The face of delivering goods and services has changed, and the way businesses gather and synthesize information is changing with it. Until recently, a business could deliver products made entirely within its own four walls, but the advent of global commerce has restructured the industry. The growing need for a competitive edge has forced businesses to use design, manufacturing, and channel, and distribution partners, creating complex supply chains that employees must deliberately and expertly manage.
As a result, one of the major issues facing companies today is the variety of disparate systems that accumulate over time. Very few companies retire applications and systems and as such, each system typically retains data separately, creating pockets of data rather than usable information.
For years, companies focused on enterprise resource planning (ERP) systems with the hope of reducing complexity and obtaining a single data source. An ERP system is a business support system that maintains a single database for a variety of business functions such as manufacturing, supply chain management, financials, human resources and customer service. In theory, ERPs empower employees with timely information from multiple sources that is integrated into a single view. In actuality, this rarely occurs. Even though companies have implemented ERP systems, most do not aggressively retire older systems. Instead, they opt to retrieve data from a system by first creating an explosion of spreadsheets and then consolidating the spreadsheets into a single view for management to reference. This not only costs time and money, but also expands the likelihood of errors.
But when used effectively, ERPs can deliver interactivity that goes far beyond the report-based architecture that so many current business intelligence solutions employ, allowing immediate access to data through familiar tools and the ability to interact with surrounding environments.
This ultimately makes the company’s operations more efficient and grows top line revenue by:
- Cutting out unnecessary work… and workers. “Simplicity does not precede complexity but follows it.” Information gleaned from a fully-implemented ERP can dramatically simplify the day-to-day tasks of employees. However, disconnected, unusable data demands additional staff to manipulate even the most basic information to achieve effective and informed decisions. Single source data also reduces time spent on creating manually developed spreadsheets, re-keying data or buying tools to extract data into data warehouses and marts to achieve the same results. Fewer people manually manipulating spreadsheets allows companies to either re-deploy staff to more meaningful, value-added work or to operate with fewer staff on payroll.
- Streamlining purchasing processes. Single source data acts as the single book of truth that enhances insights on business functions including supply chain, customer profitability and general operational effectiveness. For instance, companies can access a single view of purchasing and supply chain activities including customers’ orders and easily determine which vendors provide the most business and which are most profitable. Companies can also negotiate better rates from suppliers, and by focusing solely on the supply chain, companies can reduce unnecessary inventory buildup and improve top line revenue by ensuring products are stocked and priced according to sales numbers.
- Improving labor productivity beyond manufacturing operations. Even though the primary goal of ERP implementation is to reduce inventory and headcount, the benefits to labor productivity in other areas should not be discounted. For example, administrative, sales, and other general costs are pure expenses, so any amount that can be eliminated directly impacts the bottom line.
Companies can target areas like customer service along with the finance and information technology departments to streamline processes that might otherwise be assumed as unavoidable expenditures. Responsive customer service created from a collaborative work environment allows service representatives to solve customer problems quickly on the first call rather than after two weeks of back-and-forth dialogue. Information from an ERP system can also encourage more efficient financial reporting and management. Changes as simple as closing the books faster at the end of the month can have a profound budgetary impact. Integrated information sharing and standardized reporting also eliminate discrepancies, enabling employees to spend less time figuring out which set of numbers to use and more time on analysis, planning and reporting. And as mentioned, the IT department has the most to gain in terms of productivity once the daily maintenance of outdated systems is eliminated.
Accurate management and forecasting requires an integrated system that provides one version of the truth that is easily accessible to employees. Equipped with the information available in ERP systems, employees from the warehouse to customer service can achieve higher levels of productivity. A single source of data holds each employee accountable for specific performance goals and forecasts, empowering them with real-time insights into the enterprise that add value to daily activities.
Mike Gorsage is a Regional Technology Practice Leader for Tatum LLC. Tatum is the nation’s largest executive services firm, providing financial and technology leadership nationwide.