ERP Strategy Essentials

ERP Strategy Essentials
Article by Sumana Ganguly
Last Updated: May 10, 2023

As the need in the business world grows substantially, so does the need for firms to invest in ERP software. This leads the businesses to invest more than $1 million on average in a new ERP system.

Despite firms getting better, they are still required to get better with innovations and refine the process.

An ERP (Enterprise Resource Planning) strategy improves productivity, boosts efficiency, and generates more revenue. These effects are seamlessly created by reducing manual effort and improving transparency.

Implementing precise software can help; however, it is necessary to pick them wisely. Technology alone won’t be enough to create the needed impact in business. An effective strategy is what makes a difference.

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What Is an ERP Strategy?

Before knowing about the strategy, let’s make sure about what an ERP tool is

ERP software is a suite of interconnected tools to manage and integrate diverse business functions, data, and processes. It helps businesses with greater access to vital company data that allows precise decision-making, efficiency, and profitability.

ERP is a strategy that firms use to shape the implementation, application, and use of the software. An ERP strategy is a set of guidelines followed before, during, and after implementing the software. A perfect plan defines rules and components and incorporates a fitting roadmap. An ideal strategy ensures the functionality and profitability of the ERP suite.

However, this ERP strategy is not a universal template. Hence it needs to be adequately maintained to realize its full potential.

The right strategy should most necessarily accommodate changing business needs and technologies. It should further be designed to take a deeper look into the business processes and should be able to identify areas where potential improvements can be made. Moreover, it should align with other business strategies.

The following factors determine a successful ERP strategy:

  • ERP software that fits the needs of the firm’s requirements
  • Active participation of the employees
  • A process that reduces the challenges and helps the firms with a smooth implementation

8 ERP Implementation Steps

Once the system is rolled out, it is difficult to take it back. The tiniest glitch can impact partners, clients, employees, and customers. This makes it essential to create a flawless strategy in the initial phase.

This strategy is a multi-faceted approach that reaches multiple departments such as inventory, distribution, sales, manufacturing, and others. Since the method is bound to affect so many parts, it must be carefully crafted. When devising an effective ERP strategy, businesses often seek guidance from enterprise software solutions companies to ensure seamless integration and optimal system performance.

The ERP team should incorporate full-time professionals such as a project manager and business and technical professionals. This makes it necessary to choose the team members according to their expertise and not their title. The team should also identify resources from business and IT areas to provide subject matter expertise for targeted decisions.

Take a look at the critical components of the ERP strategy:

  1. Identify and Address IT Issues
  2. Setting Out a Budget
  3. Integration Challenges
  4. Risk Assessment
  5. Create a Robust Outline
  6. Inputs from Stakeholders
  7. Deployment Method

1. Identify and Address IT Issues

The IT system must be able to support the ERP software, along with updated hardware. Working with an IT team or an expert technology consultant can significantly help identify and address these issues.

2. Setting Out a Budget

The success and failure of software depend on its financial planning, which makes it necessary to draw a budget in the initial phases. This will end up creating a solution with added costs which may turn out to be no good for the business.

The ERP implementation steps may exceed the expected budget, and that’s why an ERP strategy should include upfront costs. Firms should consider earmarking funds to support the implementation and contingency budgets.

3. Integration Challenges

If the business is using legacy software, new ERP software might not be able to communicate effectively. There will be a requirement for business processes or to get ERP-tailored software that allows communicating with each other.

This specific IT integration may cause data and transactional errors making the business even more troublesome.

4. Create a Change Management Plan

Almost 51% of companies experience operational disruptions when they go live. An ERP software can only be as effective as those engaging with it. And that’s why it is essential to train the workforce so that the staff members can embrace the new software seamlessly. Before the training is in session, firms should also ensure that the IT team is sufficiently equipped to train their employees.

The employees should also be familiar with the ERP implementation strategy. Ensuring these steps can make the workspace even more productive.

Businesses need to set implementation goals that they wish to achieve upon deployment. One such example could be an increase in ROI. Apart from the fixed goals, businesses should also ensure that it has certain qualities.

Businesses should encourage their employees to adopt the new technology. This plan helps reinforce the software's importance and why it should be used.

5. Risk Assessment

Despite ERP strategies offering limitless value, the operations go wrong during execution. However, planning the following steps could help. Decision-makers should identify areas of potential loopholes and should address them before the installation begins.

The IT team can help to handle the client roll-out, connectivity, hardware issues, and finally, test the system. A hybrid ERP will also require the same considerations.

6. Create a Robust Outline

Before committing to a vendor, it is crucial to highlight a roadmap for smooth implementation. Define crucial aspects such as objectives, roles and responsibilities, milestones, and outline if there are sufficient resources.

A cross-functional project team can help gather inputs about the different business group requirements and the problems the ERP system needs to solve. They can shortlist vendors, issue requests for proposals, choose the right ERP system, manage ERP implementation phases and ensure alignment.

Businesses need to define the business goals in as much detail as possible, but as there might be organizational changes that need re-evaluations, firms need to be flexible too.

This can also show how the software should be customized or the modules to be added to meet the needs of each business group.

7. Inputs from Stakeholders

Businesses will not know about the effectiveness until it’s open for the employees to use it.

Businesses need to interview employees working in multiple departments for their feedback. This will help companies to assess their pain points and the challenges they encounter in their daily tasks. Any manual or complicated tasks that remain untouched should also be noted.

8. Deployment Method

Businesses can choose from an on-premise solution or a cloud security solution.

If the software is installed on-premise, firms must evaluate when to upgrade it. And if the ERP is in the cloud as software, then companies will manage the upgrades with the service provider.

Weighing the pros and cons can help make the right decision. Once the decision is made, businesses need to communicate the same in detail with potential vendors.

Importance of an ERP Strategy

Most of them don’t align it to the changing times or are not well-defined, which can be the most significant loophole in determining the strategy.

An ERP strategy is away from budget overflows, missing deadlines or other problems. The real-time data could be centralized which makes measuring insights across departments easier. An ERP Strategy can also automate functions and communications across multiple verticals.

Business applications could also be put together for a long time. This could create a portfolio that no longer supports the current goals, requirements, and processes. The bigger problem is that the firms do not begin with a clean slate and already have a lingering legacy problem.

Make a note on how to set up the legacy system so it doesn’t disrupt the current workflow while avoiding any overlap scenarios.

Benefits of an ERP Strategy

There is a lot that an ERP Strategy can help the business workflows with. Here’s how:

Helps Save Money

A detailed strategy, as well as vendor transparency, can keep the implementation costs within the budget.

If the business doesn’t have a predefined strategy or a list of goals, it is more likely to shift from one vendor to the other. A detailed list will help businesses find the right vendor easily, eventually helping companies to save money.

Saves Time

By aligning the ERP strategy with the needs of the firms, businesses can refrain from wasting more time while requirements are explained to them. Though developing a process might take time, it is worth the effort as there will be detailed discussions and negotiations in the future. Developing a detailed strategy can save time in the long run.

Offers a Competitive Edge

According to a study, ERP implementation has led to the improvement of 95% of businesses.

An ERP Strategy drastically improves the chances of finding the best solution, which can help the business withstand the ongoing competition.

This can help with the following benefits:

  • Increase ROI
  • Reduce the need for manual workflows and errors
  • Enhance customer relations
  • Streamline workflows

Keeps the Employees Satisfied

If the ERP system fails, the employees will likely be disappointed after putting in the time and effort to learn a new system.

If the system doesn’t include the requirements for daily functioning, the employees will also waste their time on tedious and repetitive tasks. This may even erode the employee’s trust.

ERP Strategy – Key Takeaways

An ideal ERP strategy needs to keep pace with the changing times. Before implementing the ERP strategy, it is crucial to determine multiple variables such as costs, installation methods, and other requirements that may affect the business.

The ERP systems need to align with the firm’s requirements, or it can be a colossal waste of money. The more detailed the strategy, the better the chances for success. ERP consulting companies are most qualified for helping you with devising a full-blown ERP strategy.

Professional IT services companies can help you in that regard by providing their expert opinion on the matter and guiding your business as fits your market.

We’ll find qualified IT services agencies for your project, for free.
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