Enterprise resource planning (ERP) is defined as:
"A business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services, and human resources."
There have been many reports which suggest the utility of the ERP system, like Aberdeen Group in its ERP in SME: Fueling Growth and Profits report has clearly mentioned- ERP systems that provide accurate, real-time information about daily operations help companies.
- reduce operational costs by 23%
- reduce administration costs by 22%
- increase on-time deliveries by 24%
- 17% inventory reductions (M&D only)
- 19% improvements in complete and on-time delivery
- 17% improvements in schedule compliance (M&D only)
Hence, very less is left to debate about the
necessity of the ERP system for the smooth functioning and also the growth of the business. With ERP, not only manufacturers but also distribution and middle chain management have benefited.
And, if we talk about the size then "Size does matter", this phrase does NOT apply to the ERP system, From SME’s to big corporates, all companies can install ERP and derive benefits from the application.
However there are some parameters based on that any small or big companies look before choosing ERP.
Requirement - The
Panorama Study also identified that 21% of ERP implementations fail to deliver significant business benefits. This happens mainly because the requirement is not defined properly, thus, ERP project not only overruns schedule but also budget.
The requirement of business purely depends upon the size of the business and scope decided for the application. As for corporates, with multiple locations and huge data, it is imperative to have correlative synchronization.
Due to non-proper defining of requirement Post implementation,
53 -percent of organizations achieved less than 50 - percent of the measurable benefits they anticipated from
new ERP software.
The ERP software like SAP or Oracle, not only provide the solution to big companies but also offers customized solution to the small companies.
Hence, even for the small companies, it has to identify the requirements very properly & at the same time, customization should be the top priority for maximizing the use of ERP.
Activities and Data – Be it big corporate or small companies, multiple functions define the operation of the company. Big companies shall have more frequency, huge data, and varied functions; whereas small companies though may not be able to compete with frequency due to limited activities but it certainly has more than one activity.
Thus, data from different activities is to be synchronized with each other like, sales & Marketing, accounting, operations, and finance. These are very basic but necessary functional department for any company, irrespective of the sizes.
Panorama study proves that ERP system support and assists large organizations which spread not only across the country but also have operations out of the country.
“An increasing percentage of organizations are implementing ERP across multiple offices, warehouses and sites. Last year, only 77-percent of respondents implemented ERP at two or more locations. This year, 85-percent of respondents implemented ERP at two or more locations. The largest percentage of respondents (28-percent) implemented ERP at four to five locations. Consistently, the majority of the respondent organizations (55-percent) reported that they are multinational”.
At the same time, we have various vendors catering to the needs of SMEs and as per recent report almost 80% of the survey respondent of ERP report was expecting growth in the business by implementing ERP.
Customization - Aiming to be a big corporate is a very positive idea for small companies, however, imitation of big corporates, without application of proper planning, may not only leave with a non-optimal usage of application but also leads to drying of already scarce financial resources.
As per Capterra, 1/3 of ERP buyers purchased ERP system without even checking the demo, before purchase and 22% of companies surveyed reported they just bought the first system they looked without evaluating options as per the company’s requirement.
Companies which are at a nascent stage and still wish to apply
ERP system should look for scalable options, as it will be helpful when the company grows without changing the existing system which caters to only smaller operations.
The scalability and intra-departmental synchronization help smooth functioning of the company.
Budget - For
ERP selection for the company, more than its size, it’s more important to know its proper requirement, and subsequently strong financial discipline adhered while implementing any system.
Overall, 74.1% of ERP projects exceed budget (Panorama ERP study) which leads to either shelving of project due to finance constraint or compromising functionality.
Another damaging aspect of not complying with a determined budget also evaporates scarce financial resource, which affects growing prospects of small and upcoming companies.
Thus, the size of the company may not decide the requirement/usefulness of the ERP, as the data shows, but the size of the company is a very important deciding factor for selecting the type of ERP solution bought and implemented, as it has a direct bearing on the financial resources.
