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Enterprise Resource Planning: Do You Need It?

Many vendors now offer ERP services for the small business. But does your small business need one? Here's how to decide if your business may benefit.
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Does your business need an enterprise resource planning (ERP) system?

If your company is experiencing rapid growth and the corresponding strain on legacy systems, or if you're starting a new process -- such as manufacturing -- from scratch, you may benefit from an ERP system, experts say. Such a system maintains in a single database the information gleaned from a variety of business functions, such as financial, manufacturing, human resources, and customer management.

As such, ERP systems offer a bird's-eye view into the working of the company and allow users to cross-reference business functions.

An executive might drill-down into the data, for example, to learn how business financials were affected by installation of a new customer relationship management (CRM) system. When ERP includes manufacturing information, businesses can reduce inventory by closely tracking customer orders and shipments, says Eric Kimberling, president of the Panorama Consulting Group in Denver, which helps companies clarify ERP goals before implementation.

Act like a bigger business

ERP systems help you behave like a bigger business, says analyst Dan Miklovic, research vice president for the manufacturing industry at Gartner.

'By automating finance processes, you can do things like accept online orders and to business-to-business transactions electronically, instead of via e-mail,' he says.

Many of smaller players think they'll have difficulty finding an ERP application. But all major ERP providers -- with names like Oracle, SAP, Syspro, Microsoft Dynamics, and Epicor -- make specialized offerings for small and mid-sized businesses, Kimberling says. Many other vendors cater exclusively to the small and mid-sized business market.

'When ERP is done right, the number one benefit is streamlining your processes and making them more efficient than doing data entry and keeping track of stuff in spreadsheets and digging for data,' Kimberling says. 'ERP makes those things more flexible and accessible to employees.'

Take Solaicx, which implemented an ERP system in July. The Santa Clara, Calif., based company has been moving from research and development to the manufacturing of ingots and wafers for the solar industry. It recently opened a manufacturing plant in Portland, Ore.

'We were running QuickBooks and some miscellaneous packages. In the research and development stage that works fine,' says Jeff Osorio, Solaicx's chief financial officer. 'But in commercial applications, with the volume of transactions that would be going through manufacturing, we needed more.'

Solaicx now houses its financial and manufacturing data within the new ERP system, from Syspro. That kind of integration makes for greater visibility into all aspects of the company, Osorio says.

The real value to small business

Bear in mind, however, that purchasing and implementing an ERP system is no small task, these experts say. Consultant, vendor, or other outside help is often needed here.

The real value to small and mid-sized businesses comes in the way they customize and configure the core product to their own particular industry and individual needs, Miklovic says.

But ironically, that kind of customization can be harder for small businesses to find. For example, businesses located in areas without a pertinent systems integrator or reseller that can essentially make a house call, could face customization challenges, he says.

'The challenge is making sure the domain expertise is available in the geography you're operating in,' Miklovic says.

An automotive supplier in California, for example, will have a tougher time finding a reseller with pertinent automotive expertise than will a similar-sized supplier in the Detroit area. In the same way, a Californian small or mid-sized business serving the wine industry will have an easier time finding an ERP reseller to meet its needs.

'But the good news is, ERP systems are affordable and can radically improve your business,' Miklovic says

Last updated: Oct 1, 2008




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