a new piece of technology.
Plan on maintaining your ERP
An ERP manages systems and data for every aspect of a business by tracking and updating real-time information regarding cash flow, order processing, sales, accounting, payroll, and more. By integrating data from multiple applications and creating a repository for all information to live and communicate with each other, you can more effectively deliver products to your customers with ease.
Though this is not a system that you can simply plug in and expect results. Here’s the truth: approximately 50% of ERP implementations fail the first time businesses attempt to use them. However, of those who implement it correctly, 95% improved some or all of their business processes. Additionally, in an Ultra Consultants study, out of 85% surveyed, 82% of organizations that implemented ERP achieved a return on investment within their expected timeline. The benefits for companies who successfully implement include reduced process time, increased collaboration, and a centralized data system.
Do you need an ERP?
As we’ve said several times in past posts—intentionally architecting your tech stack around a single source of truth is just good business. It reduces time-to-market, reduces wasted time by ensuring that everyone knows where to go for the most up-to-date information, and it can increase net income through a combination of more efficient operations, reduced inventory shrink, and more reliable order and inventory management.
This article was written in collaboration with Kelsey Duffield.