10 Reasons Why You Need ERP Software
Enduring business success hinges on a company’s ability to execute consistently and efficiently. In the early 1960s, management guru Harold Leavitt posited the idea that long-term profitability rests upon having the right people, processes, and technology. When anyone of those three factors is deficient, it ultimately shows up in the form of poor business results.
Companies that can effectively align and balance these three resources, though, tend to operate smoothly and efficiently. People, processes, and technology work in tandem to orchestrate the flow of goods, services, and ideas, – ultimately leading to sustained profitability.
In most companies today, enterprise resource planning (ERP) software provides a blueprint for combining the three elements of the “PPT” framework in a way that supports ongoing operational excellence.
What exactly is the purpose of ERP, and is it a good investment for your company? In this article, we’ll describe how the best ERP software works and why it’s so important to your company’s long-term success.
The Purpose of ERP Software
ERP software provides a single, comprehensive system for managing virtually all the essential information your company needs to operate. That includes everything from financial accounting to sales, purchasing, inventory, supply chain management, planning and budgeting, labor and production, human resources, and more.
Unlike the fragmented software systems of the past, ERP brings all this information together under one roof. When a member of your sales team enters a customer order into the ERP system, the system automatically allocates inventory for that customer, determines the cost of goods, and calculates a gross margin. When the order is shipped, the ERP system subtracts goods from inventory on hand, records the amount due from the customer, and makes all the necessary general journal entries behind the scenes.
In other words, ERP software manages the flow of financial transactions throughout your business. At the same time, it’s orchestrating your business processes, ensuring accuracy and consistency. When that salesperson enters an order, the people responsible for fulfilling that order receive a notification in the ERP system. In a manufacturing firm, the order may be sent to the production manager, for example. Once that job is complete, the shipping department is next in line, and so on. ERP manages all of this automatically.
The result is that you’ll have better control over the efficiency and profitability of all your business processes. Here are some specific ways that ERP software can help your company achieve excellence:
1. Increase Efficiency
When an organization is built around operational silos, it often leads to miscommunication, inaccuracy, and inefficiency. That often shows up in the form of higher costs, lower customer satisfaction, increased scrap and waste, and poor use of resources.
ERP software helps to streamline your processes, automating many of the most time-consuming tasks and ensuring accuracy and consistency across various departments. In most organizations, this dramatically reduces duplication of effort, and it ensures that everyone is marching to the beat of the same drummer.
2. Automate Manual Workflows
When an organization relies on disjointed Excel spreadsheets, Word documents, and homegrown databases, – people throughout the company inevitably end up manually entering data from one document into another. Paper-based systems are notoriously inefficient, and often lead to lost information.
By automating manual workflows, ERP software helps to reduce errors while also saving considerable time.
3. Unleash Your Top Talent
Unfortunately, those manual tasks often require intervention from your most talented and experienced employees. Even if they’re not performing data entry work themselves, they must get involved in hiring, training, and supervising the employees who do. Manual systems are inherently flexible, which means they allow for errors to creep into the process fairly easily.
With ERP software, you have the flexibility to define clear rules and guidelines to govern your business processes. Workers can focus on the task at hand instead of struggling with manual processes. In the end, that means your most talented people are free to focus on higher value activities rather than tending to minutiae.
4. Improve Visibility to the Things that Matter Most
Business leaders want immediate access to information that can help them make smart decisions. Unfortunately, manual systems make that virtually impossible, and a lot of older ERP systems do a poor job with reporting and analytics.
Today’s ERP systems come with flexible reporting tools that combine, collate, and summarize data from across the enterprise. Because all the information is stored in a single system, getting coherent, meaningful reports from your ERP software is relatively easy.
The best ERP software offers business intelligence (BI) for advanced analytics, as well as predictive capabilities.
5. Deliver Outstanding Customer Service
At one time or another, most of us have dealt with a company that simply didn’t have its act together. When a salesperson gives you a different answer than customer service, it’s probably because they don’t have access to the same information, for example. In the end, you end up feeling like you’re getting the runaround.
ERP software provides a single coherent, and consistent view of information across every department in the company. A salesperson can easily look up the status of order, for example, without picking up the phone or sending an e-mail to the shipping department. Everyone is on the same page, – that translates to better customer service, faster response times, and improved order accuracy.
6. Reduce Your Costs
Naturally, if people throughout your organization are working more efficiently, your company will save money. There are many other ways that ERP software can help you cut costs, though. Many systems allow managers to configure alerts to notify them of potential budget overages. System reports can help leaders zero in on excessive costs or can help to identify untapped opportunities for bulk discounts.
7. Harmonize Your Systems and Processes
When different parts of an organization are using different software, – for example, when back-office personnel are using a different system than the sales team, – the flow of information tends to be slower, less accurate, and more prone to miscommunication.
With the right ERP system, everyone can be working with the same software. That means your entire team is using the same terminology and nomenclature, the same standards for data entry, and the same look and feel. Everyone is speaking the same language, and your processes will naturally operate more smoothly and efficiently.
8. Improve Collaboration
As organizations grow, collaboration usually becomes more difficult. With a larger team, communication can often slip through the cracks. If you have multiple locations or if employees frequently work remotely, that can make things even more challenging.
ERP software puts information at everyone’s fingertips. Just as importantly, all your employees will be working with the same information. That makes collaboration easier, faster, and more effective.
9. Optimize Your Inventory
Managing inventory at optimal levels can be especially challenging, particularly at a time when supply chains are under so much stress. If you maintain high levels of inventory, you’re tying up working capital that may be sorely needed elsewhere. You’re also increasing the likelihood that will end up with outdated product that must ultimately be sold at a loss.
On the other hand, insufficient inventory will ultimately translate into lost revenue, sending your customers to the competition.
Striking the perfect balance is a challenge, – but it’s one for which ERP software is especially well-suited. A good ERP system can tell you the precise amount product you have on hand at any given time, – but the best ERP software also supports planning capabilities, helping you to maintain optimal inventory levels at all times.
10. Keep Your Data Secure
Manual systems offer a host of opportunities for bad actors to compromise your valuable business data. Older software, – including on-premise systems, – can also be risky. That’s especially true if your company relies on a handful of IT generalists to manage your network, apply software updates, and tend to routine service requests.
Modern ERP software is designed to meet rigorous security requirements, with strict role-based access and user permissions that restrict the availability of sensitive data. Most cloud-based ERP software is hosted in data centers with 24×7 security monitoring, staffed by experts who stay up to date on the latest cybersecurity threats.
Want to be More Profitable?
With the right ERP software, you can align people, processes, and technology within your organization to unlock all these benefits, and more. Synergy Resources has a team of experts who understand business, technology, and organizational transformation. We would love to talk with you and your team about your business objectives, pain points, and strategic aspirations. Contact us today to schedule a free consultation.