Business Advisor: November 2012

When most people think of enterprise resource planning (ERP) systems,
they think of complex software solutions directed at large,
multinational companies with massive budgets.

When most people think of enterprise resource planning (ERP) systems, they think of complex software solutions directed at large, multinational companies with massive budgets. We’ve all heard the horror stories of how complicated ERP systems can be, and the challenges associated with finding and implementing the right system. For this, and other reasons, many mid-sized companies have shied away from ERP systems for many years – preferring to struggle with an array of disjointed systems and masses of spreadsheets, rather than undergo the pain of the implementation of a new program.

However, today, implementing an ERP system is well within reach for most small and mid-sized businesses. These days, almost all of the mainstream ERP vendors offer some kind of solution directed at helping small and mid-sized businesses increase productivity, reduce costs and transform their business. These systems include best practices and right-sized solutions that are practical and, in many cases, much more affordable than in the past.

There are several reasons to consider implementing an ERP system for your business. Having an ERP system allows you to:

• Integrate business functions:An ERP can help you reduce your operating costs by better co-ordinating various business functions within your organization. An ERP provides a single integrated platform with shared data. Areas such as production, new orders, purchasing, accounting, supply chain management and logistics are all linked together to provide your management with clear visibility into key performance indicators. This is extremely valuable for forecasting and supporting business decisions.
• Get a real-time view of your operations: Knowing where the company stands on a range of issues at any given point in time provides you and your management team with the real-time data you need to make smart decisions. Many small businesses have too little information at their disposal, to make data-driven decisions. Making critical decisions based on gut instinct can be a very dangerous strategy in today’s tough business environment. An ERP system provides the data you need, and today’s systems do so in easy-to-read, easy-to-analyze, drill-down dashboards.
• Better predict optimal inventory: The financial benefit an ERP system can bring your business comes in part from its prediction capabilities. An ERP system operates with real-time information linking accounting, inventory and production in a way that allows owners and management a consolidated view into overall operations. This allows managers to predict monthly orders in order to maintain adequate inventory levels.
• Improve inventory management: An ERP system can enable you to accurately track all of your inventory, from its arrival at your facility, through production, until final shipments are made. In the case of a bakery, an ERP system can enable you to track ingredients from the vendor to specific batches in production. For example, if you bought flour from a vendor and found out later it might be contaminated, the flour can be specified by batch within the ERP system, allowing you to pinpoint when the bad batch arrived. The goal should always be isolation, so if only one batch is bad, you are able to find it and eliminate it. Batches can be isolated with precision, because an ERP system enables you to barcode each batch and track batches through the arrival and baking process. This tracking feature is particularly useful in recall situations.

Choosing the right ERP system for your business
There is no question that an ERP system can go a long way in helping you transform your business operations. However, with so many options out there, choosing the right system for your business can be a challenge. Like any type of software, ERP systems can be tremendously different; each one has its own strengths and weaknesses. ERP software selection starts with an understanding of critical success factors, which we define as those things an organization must do well in order to be successful. With this in mind, before investing in a new system, consider hiring a professional, vendor-neutral advisor, to help you conduct ERP software selection in order to help you make the best possible decision. Good ERP system advisors can bring a wealth of knowledge to the table that can prove invaluable as you to sift through the advantages of one system over another. In addition, a strong advisor will help you focus your attention on the key functionality that will have the greatest impact on your business.

Although getting help from a professional advisor does represent an additional expense, it’s one that will usually pay for itself very quickly. After all, although there is little doubt that ERP systems are more cost effective than ever before, they are still one of the most important IT decisions you will ever make.

Vlad Guzenberg is president of the Fuller Landau Technology Group. He has more than 15 years of experience in information technology. Vlad’s background includes systems design and development, technology planning and software selection. He can be reached at 416-645-6544 or by e-mail at vguzenberg@fullerlandau.com.