Since we’ve been in the process of explaining what ERP is via a video, we might as well put it in words for those who prefer this medium.
So, ERP (or Enterprise Resource Planning), is basically about how to manage whatever resources you have available for your business – simple as that. When you’re just starting off and you’re on your own or with just a few employees, running your company is quite straightforward; even pen and paper will do. But once business picks up and the customer base increases, you start expanding, hire more people, develop a broader range of products or services, etc, then things start getting complicated. Complexity can actually escalate pretty quickly and you need to be systematic and thorough to avoid mistakes and taking a loss – or worse.
The most immediate solution that people think of to solve this problem is to use a spreadsheet. Much as it is flexible and popular, a spreadsheet is simply not designed for this type of work and you will very quickly see its shortcomings. It takes a lot of time to do a simple job (especially given the repetitive nature of certain tasks), automation is limited and data entry errors start to become quite common. Also, connecting of the various spreadsheets between them can only go so far and it’s generally hard or expensive or both to make a spreadsheet talk with the rest of the world. And even if somehow you can manage with the above, keeping all people involved synchronized and the business data updated is hugely impractical.
Since it soon becomes quite a feat to handle everything simply by throwing spreadsheets at it (let alone pen & paper), a number of software solutions have been developed to help businessmen and employees save themselves time and avoid making mistakes. It is these solutions that are the ERP and they come in all shapes and sizes primarily depending on the target business size, complexity and industry. Some are broad and can cover all needs a large corporation might have (including direct monitoring of a factory plant, for example) while others are limited and can support only basic functions – which can still make a huge difference for the small enterprise though. Some are specialized for particular industries while others are generic and can work for many businesses with minimum customization. The field is only a couple of decades old but has evolved considerably both in breadth and width – the literature and experience available out there is immense.
Before moving on to the subject of how one picks the right ERP solution we’ll take a look at what specific needs it can cover in a business and give detailed reasons why it makes sense to use it. In the meantime, if all this struck a cord and it feels too close to home, let us know how you feel at the comments.