For organizations struggling with disparate data and systems, communication disconnects among departments, operational inefficiencies and time lags, buying an ERP system is a potential remedy.
Organizations look to ERP, which is short for enterprise resource planning, to solve any number of issues ranging from gaining visibility into inventory and supply chains to improving project management and compliance monitoring. Overall, ERP software is seen as a powerful tool that helps companies make more informed decisions.
Beyond that, companies have other factors to consider before starting the ERP system selection process. ERP software is extremely varied, offers deep levels of customization and gives businesses enormous flexibility in their ERP options. But that flexibility also makes the buying decision difficult.
Because there are so many different types of ERP systems, knowing a company's specific product, IT, operational and business goals is paramount before looking at options. Here are nine common ERP use cases that can help with choosing ERP software.
1. Small to midsize company wants ERP benefits, but is wary of initial costs
A small to midsize company wants to improve its business processes, eliminate the costs and data inconsistencies of multiple systems and improve operational efficiencies.
The company chooses cloud-based ERP software, which enables it to replace its systems without having to invest in ERP hardware and software for its data center. Instead, the cloud vendor runs the ERP infrastructure, which the company effectively pays for in a monthly subscription.
With finance teams, sales reps and other business users all logging in to the same system and working with consistent, up-to-date data, the company can make quicker and more informed decisions. What's more, the ERP investment can create a multiplier effect as better decision-making drives revenue growth, which can lead to expanded use of the ERP system, which in turn can enable more growth.
2. Industry-focused company wants ERP aligned with its specific needs
A company in a highly specialized industry -- for example, food and beverage -- wants ERP tailored to its specific business needs and pressures.
The company chooses an ERP system specifically designed for its industry. The specialized ERP saves the company time in adapting the ERP to its business environment and provides the right infrastructure and workflows for running the business processes that are unique to its industry.
A specialized ERP system also offers opportunities to create two-way integration, which enables changes in the ERP software to trigger updates in a related system, and vice versa -- say, a cloud-based customer relationship management platform -- thereby preventing the need for manual data entry and yielding more real-time data.
3. Large company needs to integrate new subsidiaries or remote offices
A large enterprise has an on-premises ERP system for its internal processes but needs a quick way to onboard global offices or newly acquired subsidiaries.
The company uses a two-tier ERP approach that combines a cloud-based version of its on-premises ERP system -- or compatible software from a different vendor -- with localization capability for its facilities in different countries. The remote sites can get started more quickly on the cloud, giving the parent company time to integrate them into the on-premises ERP system later, if at all.
This approach also can help the enterprise on the human resources management front by simplifying onboarding of new employees during expansions and acquisitions.
Over time, the company can decide whether to move its remote offices and acquired subsidiaries over to its on-premises ERP or to migrate corporate to the cloud version.
4. Manufacturer needs to streamline operations and costs
A manufacturer needs to integrate its manufacturing processes and improve efficiency. It also wants to get rid of the data discrepancies and software licensing costs from using a different system for each function.
The company buys an ERP system with strong material requirements planning features to solve typical MRP issues, such as buying and managing components and raw materials, as well as tracking orders, starting with order placement and origination. By also using the ERP's order management features, the company can begin processing these orders all the way through manufacturing, distribution and delivery, ending with order fulfillment and payment.
Such a system can also help to automate such important functions as inventory management, materials purchasing and asset management.
The manufacturer can eventually expand the ERP to other areas, such as predictive maintenance, by using digital twin technology and IoT sensors to monitor equipment performance and ultimately reduce downtime costs.
5. Company expanding globally needs more automation
A company that uses basic accounting software is expanding globally and needs to automate processes, such as currency conversion, that otherwise might need to be done manually. The company also needs more visibility into its finances, timely reporting and remote access.
The company chooses an ERP system that can automatically convert different countries' currencies that also integrates with its other systems for credit card processing and payroll, thereby producing further efficiencies. The company can then generate detailed and accurate reports from the ERP system and enable faster decision-making.
What's more, the tight financial integration goes a long way toward getting finance teams, business users and sales reps on the same page.
6. Service organization wants better coordination to reduce miscues
A professional services organization wants its finance, sales and operations teams to coordinate better. It also wants to reduce errors and operational miscues by ensuring that everyone is using the same data.
The company opts for a service-oriented ERP system that can track service engagements and record activities, resource consumption and costs as they occur. The system can also alert field operations to new service requests based on who is nearby, reducing resource waste. Additionally, it can aid CRM efforts, ensuring that stakeholders can address customers' needs in a timely fashion.
7. Medium-size company needs improved analytics
A medium-size company wants to expand ERP for better analytics to improve operational efficiencies.
The company decides to add a business intelligence component to its ERP system. But it also wants to shorten its financial close cycles, improve accounting accuracy and take advantage of advanced financial modeling and risk assessment.
The business chooses an ERP suite with strong financial management capabilities, as well as AI, machine learning and predictive analytics to provide real-time information for more informed decision-making. If the company sells products online, it can use the analytics capabilities to improve its customers' e-commerce experience.
8. Small company has a CRM system, but needs more functionality
A small company already has a CRM system for sales and marketing but then decides it also needs support for functions like accounting and operations.
The company selects an ERP system that addresses these new business functions and is compatible with its existing CRM system.
9. Company wants a flexible and scalable ERP system
A company's initial goal is to start with one component of ERP, like CRM or human capital management. It later adds functional modules as it grows. Some of these individual systems are easier to expand into a full ERP suite than others.
Because of this, the company gives extra consideration to the flexibility and scalability of a proposed new ERP system, even though it does not need all the functions immediately.
ERP use cases and systems are complex, and complexity increases the risks for any implementation. For this reason, getting the right business partners or integrators to help with ERP implementation is as important as selecting the right system.
Because ERP use cases, product choices and vendors vary, it can be easy to go off course from company goals. The organization should make every effort to ensure that it keeps those goals in sight while making an ERP system selection and should always be aware of how the system is structured and how it functions.
These nine ERP use cases involve not only the ERP functions and modules that a company needs, but the all-important question of whether to deploy ERP on premises, strictly in the cloud or in a hybrid of both. The deployment issues can't be disentangled from the functional questions, in part because they often affect the feature-richness and usability of an ERP system.
ERP vendors doing more to support digital manufacturing technologies
SAP tops list of ERP vendors, but market is more evenly divided