2018 Edition ERP System Buyer’s Guide brought to you by: Copyright © 2018 Better Buys www.betterbuys.com Looking for an Enterprise Resource Planning (ERP) System Provider? Here’s What You Need to Know A business needs many functions to run successfully. Some of these functions include human resources, marketing and accounting. Having separate solutions to handle each business function can be cumbersome, inefficient and expensive. Enterprise resource planning (ERP) software is a single system to handle all areas of the business. However, it’s a huge market – and trying to find the right software for your needs can be daunting. Here’s where our buyer’s guide comes in. In this guide, we provide an overview of ERP solutions and then break down the features, benefits and challenges, as well as what to look for when making a purchase. What is Enterprise Resource Planning (ERP) Software? Enterprise resource planning (ERP) software is a solution designed to help companies manage all facets of the business within a single interface. The solution includes different modules that integrate with one another. Some of these modules include: The enterprise resource planning field dates back to the early 1960s when ■ Accounting ■ Customer relationship management ■ Human resources ■ Supply chain management ■ Manufacturing ■ Business intelligence ■ Inventory management 1 Entire Contents © 2018 Better Buys the first materials requirements planning (MRP) software debuted to help the manufacturing industry track supplies. In the 1970s, business software vendor SAP got its start as an application solution provider with data-processing capabilities. ERP software evolved over the years to include not only manufacturing/ supply chain management, but other business functions as well. The enterprise resource planning (ERP) acronym was first developed in the early 1990s by Gartner, as a reference to software that includes all integrated applications. ERP solutions was deployed mainly in on-premise servers until the early 2000s when the solution became available over the Internet. Today, ERP software can be installed either on-premise (on a company’s server), in the cloud (also known as software-as-a-solution or SaaS) or in a hybrid environment. Companies with legacy on-premise ERP solutions can also integrate any cloud-based ERP modules to the system, therefore creating a hybrid environment. The ERP software landscape continues to grow – in fact, Allied Market Research reports that the global ERP software market’s revenue is expected to increase to approximately $42 billion by 2020. Some of the major players in the ERP software market include Microsoft, SAP, Oracle + Netsuite, Infor and Sage. Who Uses ERP Software? ERP software has traditionally been intended for large and enterprise businesses, as those companies have multiple business divisions with different data and different needs. However, ERP software vendors also target small- to-medium-sized businesses to help automate their business processes. For instance, the SAP Business One solution is intended specifically for small businesses and includes core modules such as finance, customer management, purchasing, production planning, business intelligence and analytics. There are also vendors that provide industry-specific ERP solutions. The typical industries that these types of solutions target are manufacturing and distribution. However, there are other industry-specific solutions such as healthcare, retailers or professional services. 2 Entire Contents © 2018 Better Buys Benefits of Using an ERP Solution Using an ERP software has several benefits, including: ■ Business processes become more automated: With a single ERP system, there’s no need to work with multiple data in multiple systems. Users don’t need to manually enter data or build separate reports, and they won’t have to worry about errors with automated systems. Automated processes lead to improved productivity and efficiency in other areas as ERP frees up users’ time to focus on key parts of their job. ■ Reducing expense of purchasing and maintaining separate software: Having to purchase and maintain more than one software tends to be costly. Having an ERP reduces that expense, which can be allocated to something else in the business. ■ Improved compliance with legal and other regulatory mandates: There are many types of regulatory compliance in different areas that a company needs to adhere to, such as finance and HR. Having an ERP helps companies keep track of all compliance by monitoring data. The ERP can also automatically make updates to any compliance changes. ■ Total visibility into business data and processes: With an ERP, top managers, executives and decision-makers have access to all information. They can have a full picture of all processes within each department and how the process affects the entire company. 3 Entire Contents © 2018 Better Buys ERP Modules ERP software contains several modules that help automate business processes. Depending on the vendor, some modules may be available while others are not. Most ERP software vendors also offer customization so companies can use the modules that fit their business needs. We’ve listed below the common ERP modules: ■ Accounting: The accounting module is designed for tracking all the company’s finances. Some features included in this module are budget and expense planning/tracking, a general ledger, accounts payable, accounts receivable, revenue management and tax management. Users can also run financial reports within this module. ■ Human resources: With the human resource module, organizations can manage their hiring cycles from recruitment to succession. Some of the features included are an employee database, applicant tracking, payroll, time and attendance, performance management and learning management. ■ Manufacturing: This module helps manufacturing and other production- oriented facilities manage their processes. It consists of the following features: work orders, bill of materials, quality control, engineering, manufacturing process and planning, and product lifecycle management. ■ Inventory management: The inventory management module lets businesses accurately track their materials and supplies in order to eliminate wasteful spending. Inventory management features may differ based on the type of business, but the common features are inventory control, purchase orders, automatic ordering and inventory scanning. ■ Customer relationship management (CRM): Businesses use the CRM module to manage their client-facing operations, such as sales, marketing and customer service. The sales staff can keep track of their prospects, such as contact information and status of sales pipeline. Users can also manage marketing tasks, including advertising and lead generation campaigns. And finally, the CRM module stores customer information and tracks the relationship between the business and the customer. 4 Entire Contents © 2018 Better Buys ■ Supply chain management: The supply chain management module tracks the product from manufacturing to warehouse and distribution to retailers to customers. Some of the features in this module include supplier scheduling, purchasing, inventory, claim processing, shipping, tracking and product returns. ■ Business intelligence: More vendors are offering business intelligence modules within the ERP software. Business intelligence refers to collecting and analyzing data from multiple sources and presenting data into dashboards and reports. The purpose of business intelligence is to help users make better business decisions with real-time data access. Some of the BI features offered include customizable dashboards and other visualization tools, ad-hoc and scheduled reporting, and ata drill-down capability. Some of the other modules can include e-commerce, production planning, document management and project management. Challenges of Using an ERP Solution While an ERP software has its benefits, it also comes with challenges, including: ■ Getting buy-in from top executives, IT, managers and employees Getting buy-in from key players is critical to purchasing software. But these key players may have resistance or concerns about an ERP software. For instance, IT may have concerns about data security if a vendor hosts the solution. Or they may not want the responsibility of hosting and maintaining the software on company servers. Top executives could also be wary of spending the money on a solution if there’s no return on investment. And finally, employees may be resistant to an ERP software if they’re used to a specialized software or have their own processes. They may also consider an ERP difficult to use. ■ Only needing to use a few modules at most This can be a key challenge, especially for small businesses that may only need, at most, three or four ERP modules. However, there are ERP software vendors that offer scalability – the key is to figure out what modules are important for the business. 5 Entire Contents © 2018 Better Buys ■ Issues can arise during the implementation process Depending on the vendor and deployment option, ERP implementation can take anywhere from three months to a year or more. Any issues that come up can delay the go-live date and can be expensive. Issues that crop up can include unclear business goals, data transfer issues or software that isn’t adequately customized. It’s important to communicate clearly to the vendor your budget, goals and requirements for using the software. It’s also important to get a detailed timeline of