I was recently asked to create a definition of ERP for a client to use in explaining it to their executives.  In other words, communicate so they understand.  I started with the below.

Enterprise Resource Planning definitions:

  • Software industry definition – a system the will, through automation and best practices, optimize your business processes for greater profitability.  
  • Customer definition – a system that will help us run our business and provide the necessary information to make better decisions, but won’t kill our business.

Then thinking that this would need to be expanded I dissected the components of an ERP (not really) system (see previous posting about how ERP is not really ERP any longer).

Three pieces of a solution:

  1. The database – the most important as it is the core of not just what the applications use to input, process and publish (output) data, but also critical for integrating with other applications internally and from your customers and suppliers
  2. The applications – ranging from a core of financials, order management, inventory management and production management to customer relation management, e-commerce, performance management and so on.
  3. The reporting tool – not just paper reports, but downloads to Excel and exports out to customers/suppliers allowing the ability to track data quality and correlate data not just from the system, but also from other sources.

The important part of the above is 1 and 3.  Frankly, the applications not only the boring part of the system, but are the least impactful of the pieces.  After all, your data what you take with you when you divorce yourself from your old ERP system.  Now, the data tends to be in not so great condition, but it is priceless.  The reporting tool, call it business intelligence, analytics or magic 8 ball, is how you use that data in making GOOD business decisions.    

Yes, the applications do transform some of the data as in order to cash and product configuration, but how does an application make decisions better?

How does a processing a purchase order or updating an inventory quantity improve your integration with a customer leading to a greater share of the available spend?

Following this I moved into the territory of what is a general reason to install a new ERP.

When deciding on taking the large impacting act of selecting and implementing a new ERP you must first, and most importantly, think about where you want to be in a year, two years, or more.  If your business isn’t at optimal capacity now but your plan is to get there within a year or even two, now is the time to buy.

Second, is the fact that ERP companies are also still looking to make sales (read deals!) and are offering more tailored, industry-specific packages.

Will ERP launch a business into a higher stratosphere?

Nope.

But, can it give you the information that you can make the decisions to hit those bigger goals?

Certainly.

There is more to it than those two points, but do not dismiss them.  Especially the first one.

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