WTH is an ERP? Get the DL on These TLAs
As a business owner or CEO, you might have heard the term “ERP” thrown around in meetings or perhaps in conversations with your CIO. But what exactly is ERP, and what does it mean for your business? In this blog post, we’ll delve deep into the world of enterprise resource planning (ERP) and provide you with the downlow (DL) on these three-letter acronyms (TLAs) that can transform your operations.
What Is an ERP System?
At its core, an ERP system is an all-encompassing software solution used by businesses to manage and streamline their daily operations. And yes, ERP is a terrible name. While ERP systems take different forms, they typically include a suite of modules that integrate functions such as financials, inventory management, procurement, customer relationship management (CRM), sales, distribution, and production—among others.
I often refer to an ERP system as an accounting system, but it's much more than that. It encompasses your back office, front office, and every facet of your business.
ERP systems are modular, and those modules have even more TLAs. The core is a general ledger (GL) that's required to keep finances straight. Next is accounts receivable (AR) and accounts payable (AP). These three make GLAPAR—pronounced "Glapper"—which are the most basic and fundamental components of ERP.
(Get ready to yawn...) Then you add sales order processing (SOP), purchase order processing (POP), purchase orders (PO), inventory (INV), customer relationship management (CRM), warehouse management (WMS), payroll (PR), and human resources (HR). Many ERP systems allow you to purchase each module separately, although some of these modules are part of their core offerings. Oftentimes, you'll need to use an independent solution/software vendor (ISV) to get functionality you want or need.
The Roles of ISVs and VARs
An ISV (a worse name than ERP, for sure) provides modules that increase usability or specialize in specific business process areas to enhance ERP. These include modules such as pricing, electronic data interchange (EDI), auditing, compliance, and donor management. It's common to have multiple ISV solutions in your ERP.
I like to think of ERP as a rugged sport utility vehicle (SUV). You might need an ISV to provide the ski rack, another ISV to supply the tow hitch, and yet another to provide those fancy wheel rims you swore you'd buy someday.
Much like visiting a car dealership to purchase an SUV, you rely on a dealer, reseller, solution provider (SP)—or more commonly a value-added reseller (VAR)—to provide and manage an ERP system. A VAR provides all the modules and ISV components you need for a complete experience, along with training and implementation services. VARs are supposed to provide value in that they understand how all these components work together, and they support you when something goes awry (it will). If you aren't getting added value from your VAR, demand more, or consider switching VARs. You could also self-implement and self-support and just accept working with a reseller that provides no services. (Although I don't recommend that.)
The Benefits of an ERP System
ERP systems are designed to centralize data from different departments across an organization—providing business owners, CEOs, and CIOs with a comprehensive view of the business in real-time. This means that key decision-makers can quickly respond to changes, adjust their strategies, and make informed decisions based on accurate business data.
Besides centralizing data and streamlining operations, ERP systems can also help businesses to improve collaboration and communication. By having all data in one platform, employees across departments can easily share information and work together cohesively to achieve business goals.
When it comes to implementing ERP solutions in your organization, it's important to note that it's not a plug-and-play process. It requires significant planning, customizations, and change management strategies that need to be carried out carefully to ensure the best outcomes. Working alongside ERP consultants can help businesses identify pain points and design solutions that align with their strategic objectives.
While ERP systems can significantly improve business operations, it's crucial to bear in mind that they aren't a one-size-fits-all solution. Every business has unique workflows, priorities, and goals, meaning that the ERP solution must be tailored to the business's specific needs. Therefore, when selecting an ERP solution, it’s vital to identify the business's requirements, evaluate various options, and select the right VAR.
