When it comes to finding the right software for your business, you’re going to stand in an endless pool of solutions available to you. Maybe you’re even wondering what the acronym ERP stands for (Hint: it’s software) and why you need to choose between a cloud-based or a locally installed one, and what would be better? Because the topic can be so vast, we compiled this ERP Guide for you!
After going through the content discussed in this article, you will be able to make a well-rounded decision when choosing new software for your business.
- What is ERP?
- What’s the difference between ERP vs MRP vs MRPII
- What can ERP help you with & what problems can it solve
- What ERP can do for you practically
- Choosing the right ERP software for your business
- Useful websites to compare software vendors
- What to do next
So, What’s ERP Really?
We’re kicking off this ERP Guide with the most important question: What is ERP?
ERP is an acronym for Enterprise Resource Planning and describes the process of planning, managing, and monitoring the resources available to your business – simple as that. It is mostly used in the context of software dedicated to these processes.
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, hiring more people, developing a broader range of products or services, etc. Then things start getting really complicated. Complexity can actually escalate pretty quickly and you need to be systematic and thorough to avoid mistakes and taking a loss – or worse.
Why a spreadsheet doesn’t suffice…
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. 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 the various spreadsheets with each other can only go so far. It’s generally hard or expensive or both to make a spreadsheet talk with the rest of the world. Furthermore, 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), software solutions have been developed to help businessmen and employees save time and avoid making mistakes.
Here’s where ERP comes into play.
These systems 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. Others are limited and can support only basic functions. Although, that can still make a huge difference for the small enterprise. 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.
ERP vs MRP vs MRPII – What’s the Difference?
Make sure to not confuse an ERP with MRP (Material Resource Planning) or MRPII (Manufacturing Resource Planning) systems. To not get you confused, in the 1990s ERP systems basically evolved from MRP and MRPII. Here’s a timeline so you can better visualize it.
The main difference between MRP vs ERP is how it handles processes of different business departments. While MRP was simply a solo software for material planning and mostly targeted at manufacturing companies, ERPs offer easy integration with other software and suit virtually all industries, big or small.
“ERPs combine all departmental data into one complete system that streamlines processes and information flow across the organization.”swipsystem.com
Another advancement was the deployment of ERP in the cloud which bears the opportunities of customizing the software to the business’s needs.
So, What Can an ERP Solution Help You With? What Problems Can It Help You Solve?
To begin with, it allows you to properly keep your books in order. Very important and something every business needs to address from day one – getting your business financials straight is essential. That includes general budget uses, paying your employees their salaries and covering their benefits, and managing your cash and assets, to name a few. What’s more important, all this is laid out and organized to include all the best practices and industry and regulation standards – so that you don’t have to implement them on your own.
Other than that, ERP helps with the manufacturing aspect of your business. Taken in the broadest sense this means the entire process of taking one set of components, using tools or machines and/or labor, and turning them into a finished product. ERP can be there for you regardless of whether you’re making and selling shoes or microchips. It can handle work orders, bills of materials, general inventory management, placement of orders and purchases, supplier interaction, and many other things along those lines.
What ERP Can Do For You Practically
Core business aside, ERP can greatly simplify interaction with the customers and improve the sales process, including marketing, promotion, following up and processing leads. In addition to this, it can do that seamlessly either on the retail/B2C level (end users) or on the B2B level (f.e. affiliates, suppliers).
At the same time, ERP makes it easy to understand what’s going on in your company (what’s collectively called Business Intelligence) by allowing you to create reports, enable alerts and perform simple or complex data mining. It can let you assign metrics to actions and assets and to generally be able to better judge what works well and what doesn’t in your business – which is a hugely important advantage.
8 Things to Consider When Choosing ERP for Your Business
We got to the bottom of what an ERP is, its evolution, and what it can do for your business. Naturally, the question that comes next is how to select which solution is right for your company or organization. The options are numerous and there is in fact an entire business ecosystem around this specific question. That includes consultants, resellers, and companies that help you decide and/or implement the solution for you. It’s a huge subject but we’ll try to cover the basic criteria for choosing ERP for your business to get you started.
Regardless of the specific nature of your business, there is a number of general criteria that you need to consider and apply in pretty much all cases. So here’s what you should take into account as a business owner when looking for the ideal ERP for your needs.
1. Deployment Type
Before you even start looking at all the options out there, you should choose first if you want your ERP to be deployed in the cloud or locally installed. Especially for smaller companies, the cloud option has proven itself to be a lot more cost-friendly than on-premise solutions, largely because of monthly subscriptions based on business size.
Head on over to our blog post about the 8 most important benefits of web-based ERP systems for inventory management.
2. Industry-Specific Features
Obviously, whatever ERP you choose needs to cover the basic aspects of your business requirements as well as industry-specific needs. Your choice will be different if you want to make your inventory management more efficient compared to wanting to better handle your customers or sales leads. On the other hand, a manufacturing business will require different functionalities than an apparel dropshipping business. Moreover, if you want to improve how you work in both fields, it’s important to prioritize your goals.
Most of the best solutions out there focus on doing only one or two things well and they are targeted at small to middle-size businesses. So, the main feature they offer should match your goals as closely as possible. Note that having more features than needed might sound like a good thing, but in reality, it adds unnecessary complexity. That could lead to an increased learning curve and drives hidden costs higher.
Apart from the above points, there are a number of other features that can be easily forgotten but would largely limit your solution if left unchecked. Depending on your business’s size, the system needs to support multiple currencies (e.g. in its reports) or have product tracking capabilities. Finally, governments or institutions might require that certain regulations are met. Therefore, if your system doesn’t support them it is of little use.
3. Data Visualization & Export/ Import
Simplicity but also completeness in data visualization is key to understanding your business in a snapshot. Therefore it should be one of the main criteria for choosing ERP for your business. Here are some questions to ask yourself when choosing the ERP:
- Can your ERP generate a printable report of all interactions with customers, suppliers, affiliates, etc?
- Can it aggregate data graphs or end-of-month/year reports?
- What level of detail of how your business works can the ERP provide?
- Can you easily share this information among employees?
- Also, if you decide to ever change systems in the future, is your information locked in the current ERP?
It’s also important to consider, how and to what extent will you be able to import your existing data into the new system. Especially if your business has been running for a few years now, it’s important to consider the current format of your data. How well organized and easy to process they are. To what extent will you need to manually edit the data. All of that will determine when you’re able to start actually working with the ERP.
For that reason, a lot of ERP vendors offer implementation services to make the transition to the new software as easy as possible for you.
4. Usability of the Application
Another important point to consider is the ease of use of the software. Do you and your employees have to undergo lengthy training to learn and change the way they work? Or is the solution so well designed that you’ll hardly ever need a manual? The abundance of solutions out there makes this particular criterion potentially the decisive factor. The ERP with the shallower learning curve usually prevails over the ERP with the most features. This is especially true in very small businesses.
Another angle here is to look at your own business practices and evaluate how they perform. The easiest ERP software won’t do much if you put it on top of ineffective processes. Evaluate and, if necessary, fix these first and then implement the new software.
5. Security Measurements
When using ERP your crucial business data are stored in a foreign place. For that reason, you should be sure that proper encryption and security measures are in place where necessary. While there should be as much security as needed, it shouldn’t get in the way of usability. You should ‘buy’ to the extent that you need it. For instance, there’s more reason for it if you know that in the past a competitor has been after your data.
6. Necessary Maintenance
Once the new system is in place, it’s not the end of the story. You will now have to consider how much it will cost to maintain it. Also, in what way it can be upgraded to include further features or needs that will arise in the future. You should also consider hardware equipment and additional licenses you might need. Other than that also a backup scheme in case of a disaster is always recommended. Hosted or Software-as-a-Service solutions usually offer this out of the box. That is mostly useful to small business owners so they do not have to deal with upgrades, maintenance, and installations. All that is needed in the latter case is a web browser and an Internet connection.
7. Integrations & Customization
As discussed in the evolution of ERPs, their key feature today is to combine information across different departments. This will only be possible with integrations if you’re not using an All-in-One solution. Otherwise, the system needs to seamlessly integrate with other applications like Shopify, WooCommerce, or Quickbooks for example, to ensure successful end-to-end usage.
For companies operating on a large scale with very specific requirements due to their size, customizations might be necessary to meet their needs. Check beforehand if the vendor offers personalized software development on top of their software.
8. Determine Your Budget
Once you have an idea of your business’s requirements, then comes the crucial criteria for choosing ERP. How much does it cost in the short- and long-term and what is your budget. Usually, the core spend is a function of the users (or machines) the software will be installed for but other costs may also be involved. Most importantly, look out for any hidden costs outside of subscribing to the software like training costs, implementation costs, etc.
Useful Websites to Compare ERP Vendors
When you thought about your company’s requirements, it’s time to create a list of ERPs that will fulfill your criteria. Here’s a list of websites where you can compare vendors and make an educated decision on which to choose.
So, How Should You Begin
Choosing a fitting ERP system for your business can be a critical step. If you select the right one, it can give you the necessary tools to scale your company. In this article, we went through the major features that you should consider while choosing ERP for your business. Of course, there are many other criteria that you might need to consider, that are specific to your business model. Moreover, another important distinction might be whether the ERP will be installed on your computers or whether it should run on the cloud.
In general, you should always opt for an ERP solution that works FOR your business instead of your business having to work for the ERP.
Cloud ERPs are a great solution for many businesses. Mostly because the demand for hardware is low and the software is adaptable to your specific needs. If you are considering a cloud ERP that is easy to use, focused on customer support, an individual approach, and a good value for investment, you might want to check our free trial of Megaventory management software.
*Terms & Conditions apply
Svea Schüler is a Digital Marketer for Megaventory, the online inventory management system that can help medium-sized companies synchronize stock over multiple stores. She believes content and social media marketing are the best solutions to create awareness and secure long-term customer satisfaction.