This is how
an ERP System can
improve your Business 12 Ways

ERP: Added Value increases with Size and Process Complexity

In the start-up phase and the period that follows, companies focus on specific challenges: the business is small, the exact direction in which it is developing is still uncertain, and growth-promoting activities take priority. When Excel spreadsheets are no longer sufficient, special software solutions, such as financial accounting software, are added.

This can work for a while. However, if the favorable business development continues, the order volume and the number of employees increase, it can become increasingly difficult to maintain an overview. This slows down the work. An important reason for this is that data and information are increasing, but the different storage locations make access and overview difficult. This has consequences: employees work without coordinating with each other. Data records are created twice or multiple times. Data in different applications is updated at different times. There are often no uniform standards for entering data.

ERP Implementation brings System and Order to the Company

The examples mentioned suggest that those who recognize the warning signs in good time and create order can avoid difficulties. At this point, at the latest, it is time to consider ERP implementation. In many cases, it is worth addressing the issue as early as possible in order to prevent chaos.

Advantages of ERP Systems: Same Database, one User Interface

With a modern, carefully selected ERP system, you can manage tasks and processes within the company effectively and efficiently. From order entry to production or warehousing and shipping. With an ERP solution, every department works with the same software and thus has the same user interface and a shared database. This has clear advantages: departments and divisions can exchange data more easily and quickly and collaborate more productively.

SMEs often think that an ERP system is not worthwhile for them because of their size. However, cloud ERP software in particular makes it possible to start with manageable entry-level solutions and add new ERP modules as needed. If more specific functionality is then required, there is often a wide range of add-ons available - often developed by partners of the ERP manufacturers. For example, Microsoft’s ERP solution, Dynamics 365 Business Central, offers a wide range of special extensions. Microsoft partners can also support you in developing and maintaining a solution.

ERP Solution: Established Manufacturers vs. Software Patchwork

Another point to consider when making your selection: if the ERP system comes from an established manufacturer, this also provides greater planning security. You can assume that the functionality will be kept up to date and that the individual ERP modules will be compatible with each other after updates and upgrades. In addition, the ERP manufacturer’s partner offers support for the entire solution. With individual solutions from multiple manufacturers, on the other hand, you are faced with a software patchwork. If the different applications no longer work together smoothly, for example as a result of an upgrade, you may find yourself on your own. In the worst case, the different manufacturers will then blame each other.

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Advantages of an ERP Solution: Example from Accounting

As a company grows, processes can slow down if they are carried out manually. For example, small businesses may only need to print and send invoices once a week or even once a month. However, once a certain size is reached, it makes sense to send invoices more frequently and automatically - also for liquidity reasons. Otherwise, employees spend hours reminding delinquent customers to pay their bills. An ERP system ensures that appropriate reminder messages are sent automatically.

1. Better Personnel Planning thanks to Better Data

During the growth phase, the demand for employees increases. At the same time, however, it is often uncertain how long and how intense the upturn will last and how exactly it will affect long-term demand. A new ERP system helps to automate processes. This makes it possible to streamline work processes. Many smaller tasks are then eliminated, and employees are significantly relieved. If processes become more efficient, fewer employees are needed. In other cases, the creation of a full-time position can be delayed.

Personnel Requirements: Forecasts become more Reliable

Since data is standardized by an ERP system, more reliable personnel forecasts can also be made. This reduces the risk of hiring too many or too few employees because the development was misjudged. The fact that data is stored in the same database makes it possible to take data from production, sales, warehousing, and shipping into account equally. This allows trends to be identified at an early stage.

2. ERP Solution: Customer Service improves

Customer service and support is a sore point for many companies. Probably everyone has had negative experiences with it at some point, either privately or professionally. A quick internet search shows that even with large, well-known companies, bad experiences with customers are apparently not isolated cases. This not only carries the risk of losing long-standing loyal customers, but also the risk of them giving you permanently negative reviews. Common causes of poor support are: employees act in an uncoordinated manner, lack access to relevant information, or do not have the necessary background knowledge. In addition, first-level support in particular is often outsourced to subcontractors. The likelihood of something going wrong increases significantly if the selection of vendors is not done carefully.

Large companies with complex structures have to take many factors into account to ensure good customer service. For SMEs, on the other hand, simply introducing an ERP system can lead to significant improvements. The reason for this is that ERP software establishes connections and creates clarity. This makes the necessary information easier and faster to access. Customer service employees can thus provide the right information more quickly. What’s more, data that has been processed using ERP software prevents many problems before they arise.

ERP Systems: Better Customer Service through AI Bots

In addition, customer service can be further improved with the help of modern technologies integrated into the ERP system. For example, AI-enabled bots can classify incoming inquiries appropriately and forward them to the right contact persons. An AI bot can also be used to tap into a knowledge database to answer customer questions appropriately in chat. Because artificial intelligence can take over many routine tasks, service employees can devote themselves to more demanding tasks.

3. Mobile Working: Access Data from almost Anywhere

Mobile working is very popular today: work from almost anywhere - conveniently, quickly, and with data that is always up to date. An ERP system - especially one from the cloud - is an important prerequisite for this. For example, a customer service employee who is currently inspecting a broken machine at a customer’s site can quickly check whether the required spare part is in stock. If it is not available, they can clarify on the spot when it will be delivered. A production manager can check the current status of production while traveling by train or taking a break at a rest stop. Data can be accessed easily via a laptop, tablet, or smartphone.

4. Greater Security and Compliance

An ERP system also improves data security and compliance. With cloud ERP solutions, many security and compliance settings are already preconfigured. In addition, the settings are constantly updated. This also enables more secure working from home and on the go. In addition, errors can be traced and their causes identified and eliminated. For example, a food manufacturer could trace contamination back to its source.

Another security-related issue is authorization management. This refers to the ability to individually determine application, function, and data access for individual users or user groups. This prevents sensitive data from the ERP software from falling into the wrong hands or the system from being manipulated.

5. Better Collaboration between Departments

When departments use independent applications, cross-departmental meetings, processes, and projects suffer. Data and its maintenance in the respective departments often take on a life of their own. As a result, they are often outdated, incomplete, or even non-existent. In addition, a comprehensive collection of Excel spreadsheets, emails, and other documents often has to be painstakingly compiled for each meeting. The more extensive and complex the reports become, the more errors creep in.

With an ERP system, all data is stored in a single database. New data records are entered into the shared database and are available to every authorized work area. This enables the creation of a single source of truth, and all participants can access identical basic data. This facilitates smooth collaboration between departments.

6. Systematic Forecasting: Demand Planning made Possible

Market demands are changing faster than ever before. Whereas businesses used to operate almost unchanged for decades, business models now have to be adapted more frequently every few years. This makes data all the more important: it is becoming an indispensable tool for corporate management.

An ERP system helps to establish a top-down view. Traditionally, decisions at SMEs are often made based on gut feeling. If the economic environment changes only slowly, this strategy can work. However, if the conditions for decision-making become more complex - an unmistakable trend in digitalization - high-quality data becomes essential. Even intensive, close contact with customers cannot always sufficiently counteract this development. Sales employees, for example, often focus too much on day-to-day business, partly due to their job responsibilities. As a result, they fail to recognize new trends, underestimate them, or only notice them at a late stage.

7. Company Growth and Expansion: Optimal Support

Companies are constantly evolving. In some cases, organic growth takes place, new business opportunities are seized, and secondary businesses are expanded into primary business areas. In other cases, new companies are acquired. Added to this is international expansion.

Modern ERP systems are ideally suited to support these developments. For example, if a company has several (international) subsidiaries, a two-tier ERP strategy is a good option. In this case, the parent company has a comprehensive ERP system - often consisting of a hybrid mix of on-premises and cloud components. The subsidiaries receive lean ERP solutions from the public cloud. If the systems are from the same manufacturer, they also have a common user interface and are closely integrated. This creates a favorable balance between flexibility and the best possible compatible data exchange. Subsidiaries often have different business models and therefore require different or additional functionality. For example, the ERP solution used by foreign subsidiaries should be able to handle country-specific currency conversions, tax rates, business practices, etc.

ERP software also enables integration with a web shop or a mobile MDE solution. At the same time, the ERP system can be linked to a point-of-sale system (POS system).

8. Well Prepared for the Use of Additional Technologies

With advancing digitalization, the use of new technologies is becoming increasingly important. An ERP solution prepares the company well for this. Data is updated, organized, and centrally managed in the ERP software. This allows the system to serve as a data source for new applications and technologies. The ERP system can also import data from other systems, then process and/or forward it. On the one hand, this supports the operation of other technologies. On the other hand, it makes the use of new technologies possible and meaningful. The Internet of Things (IoT) and artificial intelligence (AI) are examples of this. Furthermore, a company can integrate its e-commerce platform with the ERP system. Data is then automatically forwarded from the front end to the back end, and orders are processed more quickly.

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9. Better Collaboration with Customers, Partners, and Suppliers

An ERP system allows you to exchange information with customers, partners, and suppliers more quickly and avoid misunderstandings. Furthermore, partners or larger customer companies may have requirements that demand standardized data from several departments and require automated interfaces. This can often only be achieved with an ERP system. ERP software can also be used to make valuable data available to suppliers. For example, the remaining quantity of certain items in the warehouse. If the quantity falls below the specified lower limit, the supplier knows that it must deliver more. A web shop connected to the ERP system can also show visitors or customers data about the stock levels of items and provide information about the status of their orders.

10. Cash Flow Management is improved

If you don’t understand your own cash flow (i.e., sources of income and expenditure), you can quickly jeopardize your company’s solvency. One of the main causes of this is a lack of data or data that is not readily available. With the help of an ERP system that systematizes and summarizes data, incoming and outgoing cash flows become transparent. This allows you to see how cash flow changes on a daily, monthly, or quarterly basis. This allows financial difficulties to be identified at an early stage. For example, large amounts of capital are often tied up in excess inventory. One reason for this could be the purchasing process: buyers are encouraged to purchase large quantities in order to take advantage of discounts. In doing so, the actual demand from customers is often not taken into account. Data from the ERP system sharpens the focus on such details.

11. Improvements in Warehousing, Shipping, and Logistics

Many companies today are active in the retail sector. ERP software offers several advantages in this area in particular. If the data from the ERP system is clearly presented, for example in a dashboard, simple analyses can be carried out quickly and trends identified. This can clarify many questions. For example, whether items that were classified as fast-moving are still so. It may be that other items are now in greater demand and a change in storage locations would be advisable. This also makes it possible to identify customers more quickly who, for example, have received more favorable terms due to high purchase volumes but are now ordering much less.

An ERP system can also send data such as addresses, item numbers, and order numbers to a fulfillment provider via appropriate interfaces. Customer data can often be sent directly to the fulfillment service provider’s franking software.

12. Production runs More Efficiently

Production also benefits from the introduction of ERP software. When an order comes in, ERP can be used to immediately determine whether there is enough raw material in stock. In addition, production capacities can be estimated. The product planning module, or a similar module that is integrated into many ERP systems, or an add-on developed by a partner, creates a rough plan. Adjustments to the production sequence can also often be made for rush orders. The ERP solution helps to reduce throughput times. The software also allows simulations of possible production options and combinations to be carried out. This allows the production sequence to be optimally aligned with the required setup work.