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Benefits and Pitfalls of ERP for Startups

Life sciences and biotech companies often make miracles happen, but the road from a spark of genius to a regulator-approved product isn’t easy. Getting to market involves investment, risk-taking, and strategic planning — all at a rapid pace.

 

The basic business models of a startup tend to grow increasingly complex as an enterprise begins to juggle financials, manufacturing, inventory, quality, and project management all at once. While speed to market matters, operational integrity and delivery times are expected to uphold high standards and meet strict compliance mandates.

Cloud-based enterprise resource planning (ERP) systems can eliminate many headaches associated with maintaining operational infrastructures and information networks. The streamlined processes enabled by ERP allow employees to focus energy on core projects and strategic business objectives rather than administrative tasks.

 

It may be tough to pinpoint when your startup should consider introducing an ERP system. Limited resources may belong elsewhere early on. Investing and implementing ERP too soon potentially could detract from your core focus, and at the manufacturing stage, you’re still learning and not yet focused on profits. On the other hand, act too late and you’ll miss the opportunity to ease some pain as you scale up your operations.

In general, you’ll want to start considering ERP when you have at least 20 employees and more than 100 invoices a month. At that point, you probably will have launched your product but won’t have seen your sales grow exponentially yet.

Sometimes it might make sense for a business to set up an ERP system sooner than this, however, or later in the company’s journey.

One good way to decide if your enterprise is ready for an ERP system is to consider some of the benefits it can offer. If you recognize some of your current pain points in these descriptions of potential ERP benefits for startups, it may be time for you to make a move.

 

1. Automation for Optimal Processes

The major benefit of an ERP system is automation of your operational flow, which can save your organization significant time, money, and energy. Business processes are optimized as the ERP platform helps manage and automate much of the day-to-day of operations.

 

In the life sciences and biotech sector, regulatory and compliance mandates also require you to keep up with evolving requirements. Many out-of-the-box ERP solutions come with built-in regulatory compliance and quality control functionality, and some also include correction and preventive actions (CAPA) compliance.

 

2. Full Visibility for a Single Source of Truth

ERP helps streamline processes, provides you with more information, and strengthens operations. In one system, you can oversee things like accounting, manufacturing details (including materials planning, costs, purchasing, and more), inventory, sales, and other operational areas. Information from different business functions can be viewed in one place, so you don’t have to track down bits and pieces from disparate platforms and applications.

 

The ability to see directly into your supply chain also helps improve product and materials tracking and inventory accuracy. This can help improve delivery times while also giving you tracking and reporting data on your transactions.

 

3. Powerful Analytics for Stronger Decisions

With ERP, you can oversee purchasing, manufacturing, production, sales, and distribution, which altogether can help steer your business strategy. By putting data in the cloud within a single overall ERP platform, an organization can use artificial intelligence and big data tools for stronger business intelligence, more complete analytics, and better forecasting.

 

Although many accounting solutions, such as QuickBooks, can give you some the information you need, ERP gives you a holistic and far more complete picture.

 

4. Streamlined Communications and Data

Inefficient processes and communications can create turbulence in a business, wasting resources and needlessly tying up a team. ERP can ensure that everyone has proper information at their fingertips and can automate tasks to avoid inefficiencies. This enables employees to use the central repository of information to focus on core strategy and undertake new business and product initiatives.

 

At the same time, cloud-based ERP solutions address the needs of today’s mobile workforces, making the system accessible to everyone at any time or place so everyone can be on the same page.

 

5. Greater Cost Transparency

Cost management is an essential for running a business. You need to see all your costs so you can ensure you’re able to pay your workforce and suppliers and optimizing supply chains.

 

ERP systems allow you to identify all the underlying expenditures that influence the cost of manufacturing your product and the cost of sale. You can connect with suppliers’ systems to see real-time costs for materials and keep an eye on your own inventory for more efficient budget planning.

 

6. A Foundation for Business Growth

The integrated approach ERP provides can help you grow and scale your business as well. ERP is highly configurable, but it also encourages best practices across a business by default. For a startup, this best practices foundation makes it easier to scale without having to develop new processes as the business grows.

 

With the life sciences and biotech industry moving at such a rapid pace, ERP scalability also helps you meet changing business requirements and demand. For companies going global, ERP systems can provide multi-location support as well, helping ensure that the organization can deal with the necessary languages, currencies, tax codes, and various regulatory mandates.

 

When Is the Right Time?

Ultimately, the benefits of ERP outweigh the pitfalls in the long run. But what’s not always clear is when to implement it. If ERP is attractive where you are in your operation today, an off-the-shelf, scalable solution might be a great starting point. Implementing an ERP system when you are a smaller organization will be a more straightforward project and will set a solid base allowing for organizational growth using the same system and avoiding greater disruption later in organizational life.

 

If you would like help figuring out where and when to start, contact one of our consultants at (801) 642-0123 or by emailing info@nbs-us.com.

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