Hayes, Hunton, Poston and Grabski, four famous researchers who have investigated the benefits of the best ERP practices for years, have recently established that organizations must implement an ERP system into their business structures if they want to enhance enterprise value and become more competitive than before. There are numerous reasons for ERP implementation that range from tangible benefits, such as inventory optimization, productivity improvement, cost reduction and profit increase, to name a few, to intangible benefits, including increased visibility, efficient processes and enhanced flexibility. This post offers new insight into the business areas an ERP system, such as Dynamics AX, can improve.
Pre-ERP Issues Experienced by Most Organizations
Today, the organizations that don’t yet have an ERP system face numerous problems relating to spreadsheets, silos, manual processes, inaccuracies and expenses. All these have a dramatic impact on overall business activity, preventing enterprises from reaching their full potential.
- Spreadsheets: Low cost, ease of use, and flexibility are a just few things that managers and office workers consider when choosing spreadsheets over other computer programs available for recording, analyzing, and managing data. A negative aspect is that spreadsheets require manual data input, which can result in errors. Numerous case studies show how spreadsheet fiascos have led to disastrous results, including shattered investor confidence and significant financial loss.
- Silos: The term "silos" actually refers to "silos mentality," which is defined as a mental attitude that can lower the efficiency of an organization by reducing employee morale, fostering complacency, destroying trust, cutting off communication, and finally, preventing departments from sharing information with each other. All these can easily destroy an organization, regardless of how small or large it is.
- Manual Processes: In the absence of best ERP practices, employees must complete a series of tasks manually. Continuous human input isn’t only highly labor intensive and time consuming, but also prevents data collection and processing in real-time, preventing businesspeople from getting the control they need to make sound, timely decisions.
- Inaccuracies: Inaccuracies can negatively affect an enterprise’s performance in terms of cost, time, and risk, compromising its financial strength and competitive advantage. Inaccuracies can occur at different stages during a process and usually cause further errors.
- Expenses: Every single business person knows that costs have a dramatic impact on an enterprise’s bottom line and its overall financial health. The less you spend, the greater the profit and amount of revenue you’ll have for financing your business.
Although all of these define major problems for any enterprise struggling to survive in a bad economy, business owners can achieve their desired performance in terms of value creation and customer satisfaction simply by implementing best practices. Here is what an ERP can do for an organization:
- Efficiency: A key aspect of an ERP is that it provides in-depth visibility into business processes, allowing businesspeople to monitor activities in real-time. This is the first step to eliminating inaccuracies, lowering operational costs, and improving efficiency.
- Standardization: Based on ERP best practices, ERP systems offer rich functionalities that enable organizations to standardize processes for streamlined, error-free operations, continuous improvement, and consistent outcomes.
- Accountability: An ERP solution provides freedom, authority, and responsibility to employees according to their roles. Making available a series of intelligent tools, this solution helps employees to not only become more aware of their functions, but also to execute their tasks individually and successfully.
- Simplification: ERP systems enable organizations to streamline all processes, from planning and scheduling to sequencing and sales. As a result, businesses can lower costs, improve efficiencies, deliver high-quality products, and boost profit margins.
- Savings: Most enterprises focusing on saving money must make sacrifices in terms of service, quality, and/or operations. These will impact everyone, including employees, customers, and, of course, the business. However, decreasing costs is a goal that can be achieved without losses. By using an ERP system, you can decrease the costs necessary to support your business and meet your financial goals, while keeping service, quality, and operations in check.
More and more business owners are coming to the conclusion that ERP best practices are the foundation for future growth, which translates into cost savings, improved productivity, and impressive profits.
