There was a time when only the biggest organizations could afford an Enterprise Resource Planning (ERP) solution. What first started as a set of systems and processes used for Manufacturing (Manufacturing Requirements Planning or MRP), is now available to organizations of any size.
At first, there were no commercial-off-the-shelf MRPs. An army of developers were required to build them. The 1970’s saw the birth of SAP, JD Edwards, Oracle and Baan. These were still focused on large manufacturers trying to get an edge at the start of the global economy. There was a significant advantage to be gained by leveraging such systems and it created a need in their supply chain; a need filled by independent developers. Commercial developers caused an evolution of MRP including other business functions such as accounting, sales, and human resources; ultimately managing all the resources of organizations – and the ERP was born.
In the late 1990’s ERPs were still out of reach for many. ERPs were designed for the large organizations and priced accordingly. Then the year 2000 brought in the democratization of ERP. The sudden broad availability of high-speed internet opened a door to Software as a Service (SaaS) developers. Now, ERP is available to businesses of any size.
What is ERP?
Before we look at the benefits, let’s define what exactly an ERP is. ERP is a suite of software tools that perform business functions such as Finance (Finance & Accounting, Financial Consolidation, Management Accounting), Human resources, Manufacturing, Order Processing, Supply chain management, Project management and Customer relationship management.
One key element to note is that to be truly beneficial for your organization it is paramount that all these functions be integrated. A distributor that uses QuickBooks Online and has a Customer Relationship Management (CRM) does not have an ERP; it has two software systems to manage its business.
What are the benefits of ERP?
The benefits of ERP only come when data flows through seamlessly from one function to another without requiring human intervention. Consider the following ERP example. A Distributor (let’s call it Wii-jet) sells products created by a U.S. manufacturer to consumers and to businesses. Wii-jet has set a minimum inventory threshold of 150 for SKU XYZ and currently has 178 in the warehouse. A Sales rep just created a quote in CRM, and then transformed it into a Sales Order for 25 units of Part XYZ. This inventory is now committed for the customer and deducted from the available stock.
Shortly after, a consumer purchases 5 from the store location. Immediately, without human intervention and without human error, the stocks from the Sales Order and the retail sale are deducted from the inventory- this triggers an automatic Purchase Order emailed to the provider for another 50 units.
Two days later, stock arrives at the warehouse and, upon receipt, are added to available stocks. An internal PO is triggered to replenish the retail stocks at the store. Once the PO is marked as received, a bill is created for vendor payment. Once the customer order is shipped an invoice is generated for the customer.
These processes are available to businesses of all sizes. If you think your business is underperforming because your business systems are not integrated in an ERP Suite, we can help. There are many more benefits of an integrated ERP solution, both tangible and intangible.
Ready to talk about your ERP requirements or curious if your company could benefit from an ERP solution? Schedule a consultation or contact Withum’s experts at 240-348-5208.