Benefits of ERP: Pros and Cons of an Enterprise Resource Planning System

Organizations from a variety of industries use Enterprise Resource Planning (ERP) software. There are types of businesses that see more benefits of ERP. There are some key trends that suggest when it’s time for a business to implement or upgrade their ERP system, which include:

  • Times of growth: The organization is growing, has grown or is planning to grow significantly
  • Issues with operations: The organization needs enterprise software to better manage processes
  • Mergers or acquisitions: For example, the parent organization needs to streamline systems across companies
  • Old legacy systems: The organization’s current system is outdated and not available for upgrades, or no longer serves the business and users adequately
  • Strategic roadmap: Organizations with forward-thinking executives have outlined a business technology roadmap that includes a new enterprise solution

While many factors indicate the need for implementing an ERP system, companies in certain industries stand to gain the most from making the move.

Download: "A Guide to Getting Started with ERP"

The types of businesses that benefit the most from ERP

What are the types of businesses that see the most benefits of ERP systems? The versatile nature of ERP software allows companies across industries to implement solutions based on their business needs. Major industries that use ERP include:

  • Manufacturing
  • Distribution
  • Professional Services
  • Construction
  • Industrial Services
  • Healthcare
  • And more

One manufacturing executive we’ve worked with said implementing ERP (in their case, Oracle JD Edwards) gave the company a “robust platform” to manage and control their manufacturing processes. “The tools and information available in the system will allow us to better manage our distribution and manufacturing businesses.” Read the full story.

Professional services is another industry where ERP is often used and see copious benefits of ERP software. The needs of these organizations differ from manufacturing and distribution. Businesses in this industry are often project-based and need tools for project planning and execution, managing project costs, strong customer relationship management and more.

The CIO of a project-based company we recently worked with to implement a cloud ERP system commented: “By moving our project management process to the cloud, we can keep up with our business growth and continue to serve our clients to the best of our ability.” Read the full story.

How does ERP software improve business processes?

ERP systems solve many problems you may be facing, including a need for:

  • One source of truth as one master system of record for all important company data
  • Automating manual processes, such as invoice creation, routine communications, financial report generation, product and service delivery and material requirements planning
  • Better visibility into all aspects of the supply chain, and increased efficiencies
  • Improved business data security, whether stored on-premise or in the cloud.

Pros of ERP – benefits of an ERP system for your business

Specifically, key business benefits of ERP software are:

  1. Improved reporting, through:
    • Better reporting tools
    • A single source of truth – one integrated database for all business processes
  2. Better customer service, through:
    • Better access to customer information
    • Faster response times
    • Improved on-time delivery
    • Improved order accuracy
  3. Improved inventory costs, by:
    • Only carry as much inventory as needed, avoid these common issues
      • Too much inventory, and higher overhead costs
      • Too little inventory,  and longer customer fulfillment times
  4. Improved cash flow, through:
    • Better invoicing and better collections tools to bring cash in faster
    • Faster cash means more cash on-hand for the business

Learn more:

How to Get Cash Back Into Your Business Faster with ERP

Four Ways ERP Helps Improve Customer Service (and why it matters)

Cons of ERP – important factors to consider

ERP projects are an investment of time and money.  Among many other things, successful ERP implementations require:

  • Alignment between the business and IT
  • Executive sponsorship and support
  • Internal team leaders
  • Trusted external partners (consulting and software vendors)

ERP software is like any business technology – the tool on its own doesn’t cause failure or success. The business environment, leadership, and end-users determine the ROI of an ERP system – along with the project planning, methodology, and implementation.

Key areas that can cause ERP implementation failure are:

  • Data conversion – One of the biggest issues during an ERP project is data conversion – moving data from the old system and mapping it into the new ERP.
  • Integrations – Early in the project, you need to start thinking about what other systems need to integrate with your ERP system and have a solid plan for integrations.
  • People – an executive needs to be involved in the ERP project, and other key business leaders need to be included. Having a communication plan is also key.
  • Training – training needs to be an integral part of the ERP project. Internal teams and end-users have to be comfortable with the new software.
  • Project planning – planning is crucial to ERP implementation success. Following a methodology is also fundamental to avoiding failure.

Learn more:

The Importance of Having the Right People on Your ERP Project

The Processes You Need in Place for a Successful ERP Project

Technology Isn’t the Reason Your ERP Project Fails

Is investing in an ERP system the right decision for your organization?

New research shows that ERP projects today are much more successful than in the past. Coupled with the fact that cloud ERP software options available on the market today are easier to implement, and keeping in mind the benefits listed above, there’s a real business case for ERP. Timing is also an important aspect to consider. In addition to the trends we mentioned at the beginning of this article, you can start by reviewing the five questions below to see if it’s time to start considering ERP software for your business.

  1. How accurate is your business data?
    • Implementing comprehensive ERP software not only provides access to important data, ERP also enables a better process for collecting and analyzing data
  2. Are your business systems connected?
    • Moving to one company-wide ERP solution can help improve internal processes – one common platform fosters better internal communication
    • Better processes and communication leads to increased efficiency and enhanced company performance
  1. Is your company growing?
    • As companies increase in size it’s easy to quickly outgrow existing processes and technology. Growing pains are a good problem to have, but like all other business challenges these issues need to be addressed in order to continue the path towards future progress. A comprehensive ERP solution can help.
  1. How satisfied are your customers?
    • Disruptions internally – growing pains, problems between production and sales, or the inability to access important data – affect the customer experience. Modern ERP solutions help you meet customer expectations.
  1. Do you need to reduce costs?
    • ERP software enables you to reduce costs through gained efficiencies in these areas (and more):

ERP software selection: next steps

ERP selection and implementation processes are not for the faint of heart. Choosing the right Enterprise Resource Planning system can be complicated, and often there is a lot at stake. You want to make the best possible choice for your business. But there are ways to make it easier on yourself and your team. There are many factors to consider, below are some of the top factors recommended for anyone thinking about a new ERP.

  1. Define why you are doing the project.
  2. Determine who will be involved.
  3. Find an ERP partner who you trust.