Does Your Business Need an ERP?

Does your business need an ERP system? Before you answer the question, let’s review what an ERP system is and what is does.

ERP stands for enterprise resource planning. An ERP system is a software system that integrates many business management and operation systems into a single system, often with real-time updates.

In the past, I worked at both midsize and large companies that had ERP systems. I found that ERP systems help with data collection, storage, processing, and communication among a variety of internal and external systems. In short, they help you run your business better. However, do you need one right now? This is not an easy question to answer as it truly depends on your business needs and where you want to take your business in the future.

Before thinking about implementing an ERP system, consider the following:

• Business size:

  • Do you have less than $5 million in annual sales? (If so, you may be able to keep track of your finances with Quicken, Money Manager EX, Invoice Expert, etc.)

  • Do you have fewer than 20 employees? (You might be able to track your staff within Excel, Google Docs, Open Office, etc.)

• Processes:      

  • Do you have simple processes (e.g., basic assembly, extrusion)? 

  • Are you a contract shop?

• Customers:

  • Do you have few customers? (If so, you may be able to manage them with Excel or similar software.)

  • Do you receive paper POs and invoices?

• Suppliers: 

  • Do you use only a handful of suppliers?

  • Do you buy most supplies with a credit card or at a local store?

If you answered yes to most or all the above questions, you may not be at a point where you can easily justify a full-blown ERP system. You can use software specifically designed to manage critical areas of your business, or you can outsource some of your data tracking and collection to a consultant or management company like Wipfli, Schenck, or ADP.

If your company is larger and you already have some software to help manage your business, you should consider hiring a SaaS company. 

If you plan to grow your business, you might want to look at systems that will later allow you to expand to a full-blown ERP system. Some systems to consider are MRP (material requirements planning), MSE (manufacturing execution system), and CMMS (computerized maintenance management system). 

Before you go out and purchase a system, develop a list of what you want your system to do, as well as any must-have requirements. Now, you can contact business software providers and ask them to give you a demonstration of their specific software.

Before you buy, you may want to ask the following questions:

• How much does system maintenance cost?

• Is the system expandable to support future growth?

• Is the system compatible with other systems?

• What type of support is offered?      

  • Is implementation support provided?

  • How much does support cost?

  • Do changes or requests need to be approved or agreed upon by a user group?

  • Is cloud storage offered?

• How long has the company been in business, and how large is their customer base?

• What is their system security?

• Are additional services and systems offered?

You are a manufacturer and are good at what you do. If business software isn't one of your key strengths, don’t be afraid to bring in a consulting firm. Ask them to review and analyze where you currently are, where you should be, and where you could be.

Business software can seem overwhelming. However, in today’s world, many customers and suppliers have adapted software solutions to improve business operations and increase effectiveness. Don’t stand at the sidelines and miss opportunities to improve operational efficiencies and make the most of potential growth opportunities. Be smart, develop your requirements, review systems, and make the decision that best fits your business needs.