Excel spreadsheets, emails, FTP sites, Quickbooks, Salesforce, SharePoint, PDFs back to Excel. Does that sound like the operations process in your business or department?
The use of incongruent systems to store and manage information is the norm for more that 60% of small and medium size businesses (SMBs) in the United States. For these types of businesses an enterprise resource management system (ERP) implementation can appear cumbersome, costly, and stressful on the workforce. However, to maintain a competitive advantage in today’s volatile markets, organizations must invest in data management systems with robust analytics capabilities and improved supply chain visibility. Supply chains are exposed to a variety of risks; organizations must be able to anticipate, quantify, and prepare for the effects of foreign actors on their business. Utilizing integrated business solutions, leading with ERP software, is a business best practice and a necessity for continued successful operations in a global economy. ERP software organizations understand these challenges and numerous solutions exist to support a lean implementation project.
Prior to starting an ERP project companies must conduct a thorough analysis of the foreseen financial and human capital costs, and the software needs of the business. Upon deciding that an ERP system will support the future growth of the business SMBs aspiring to have a successful implementation must focus on the following items:
- Appoint an ERP Project Champion
Leadership is key to a successful implementation. Prior to launching an ERP project, organizations should look inward to their workforce and find an individual to champion the project. Having a project champion who is able to create a link between the organization and an ERP consultant can significantly streamline the project and reduce the overall implementation costs. This person is responsible for guiding a business through process transformation, recognizing errors, as well as understanding and mapping all business processes. They will work with internal and external teams on demos and testing, preparing the data prior to being loaded into the system, and training end users.
For most SMBs the project champion is also the project manager, who will hold all responsibility to ensure that implementation is on time and within budget. Project champions should have a good understanding of all business operations and the ability to work cross-functionally with different departments. This person will also become the spokesperson to the CEO and CFO on the project charter, budget, and team readiness. Most importantly the ERP project champion will be the in house post implementation support for the team. According to Panorama Consulting in their study Key Findings From 2015 ERP Reports: more than 52% of companies faced some sort of material operational disruption at the time of go-live, making this a critical role to implementation success.
- Find a Transparent ERP Partner
Organizations undergoing an ERP implementation are exposed to risk. A challenging part of an ERP implementation project is finding the right solution for the unique operations of the business. A system that appears to be one-size-fits-all approach is usually not the right way to go for a smaller business. Organizations must focus on their core business practices and find a partner that can support improvements in specific areas. There are numerous ERP solutions available on the market, according to research from Gartner “50% of businesses say that lack of industry standards makes it hard to compare solutions, while 39% feel that vendors are muddying the waters with lack of clarity about cost.” Change is demanding on the workforce and operational disruptions are inevitable, finding the right ERP partner can help leadership understand these risks ahead of time and prepare.
- Licensing & Hosting
The backbone of an ERP system is the data storage server that supports smooth operations. Aside from finding the right partner with the appropriate software, the IT department must make decisions on the type of licensing and hosting. ERP systems can be hosted on the cloud or hosted on site. The latter requires: a backend data management system, most common is SQL server, and enough computing power and space on a terminal server. Organizations will also need a strong firewall to protect the information and high quality internal network for client machines to reach the data server. On site hosting is burdensome for the business, as the initial capital investments in the infrastructure are very high and the maintenance costs outweigh the benefits.
Finally, businesses must decide if they require a full ERP cloud system, if their needs are more limited they can seek a software- as-a- service model (SaaS). Cloud and SaaS hosting differ slightly, in that the ERP provider generally hosts the SaaS model on their own infrastructure. This gives the vendor full control over the system, but also all responsibility for upgrades and maintenance. These types of systems also have a different cost structure to the business. The graphs below offer a representation of the various hosting models, showing that for both small and medium size businesses the hosted or cloud solution is the best financial choice.
- Focus on Process Waste
ERP systems are a first step in helping organizations becomes leaner in their operations and supply chain management. During the first phase of the implementation, organizations undergo a vigorous business mapping and analysis process to help all those involved visualize the entire business operations. Lean Six Sigma principles encourage organizations to focus on operations improvements by analyzing processes, discovering where any of the 7 wastes are manifested. To ensure that the project is carried out correctly those involved must agree on key performance indicators, and measure and analyze this data. This is precisely the role of an ERP in small or medium sized business.
For example, if a SMB’s main concern is that order-to-cash time is taking on average 30 days longer than the expected 60 days, the implementation of an ERP system will help streamline the information exchange between internal departments and shorten the time by 50%. Some of the most significant wastes organizations face without a proper ERP system can be tied to extra processing, inventory and motion. These are costly, with direct effects to a company’s financial statements.
ERP systems offer new and more complex data analytics capabilities, compared to fragmented systems. While creating the report can sometimes be timely, once the structure exists, running these reports can take a few seconds and offer new visibility into the company’s operations, sales, supply chain and financials. The best way to capitalize on these capabilities is to work closely with each department and understand what information would be most valuable to them, and how this information can improve their processes. This is another place where the project champion holds a unique and important role. This person should be communicating with the department managers, listening to their concerns and delivering the message to the ERP partner, who will most likely produce all of the initial reports. When this is done correctly companies see immediate results in better S&OP planning, customer invoicing, less accounts payable mistakes resulting in late fines and increased customer satisfaction.
Enterprise resource management systems are beneficial to small and medium sized businesses, by streamlining operational and supply chain processes. They offer a centralized location for sales, purchasing, inventory, customer information, AR, AP and GL data, and strong analytics capabilities so SMBs can stay competitive and lean. When choosing an ERP system it is important to understand the core of the business and find partners whose strengths are aligned with the operations. Ask the right questions, have the long-term business goals in mind and assemble the right team.
2 thoughts on “ERP Benefits for SMB Supply Chains”
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Insightful article. I think Cloud and ERP are beneficial for small- and medium-sized businesses the way it is beneficial to large-scale businesses. It just have to be the Cloud/ERP suitable for your company needs and demands. Be sure that whatever platform you choose complements your business. — http://lirik.io/