Enterprise resource planning (ERP) solutions empower businesses of all sizes with the means to connect operations company-wide.
But while some CFOs imagine that rolling out a new ERP system is a software upgrade, it actually is a business transformation project above all else.
That’s because ERP touches all aspects of a company, and positively impacts processes. By rolling out an ERP solution, businesses greatly improve operational processes and this usually leads to a rethink of how the business is run. ERP isn’t software that touches just one department—it touches all parts of a company, and this often requires new ways of thinking and acting.
That’s one reason why ERP implementation is a significant undertaking. But it also is an opportunity.
Here are five ways that ERP helps businesses modernize and transform.
1. It Helps Businesses Get More Data-Driven
ERP enables decision-makers to access data gathered from all key areas of their company, free from operational silos. A cloud-based ERP platform centralizes data into one user-friendly hub and makes it far more accessible. Complex data related to everything from supply chain to employee performance becomes easier to digest and act upon as a result.
Analyzing data enables decision-makers to identify opportunities to improve all aspects of a business, affecting internal and external processes.
For example, checking customer satisfaction surveys and data on delivery delays together may reveal that customers are waiting longer to receive products than they should be. In this case, changing suppliers or an alternative delivery method might create a stronger customer experience.
This is just one example of why digital transformation has led 70 percent of leaders to report significant improvements in customer satisfaction and engagement, according to a recent SAP Digital Transformation Executive Study.
Working with an ERP system’s data may help you to spot more diverse improvement opportunities, such as reducing worker numbers in one warehouse and increasing them in another which handles more orders.
2. ERP Assists with Attracting and Retaining Talent
One of the most fascinating ways in which ERP implementation transforms businesses is talent management. To return to the SAP Digital Transformation Executive Study, SAP found that 71 percent of leaders feel digital transformation makes attracting and retaining talent easier (compared to 54 percent of other businesses).
An ERP system provides visibility on employee productivity and performance. Analyzing data and paying closer attention to workers’ activities may highlight common issues which interfere with their success.
Two-thirds of leader businesses make workers’ lives easier by removing obstacles that impair their ability to complete tasks to the best of their ability. If poor performance continues, the problem might lie with the employee themselves rather than potential disruptions.
Also, research shows that digital transformation has led 64 percent of leaders to report higher employee engagement. ERP implementation reduces the risk of employee achievements (or lack thereof) going unnoticed.
Leaders have the data to understand which workers deserve more recognition and which should be watched more closely. Over time, this can contribute to a more balanced, fairer workplace.
3. It Improves Reporting
Feedback loops that are slow have no place in business today. While they may have worked even a few decades ago, today businesses need real-time decision-making.
ERP’s real-time reporting capabilities enable businesses to keep track of product parts, manufacturing, packaging, shipping, etc. This increased visibility can reduce the risk of compliance oversights and the costly repercussions they bring. Businesses have the power to identify what needs to be changed and how this will affect other processes.
For example, switching from one supplier to another to meet certain criteria may incur extra expense and cause product prices to increase, even if only by a small margin. A good ERP system makes managing and contextualizing all this data simple.
4. It Encourages Business Process Reassessment
Research shows that more than 90 percent of digitally-focused leaders consider technology “critically important” or “very important” to retain their competitive advantage.
As we’ve already established, using an ERP system gives businesses access to real-time data for making the right decisions for their business. Improving inventory management, shipping, customer service, employee engagement, etc. can create a stronger organization. Eliminating unnecessary, repetitive tasks and driving down costs without impacting product quality or customer satisfaction boosts a company’s performance further.
However, implementing an ERP, changing well-established routines, and embracing more standardized business processes must be managed carefully. Particularly when transitioning from platforms that might have been customized extensively for specific goals and individual workers’ preferences. That’s where change management comes in.
“Change management is needed because businesses are moving from solutions that were tailored to their needs to processes that are best for their business,” notes Navigator Business Solutions VP of Sales, Ralph Hess.
That means setting up an ERP requires recognizing what’s actually essential to make the business operate at its best, rather than just what was done in the past. ERP implementation initiates a rethink of processes.
5. ERP Modernizes IT Infrastructure
When a business rolls out a new ERP system, it almost certainly will be a cloud-based solution. And since ERP touches all aspects of a business and serves as the backbone of IT operations, this move to a new ERP solution effectively upgrades a company’s IT infrastructure to the latest technology.
What’s more, the move to the cloud means that businesses fundamentally transform their relationship to IT upgrades. Upgrade cycles effectively come to an end, since cloud-based solutions are updated automatically and on an ongoing basis. Because the cloud model is service-based, this means that both IT hardware and software are effectively upgraded on an ongoing basis. IT modernization not only happens during ERP implementation, but into the future.
ERP implementation brings businesses the data and visibility to transform their operations, from reducing employee turnover and cutting shipping costs to mitigating compliance issues.
It’s not just about investing in the latest software. ERP implementation transforms and modernizes businesses in the process.
For more about how ERP implementation is a business transformation project, check out our free guide, ERP Implementation for CFOs: What You Need to Know.