What Is Enterprise Resource Planning? 5 Steps To Choose the Right ERP System in 2022
Enterprise resource planning can be thought of as the tie that binds all the different computer systems within a given business or organization. Without ERP software, each individual department has to rely on its own system to optimize specific tasks; but with ERP, all systems can be accessed through a single application within one unified interface (a pretty important and useful distinction). The trick is finding the right ERP suite for your business, and making sure the software is implemented correctly to get the greatest return on your investment.
What is enterprise resource planning (ERP)?
Enterprise resource planning (ERP) is a way for brands to manage and integrate the core components of their business intelligence. Advanced ERP software can readily sync inventory planning, purchasing, sales, marketing, and more, meaning companies can run their operations through a single system. Once all relevant, receivable information has been collected within the common database, business owners have access to increased visibility — which can empower them to implement process improvements and address inefficiencies that impact revenue.
Types of ERP systems
Simply put, not all enterprise resource planning systems are created equal. Among the four types of ERP systems on the market today, there are notable differences between each, from setup to support. A general understanding of these nuances can be incredibly helpful as you’re determining the right operations software to satisfy your unique business functions.
On-premise ERP software operates on in-house servers at your own location (or at other locations that are still under your control). This type of solution offers the security of using your existing IT infrastructure to connect with applicable people, processes, and fellow systems. An on-premise strategy may be well-suited to your business if you need to supervise the ERP system for yourself, and/or if you already have dedicated IT resources on site who can handle the required server application and maintenance for this program.
A cloud ERP runs on a cloud platform as opposed to an on-premise network, thus allowing companies to have access via an internet connection. A typical cloud program will integrate and automate a variety of financial and operational activities, as well as contribute a single source of data on inventory, order, and supply chain management. Cloud ERPs are an excellent option for teams who want the flexibility to work from anywhere (including on mobile devices), and who need to analyze and interpret large volumes of real-time data.
A SaaS ERP — that is, software as a service enterprise resource planning — is actually a subset of cloud ERP. When using SaaS ERP, the system is run through the ERP vendor’s data center, as opposed to the purchasing company’s servers (like what’s seen with an on-premise ERP). In other words, SaaS ERP is managed by the software vendor and hosted in the cloud. Companies interested in cloud functionality and who’d prefer not to be tethered on location at all times might enjoy the benefits of this cloud-based ERP method.
SaaS Operations Management Platform
A SaaS operations management platform is a full-visibility, broad-functioning command point from which administrators can oversee: user access, IT workflows, integration integrity, data security, policy adherence, and SaaS-related automations. Of the many advantages of using SaaSOps, this platform allows users to discover, manage, and optimize ERP applications. From there, you can improve both security and compliance, reduce time spent on manual audits (and similarly time-consuming tasks), and even minimize your overhead costs.
Why does choosing the right ERP system matter?
It has a huge impact on your bottom line
While a number of software companies have introduced plans that are payable in increments, purchasing a new ERP package is still a significant investment. The upfront costs associated with onboarding an ERP can be particularly overwhelming for small businesses, who may worry the program won’t pay off like they hoped. But the truth is, most businesses can’t afford not to implement ERP software into their daily operations.
That’s because ERPs work to unify all your current systems into one centralized space. In doing so, your team can utilize their time more effectively, and eliminate the need for users to be proficient on several different systems. This not only reduces the amount of money spent on training (i.e. boosting your bottom line), but it also lowers the logistical effort involved.
It has an effect on productivity levels
When relying on the usual organizational and/or operational techniques, it’s almost impossible to avoid tedious and repetitive tasks — think generating reports, tracking inventory levels, and processing customer orders. And in addition to taking up valuable time, manual processes are highly susceptible to human error and unforeseen inaccuracies.
Fortunately, with the right ERP system in tow, your company can easily automate a whole range of tasks and subsequently remove them from your to-do list for good. Innovative ERP solutions have the capacity to perform advanced calculations within mere seconds, freeing you up to focus on more thoughtful, value-added projects. And with such a direct effect on productivity and business performance, it’s no wonder that greater profitability will soon follow.
It supports customer satisfaction
Whether you realize it or not, enterprise resource planning software has a tremendous influence on customer satisfaction. Many of today’s leading systems come equipped with customer relationship management (CRM), or, this can easily be integrated if it’s not built in from the start. By using ERP in conjunction with CRM, you’ll have deeper insights into order history and billing information to help you gain a better understanding of consumers’ wants and needs — meaning you can create a more targeted sales strategy for greater lead generation.
On top of that, ERP software is an amazing resource to help companies enhance inventory control and deliver goods even faster. Modern systems also foster stronger communication with customers, thanks to reliable lead times and accurate inventory tracking.
3 things to expect when implementing an ERP system
As is true of any business management software, implementing an ERP system can be a complex, sometimes confusing endeavor. But when you look at the process in terms of phases and have a realistic idea of what to expect, you’ll feel better prepared to tackle things head on.
Carve out a designated period for discovery and design
To achieve the greatest results from your ERP system, you’re wise to spend time on the principles of discovery and design prior to implementation. While this will undoubtedly look different for every business, it’s meant to include intentional research and a detailed list of your system requirements (hint: whether you’ll be using an on-premise or cloud ERP solution).
More succinctly, you’ll want to outline or highlight your current issues, which inevitably involves the process inefficiencies you’d like the software to address. Prioritizing this planning phase ensures adequate resources are allocated, and helps you design new, more efficient business processes that take full advantage of what the software has to offer.
Focus on development and testing
With a clear vision for your design requirements, you can start thinking about project management and program development. ERP development is centered on configuring and customizing the software to suit your specific needs. What’s more, it might also include verifying the integrations you need to support (and complement) your existing software applications.
Testing your system may actually happen concurrently with this period of development. For example, your team might opt to test out a particular ERP module while another component is still being developed. In any event, the initial testing of basic functions should always be followed by a more rigorous round of tests that looks at the full capabilities of your system.
Round out the process with deployment and support
Deployment is essentially the day you’ve been working toward, when your company’s ERP can finally make its live debut. If you’ve done the proper backend work and paid close attention to your design and development pieces along the way, this will hopefully be a smooth transition with very few technical issues (or ideally, none at all).
But if you do encounter concerns or something happens to go off course, it’s important to have the support you need to resolve these problems as quickly as you can. The best ERP software will show up as a true partner to your brand in that, it’ll have people available to help you troubleshoot or provide answers to any of your lingering questions.
How to choose the right ERP system
It may feel daunting at first, but ERP implementation isn’t something to be scared of. If you abide by a few simple guidelines — like knowing your business requirements and allocating enough time for the process — your implementation is sure to run as smoothly as possible.
Know your business processes and requirements
Your business needs a clear, concise vision around what it’s going to take to follow through with your ERP implementation. This means establishing precise processes and requirements that are aligned with your overarching business goals; without acknowledging what you want to accomplish, there'll be no gauge of whether or not you’re on the right track.
Once you have a good understanding of your requirements, you can identify key performance indicators (KPIs) to help measure the success of your implementation.
Talk to different ERP vendors to understand their functionality
The ERP vendor you partner with is another key ingredient to your overall implementation. That’s why it’s such a good idea to talk to different service providers and learn more about the functionality and features they can offer. Look for an ERP platform that not only has reputable expertise and experience in your particular industry, but who aligns with your goals, as well.
Request references from vendors as part of your decision-making process
In addition to speaking with potential vendors directly, you can also request customer references to aid in your decision-making process. By researching and/or interviewing these references, you’ll have greater confirmation that the ERP system you’re eyeing can adequately provide what you’re looking for — and that they can offer continued support after your ERP goes live.
Allocate enough time for ERP implementation process
It’s vital you have reasonable expectations for how long the ERP implementation process will take, and then allocate enough time (and money) to make it happen. The lifecycle for your implementation will largely depend on the size of your company, the complexity of the system being installed, and the integration of data from other legacy systems, though it can take anywhere from six months to a few years to complete.
Hire an internal ERP manager and team for accountability
Lastly, an internal ERP manager and team will be essential to how well implementation flows. When human resources hires someone with industry experience, it can help you navigate this process and ensure your project stays on course. In the same way, the procurement of these professionals will better guarantee you get as much out of your ERP software as you can.
Effective alternative to ERP systems
Skubana’s cutting-edge ERP alternative solution has been helping ecommerce businesses of all sizes streamline and grow their operations for years on end. Compared to an ERP implementation, the timeline for implementing The following are just a few examples of how Skubana’s cloud solution has helped companies boost their order volume, increase their revenue, bolster their order efficiency, and level up across multiple selling channels.
Double orders with automation
Fifteen years into their photo ID business, Specialist ID was passing over $5 million in gross sales, but still operating like they had when they were pulling in only $100,000 per year. By using the same old back-office systems, Specialist ID’s growth was significantly hindered — that is, until they called on Skubana. Skubana’s alternative to an innovative ERP software system enabled Specialist ID to dramatically beat their order ceiling and double their orders without any strain, thanks to out-of-the-box customizations like automated demand forecasting and reorder points.
Increase revenue by 200%
Moonglow, a customizable jewelry brand, made a goal to scale their business to ten million in annual revenue by the end of 2019. To do so, the founders implemented Skubana to manage the operations and unique workflows of their business. Prior to working with Skubana, the Moonglow team fulfilled 60 orders a day, but had no way of tracking, quantifying, or forecasting their inventory. After adopting Skubana, however, Moonglow was able to handle their expanding order volume with ease, even increasing Q4 revenue by a whopping 200%.
25X sales with order control efficiency
When Death Wish Coffee won a 30-second commercial during 2016’s Super Bowl, they understandably saw a huge spike in sales; the only downside was, they didn’t have the systems in place to deal with this shift. Fortunately, Skubana answered the call and helped the company put an end to overselling. Now, with one warehouse, two 3PLs, dozens of flash sales, ample product kitting, and thousands of orders fulfilled, Death Wish is the epitome of order control efficiency, and has increased their sales 25X in a remarkably short window of time.
Level up across multiple channels
When Vincero, an upscale watch brand, was ready to scale their business and level up across multiple channels, they sought the help of Skubana to bring their vision to life. With Skubana’s order and inventory management software solutions, Vincero was finally able to move away from their ongoing and sluggish manual processes, and instead automate all their order handling for multichannel optimization. Now, things like routing, editing, and canceling orders are easily accomplished through Skubana’s unified and comprehensive system.
Frequently Asked Questions
What are some popular approaches to ERP implementation?
The most popular approaches to ERP implementation include on-premise ERP, cloud ERP, SaaS ERP, and SaaS operations management platforms. Among these four types of ERP systems, there are notable differences from setup to support. An understanding of these nuances can be incredibly helpful as you’re determining the right software for your business.
What does the ERP implementation cycle look like?
As is true of any major business initiative, implementing an ERP system can be a complex endeavor. But when you look at the process in terms of individual phases and have a realistic idea of what to expect, you’ll feel better prepared to tackle things head on. Generally speaking, the ERP implementation cycle calls for a designated period of discovery and design, a focus on program development and testing, and finally, deployment and software support.
Why is choosing the right ERP system so important?
Enterprise resource planning works to unify all your current systems into one centralized space. In doing so, your team can utilize their time more effectively, and eliminate the need for users to be proficient on several different systems. This not only reduces the amount of money spent on training (i.e. boosting your bottom line), but it also lowers the logistical effort involved.
Matthew Rickerby is the Director of Marketing at Extensiv, the leading solution for multichannel, multi-warehouse D2C brands. For the past ten years, he’s covered e-commerce topics ranging from SEO to supply chain management.