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WHAT IS ERP SYSTEM?

You must have heard of ERP or ERP. You may know its meaning. You assimilate it, without more, to business management. But when you do your research on the term ERP system definition on the web, the resulting amount of data can quickly become confusing or even discouraging. As part of a business growth strategy, an ERP solution is an essential element

WHAT IS ERP SYSTEM? THE COMPLETE DEFINITION

In its definition, ERP system is a management software integrated into the information system of a company to  coordinate the management of processes and activities.

This ERP term  “Enterprise Resource Planning”  is the English acronym which means: “Planning of the company’s resources”. It can also be called an integrated management software package or ERP. The objective for a structure which integrates an ERP solution is  to improve and optimize the management of its  production operations , accounting, logistics, stocks, purchases… thanks to a set of modules linked by a shared database.

CHARACTERISTICS OF ERP SYSTEM

By definition, it is accepted that an ERP system must cover at least  two to three major families of functionalities to be considered as such (production, accounting, adv, etc.).

Technology Group, establishment of references and expertise in management software (formerly CXP Group), has defined a list of precise characteristics:

  • The solution must come from a single publisher, i.e. the establishment that codes
  • The system must guarantee the uniqueness of information by a single base
  • The system must provide audit trails guaranteeing full traceability of the data
  • The modified information is updated in real time and impacts all the other modules
  • The tool must cover all of the company’s IT applications

WHY IS AN ERP SO IMPORTANT FOR A BUSINESS?

One of the main advantages of an ERP tool is that it makes it possible to unify all the management tools and increase productivity, which, in the end, has a positive impact on the turnover of a company. As logically as naturally, this development is a potential to be worked on. The impact can certainly be rapid but must above all be considered in the medium-long term .

What is an ERP SYSTEM for? 

The objective of the ERP is to make you  gain in operational efficiency, time and transparency .

An ERP aims to homogenize the entire information system and data of a company. It is divided into several modules and are linked by a single database. This base guarantees:

  • The uniqueness of all company data
  • Real-time data update
  • The provision and exchange of information between all modules, services and therefore users.

Very simply, the ERP system  simplifies your day-to-day management . Below are some additional and concrete reasons why an ERP is important for an organization:

  • Measure the performance of a company with the right KPIs (easily calculate its real cost)
  • Manage your planning thanks to a 360 ° view (purchases, sales, stocks, production, accounting)
  • Optimize and better control stocks
  • Ensure monitoring and regulatory compliance
  • Get a complete view of customers
  • Management software that integrates an international dimension
  • Management software that adapts to a profession

For any business management or any manager, ERP software is of interest thanks to reporting and business intelligence functionalities for improved decision-making.

WHICH COMPANIES CAN EQUIP WITH AN ERP SOFTWARE?

Contrary to popular belief, an ERP implementation project is not only reserved for a public and elite of companies with an international dimension. ERPs are just as essential for SMEs but also start-ups which suffer from a lack of construction of appropriate organizational processes.

According to Statistics, in 2014, 39% of SMEs were equipped with an ERP. In 2020, this figure rises to almost 50%. Faced with market changes and constant demand, publishers have understood the need to offer suitable solutions.

No more overwhelming software packages, the applications present in the catalogs want to be more consistent in terms of sizes and costs. Publishers have also been able to diversify their distribution method. Accessibility to packaged software for more limited needs can now be done on-premise, via the cloud in SaaS mode (which makes it possible to limit investments) or both.

HOW DO I KNOW IF MY COMPANY SHOULD START IN AN ERP PROJECT?

Is your business growing rapidly? Still using Excel spreadsheets? We’ve listed a series of signs for you that it’s time to level up.

1. Compartmentalized IT systems

Your business does not operate as a single unit. You still spend a lot of time looking for a typical answer to your questions. Example: what is the real cost per product line? Difficult to get a precise answer if your systems are not communicating with each other.

2. Manual data management

Each department in your business uses its own processes for managing and storing data. Therefore, if two tools communicate poorly or not at all, it is possible that duplicate or modification errors accumulate and waste your time.

3. A lack of visibility into the processes

With rapid growth, you may find it difficult to scale your processes that fast. Inventory control, customer satisfaction or even cost monitoring can suffer.

4. An information system that is expensive and difficult to maintain

If you have multiple IT tools, it can be expensive and time-consuming to maintain and scale. Your information system is very extensive and you spend a lot of money on resources to purchase licenses or maintenance contracts.

5. Valuable time to collect data

Your basic activities take too long. You have great difficulty in retrieving and searching for the data. It even becomes a daily challenge to analyze information with so many different tools.

HOW TO USE AN ERP SYSTEM?

The purpose of ERP software is to be able to reach as many people as possible. The functional coverage is broad.

Each component or module application of an ERP system has its own functionalities intended for one of the company’s departments. All of these services are or may be affected. Below are the main ones:

Accounting / Finance: general and analytical accounting, auxiliary accounting, payment management, VAT declaration, etc.

Production  management: CAPM, nomenclatures, operating ranges, calculation of net needs (CBN), MRP, production order, etc.

Commercial management: purchases, sales, stocks, customer relationship management …

In general, professional establishments start by integrating financial management or sales and logistics applications. It is also possible to obtain ERP modules specific to its activity . This is particularly the case for large industrial activities (pharmaceuticals, chemicals, etc.) or for trading and distribution activities.

TYPOLOGIES OF ERP MARKET SOLUTIONS

The ERP market is rich. Zara ERP of management, these software packages want to meet all the needs for all types of business. Some of the most popular software packages include:

  •  All-in-one or generalist ERPs: include all the basic functionalities useful in a majority of activity sectors
  • Specialized ERP: this business software offers functionalities adapted to a sector of activity
  • Open source ERP: solution which does not require the purchase of a license and which contains all the functionalities for the management of a structure but which requires very good computer knowledge
  • ERP in SaaS mode: software as a service. Everything is kept under a remote server.

Everything is accessible anywhere, anytime and from any medium.

WHAT ERP BUDGET SHOULD BE PROVIDED FOR?

Like many businesses before launching, the question of the budget is one of the delicate points. How much do you need to put on the table to integrate an ERP solution that will meet all your development needs and goals?

According to much feedback, companies that decide to equip themselves and integrate new ERP system spend on average 2 to 3% of their turnover for an estimated period (within a wide range) between 8 to 12 years old.

So if you generate an annual turnover of 10 million euros, the total ERP budget would be around 200,000 euros. This is not an absolute truth. This figure is given as an indication. The budget to be allocated varies according to many criteria such as:

  • Number of users
  • Solution technology
  • Business specificities
  • User training
  • Project duration
  • The importance of change
  • Internal client resources

Faced with its sums, the requesting public expects a  visible and rapid ROI (return on investment) . We advise you to consult studies on the subject and in particular that carried out by the firm Forrester on Sage X3. In addition to being complete, it allows you to have a precise idea of ​​what you can aim for and what you are entitled to expect with the integration of a new ERP.

5 QUESTIONS TO ASK FOR INTEGRATING ERP SOFTWARE

ERP software well suited to the company, its environment and its specificities will allow greater reliability, transparency and efficiency to be obtained. So how does a business choose and then integrate the right solution? For this, it is necessary to ask and answer various questions:

1. Why does your business need an ERP system?

First of all, it is essential to define the reasons that will push you either to integrate ERP system for the first time or to change your solution. What benefits can the company derive from it? What functionalities do we need for our management? How does this approach fit into the structure’s growth strategy?

These reasons will be in part the result of your analysis phase to define your blocking points, your points for improvement or your priorities vis-à-vis such a project.

2. Where to start your ERP project?

The most important thing when launching the project is to have all the steps to follow in mind. Setting up an ERP system requires both technical knowledge and time. Editors and integrators can provide you with some ideas, but that is not their role. You can also choose to become a consulting firm or rely on a project team led by a dedicated project manager with all the required skills.

3. How to choose your ERP solution for your business?

The ERP panel on the market is close to infinity. It is not necessarily easy to navigate among solutions that seem very close to each other. The difference and the choice of the right ERP can be played on precious details.

To choose your ERP, there too, a methodology exists. It wants to be classic but remains the most effective that it is. Rest assured, in any case, you will not escape the traditional benchmarks and comparison criteria.

4. Who will integrate the ERP in the company?

Once you have chosen your solution, several possibilities are available to you. In case you decide to do specific development, it means that you have IT resources for such a project. Otherwise, if you opt for the ERP of a publisher, the implementation can be carried out either by the publisher itself or by an integrator of the solution.

Your internal project team will aim to examine these possibilities according to methodologies, skills, your degree of customization, etc.

5. Who will take care of the ERP software post-project?

An ERP system deployment project can last from 3 to 12 months and engages a company for about ten years on average. It is therefore a real long-distance race once the thrill and excitement of novelty has passed.

Certain elements should be considered as early as possible during the choice phase, such as maintenance or the evolution of the different systems depending on the technology. Others are to be expected at the end of the project with the completion of a review.

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