Those who’ve never used ERP software may find it difficult to understand why ERP is a practical business staple.
As globalization squeezes many market industries, finding tools to give your business a competitive edge is essential. Most companies turn to ERP to achieve this and other goals.
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ERP shows no signs of slowing down, so Allied Market Research predicts the ERP market may reach $117.09 billion in 2030.
This article covers the eight main uses of ERP and the importance of ERP system usage.
Table of Contents
- Why ERP Is Important
- Other ERP Uses
- The Importance of Enterprise Resource Planning Selection
- FAQs
- Next Steps
Why ERP Is Important
Enterprise resource planning software manages diverse business functions, but how is it better than other solutions?
Even though ERP may have similar goals to other solutions, its unique features and benefits make it a distinctive competitor in the software market.
Faith Kubicki, director of marketing for InTempo Software, described the perks of an ERP’s centralization and scalability capabilities.
[An ERP] allows companies to bring all of their processes, from accounting and inventory to operations and reporting, onto one system. The data is consolidated in one place, which means they don’t have to chase it down from siloed systems. Or worse, get the wrong data from an outdated, manually updated spreadsheet on someone’s desktop.
“It’s also a critical step for companies that are looking to scale, as it allows for processes to become standardized and enforced across multiple locations. Overall, much less is left to guesswork, chance and internalized knowledge; a must for companies that are looking to grow.”
Geoff Whiting, content strategy manager for Hubstaff, stated how ERP can simplify data retrieval.
ERPs are important because they help manage company information and activities in ways that make it easy for everyone to act on the correct information. A good deployment makes it easy for every position to find what information they need and to record all the data they have for the future.
“Say you make and sell workout equipment to gyms. An ERP helps a company look at one piece of equipment and understand the associated costs of all the components, assembly or manufacturing needs, sales and orders and even how happy customers are, based on surveys you send out.”
Here are eight reasons why businesses should consider the importance of enterprise resource planning systems.
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1. Save Money
Although many vendors recently introduced flexible pricing, ERP packages are still a significant investment. For many, the enormous costs alone make the program unlikely to save your organization any money.
But once you get past the sticker shock, it’s easier to see how ERP can provide an excellent ROI.
First, ERP uses centralization for many systems across your organization. From product development to accounts payable, your staff can access all the necessary tools from one centralized system.
By unifying systems, you help your workers use their time more efficiently. With ERP, users don’t have to hunt down a piece of information across multiple systems. With the central database, information is much easier to retrieve.
Moreover, your organization saves money with ERP by eliminating user training on several systems.
This elimination reduces money spent on training and the logistical effort involved. Instead of scheduling several training sessions with several different vendors, you only need to communicate with one.
ERP also brings in automation to save time and money on repetitive tasks. Branden Korf, marketing associate for EBizCharge, advocated for ERP automation.
Countless businesses have a story about how manual invoice processing has cost them time and money after a human error led to an incorrect amount being charged. Even more time is spent trying to regain users’ trust after a mistake like that. An ERP system will decrease errors and increase efficiency.”
Whiting gave an example of how an ERP system reduced costs in warehousing.
I previously worked with a warehouse company that managed a lot of imported goods for others. They received goods packaged to protect them when shipped internationally in containers. Teams would then break down these shipments into individual units or smaller groups, but they also had to repackage the goods for storage or cost-optimized shipping.
“That activity consumes a lot of wrap, boxes and other materials teams use in the moment. So when someone notices they’re running low of something, they’ll want to reorder it immediately. Adding an ERP let[s] people tell the system that they were running low and it would reorder the materials, which instantly protected revenue by eliminating the chance that three people would each bulk-order this sometimes very-expensive, packaging material.”
2. Improve Collaboration
Centralization also encompasses the importance of ERP. Modules vary slightly depending on your program, but generally, all systems improve collaboration in some way. The consolidated database is an integral part of what makes an ERP unique.
With this information repository, you provide your company with a single source of truth. Merged data reduces incorrect data errors.
Moreover, ERP uses a central database to diminish any hesitation or stalling during projects since all team members can access the company-wide data they need. There’s no need to merge information across various systems or sources.
Korf described how centralization can reduce inaccuracies and boost cross-department communication.
Access to the same information leads to better cohesiveness and overall accuracy. ERP systems provide a comprehensive overview of all teams within the organization. This visibility helps break down silos and promotes collaboration between different departments.”
3. Offer Better Analytics
A central database of information also aids in improving your analytics and reporting. One of many other uses of ERP includes recording and storing inputted data, making this system an excellent BI tool.
As long as your vendor provides robust functionality, ERP software makes generating several reports easier. Develop reports that could take days of research and compilation without an ERP in minutes.
An example of BI tools.
Most ERP solutions provide a customizable dashboard so executives can see reports when logging into the system. These reports may include income and expense statements or custom KPIs that offer insight into specific functions.
Aerin Ogden, director of marketing at QFloors, discussed how in-depth reports can help you maintain profits and losses.
“With accurate financial reports that come from ERP software, you can know in real time where your company stands. You can see how much your company is making or losing. Instead of rounding or ballparking it, you can go off of real, accurate data.
“Case in point, during the recession from 2007 to 2012, the flooring industry was hit really hard. Reports say that 20-25% of flooring dealers went out of business. However, out of all our ERP users who used flooring ERP software, only 3% went out of business and 97% weathered the recession.”
Quick access to these reports pushes faster and better decision-making. You no longer need your IT staff to generate those vital files.
Lastly, documents typically come with access levels, ensuring only relevant staff see valuable company data. This visibility also adds to the question of why ERP is critical.
4. Strengthen Productivity
With traditional methods, tedious tasks are entirely unavoidable. Generating reports, monitoring inventory levels, tracking timesheets and processing orders have historically taken hours to complete.
In addition to taking up time, these processes lower employee morale and open yourself up to human error. After the umpteenth hour of entering the same data line into different forms, even the best staff members can make a mistake.
A preview of a KPI management’s interface.
An ERP can automate your most tedious assignments if you choose the right solution. The database within ERP software eliminates redundant tasks such as data entry and allows the system to perform advanced calculations within minutes.
Automation, one of many uses of ERP, frees up your team members’ time to do more thoughtful work, increasing your ROI regarding labor. From this, ERP increases your organization’s productivity, efficiency and profitability.
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5. Enhance Customer Satisfaction
Managing your customers has never been so important. In our digital age, more and more people are turning to the internet for advice on what clothes to wear, what food to eat and how to live their lives.
A preview of CRM and client analytical tools.
Providing client-centered goods and services with the right customer experience tools is the best way to improve client retention. ERP delivers these results in a few different ways.
Most ERPs are equipped with customer relationship management (CRM) tools or can easily integrate with them. With an ERP, your CRM has access to data across business functions.
Along with contact information, an integrated CRM can show you details such as order history and billing information. This information enables your team to see your clients more holistically and understand their wants and needs more deeply.
Korf discussed how EBizCharge makes the most out of using client profiles to maximize their customer experience efforts.
ERP systems with CRM modules help businesses keep a customer profile on users. For example, at EBizCharge, each user is designated an account representative, and this is noted in the software we use. When customers reach out to support with questions, we can look up who their rep is and notify our specialists. Then our specialists can take a look at the customer profile, gaining insight into their business to help them out appropriately.”
Ogden described how ERP’s effective organization methods send positive vibes to current and prospective customers.
Having organized and efficient operations will build trust between you and your customers, and you’ll be able to provide quality service. You can quickly calculate proposals and see if you have what you need in your inventory. If a customer has a question about a certain product, you can quickly pull the product’s information and give it to them.
“You won’t have to worry about being out of stock, lost orders, duplicate purchases, double scheduling appointments [and so on]. Customers can tell if you’re not organized, and the longer you take digging through emails and files, the less confident they will be in your services.”
Kubicki described how customer portals can increase convenience.
[Customers] want convenient 24/7 access to invoices and order histories, which an ERP can facilitate through a customer portal. Plus, the company no longer has to have a customer service rep spend valuable time digging up responses to these inquiries. [Buyers] want to be able to pay once and store that card on file so they don’t have to read off card numbers every single time they make another purchase.”
Increased customer visibility helps you formulate your sales strategy for improved lead generation.
6. Simplify Compliance and Gain Risk Management
As companies grow and do business in different countries, tracking all the regulations imposed on your business can be challenging. Local companies must also worry about environmental, information security and human resources rules.
Luckily, many ERP offerings are built with these regulations to help you maintain compliance at every stage. Moreover, ERP software provides built-in auditing tools to document chemical use, tax provisions and other components.
Compliance and risk management tools make it incredibly easy to formulate reports and send them to the relevant governing body. This solution’s enhanced reliability and accuracy improve financial management and diminish bookkeeping mistakes.
Forecasting tools also allow users to predict demand, labor and budget events. This handy information enables you to create more secure budgets, schedules and product development plans.
7. Boost Inventory Monitoring
A significant challenge for growing companies is tracking and monitoring their expanding inventory levels. ERP utilizes barcoding, Radio Frequency Identification (RFID) tags and serial numbers to keep tabs on your inventory at every stage during the supply chain.
Inventory management tools help you keep track of inventory levels at different warehouses, which items are in transportation and which items are on the shelves ready for consumers.
An example of inventory management tools.
The increased warehouse visibility greatly optimizes the pick, pack and ship process, removing all the guesswork.
Inventory monitoring also bolsters reporting, as tracking technologies provide more accurate numbers. Users can configure custom KPIs to see which products move the fastest — showing greater demand — and which increase carrying costs.
With the greater precision provided by ERP, warehouse managers can get real-time data on their inventory to make more accurate business decisions.
8. Amplify Production Planning and Resource Management
ERP can also manage manufacturing workflows. Manufacturing ERP provides insight into all production, warehousing, inventory and shop floor operations. In-depth monitoring allows users to optimize production schedules, equipment and labor to maximize capacity.
Additionally, ERP manages your bill of materials (BOMs) and fixed assets. Create, edit and track all BOM changes.
Fixed asset management allows users to schedule equipment maintenance to reduce unexpected downtime, improve profitability and strengthen supply chain relationships.
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Other ERP Uses
Although we covered eight good reasons for investing in ERP, we could talk for days about its advantages and disadvantages.
Korf described how mobility offers users real-time updates from virtually any location.
Access to your ERP on the go and with full responsiveness can be extremely valuable. Employees can work remotely with access to information on the go. Customers can have a user-friendly mobile shopping experience, and managers can access important data for real-time decisions with the entire company’s data inside their pockets.”
Ogden discussed the importance of job costing and industry-specific solutions.
For our industry, flooring, our ERP’s job costing feature is vital because it ensures that flooring dealers have the right margins. They don’t want to oversell a product, but they also don’t want to undersell and lose money. Your industry might have certain specifications or caveats when it comes to billing, accounting [and] orders. Industry-specific ERP software can help address those specializations.”
The Importance of Enterprise Resource Planning Selection
The importance of enterprise resource planning selection stresses choosing the right software for your company’s needs. It’s easy to get entangled in all the bells and whistles, but if you don’t sort out ERP requirements, you’re just a kid in a candy store.
Although software selection seems daunting, our nine-step Lean Selection Methodology helps you find the right system for any business size or industry.
Whiting recommended creating an ERP RFP template to determine your wants and needs.
Templates help you get started with a feature list to help you understand what’s possible. Take your time customizing it and asking questions. This [creation] starts the process of ensuring your needs are met by the capabilities of an ERP. The difficult part is taking [your template] and matching it to your company objectives. An ERP is useful when you’ve got large objectives that span multiple departments and need a lot of information and input to succeed.”
Kubicki suggested standing by your industry and finding a solution that meets those needs.
It doesn’t matter what vertical you’re in. You’re going to have highly specific processes that can’t be accommodated by generic features. Instead of forcing your teams to fit the proverbial square peg into a round hole, you can use workflows that actually make sense for how you do business.”
Ogden stated that doing homework on potential systems and investing in solutions you’ll use are vital factors in your software selection quest.
Please don’t underestimate the importance of research. There are a lot of ERP systems out there with a lot of different caveats and features. Don’t just settle on something generic, but find a solution that works for your specific needs.
“Many ERPs have hundreds and hundreds of features, but many business owners get hung up because they realize after the purchase that they don’t have the time and energy to learn the system. Some ERPs are more extensive than others, and you need to be aware of how long it’s going to take to learn how to effectively use them.”
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FAQs
What is an ERP?
Enterprise resource planning (ERP) software is a solution that unifies company departments with specific features and automates workflows to improve productivity.
Some ERP modules include manufacturing, CRM, accounting, procurement, supply chain management and more.
What are the uses of ERP?
ERP uses include inventory management to supervise and collect real-time stock data, accounting to manage profits and losses, manufacturing to govern BOMs and production times, and marketing to manage clients and obtain leads.
Other uses of ERP are managing HR operations and storing employee data, following compliances, and using BI and BA data to make smarter decisions.
How should I choose the right ERP system?
As mentioned by our SMEs, it’s crucial to find a system that meets your company’s needs, such as industry, requirements and objectives. You should also create an RFP template and do your research to map out potential vendors and products.
You can also leverage SelectHub’s Lean Selection Technique with these nine steps:
- Establish
- Collaborate
- Define
- Distribute
- Justify
- Prove
- Rank
- Negotiate
- Sign
Next Steps
Boosting productivity, saving money and increasing customer satisfaction are just a few reasons why ERP is important for your business practices. This system can streamline recurring tasks, help you manage numerous resources and fuse innumerable departments.
Ready to take the next step? Check out our free in-depth comparison report that helps you review and determine which solutions best meet your needs according to your requirements.
How has ERP improved your business practices? Which benefits are you looking for and why? Let us know in the comments.
SME Contributors
Faith Kubicki is the marketing director for InTempo Software, an ERP system that consolidates accounting, operations, sales and service for equipment rental companies. She has spent the last three-plus years helping independent /local companies grow their businesses with mission-critical software solutions that support their processes and goals for future growth.
Aerin Ogden is currently the director of marketing for QFloors, a flooring ERP software company in South Jordan, Utah, and has worked there for more than three years. Ogden graduated with a B.A. in communications (advertising) and a design minor from Brigham Young University in 2017. In her spare time, she likes running, going to spin class, reading, and playing with her white fluffy Bichon Scout.
Branden Korf is a marketing associate with EBizCharge, a payment solutions company specializing in B2B processing. He communicates the benefits of using an integrated payment processing solution to streamline financial processes within ERP systems. Korf’s ERP experience has made him familiar with popular ERP software and how to choose the right one.
Geoff Whiting is the content strategy manager at Hubstaff, a leading workforce software solution designed to empower remote and in-house teams. With a background in journalism and psychology, he develops content and communications strategies focused on the modern workforce and the tools it needs to thrive in remote and hybrid environments. Whiting has been a remote worker for more than 15 years and advocates that treating employees with trust and respect yields substantial benefits for organizations and their customers.