While companies of almost any size can use an enterprise system, in most cases an enterprise refers to an organization of 500 or more computers connected to the same network. Regardless of the company's size, business enterprise systems all have one thing in common: they reduce the effort required by managers and employees in managing information. Enterprise systems integrate the information and processes used throughout an organization and, ideally, make them accessible from one place.
Three different types of enterprise systems are available today:
- ERP: Enterprise Resource Planning
- CRM: Customer Relationship Management
- SCM: Supply Chain Management
Anyone with a computer or a mobile phone is already familiar with two types of software: operating systems and applications. Operating systems, like Microsoft Windows, Linux, Android and Apple iOS, access the hardware and provide a platform on which the applications can run. The applications or apps, are the software you use to play games and to do your work.
In a business environment, computers are usually connected in a network through one or more powerful computers called servers. The server may be located in your office, or it may be somewhere else, which you access over the internet. Applications that are located on the server, which everyone in the company can use at the same time are called enterprise software. A company can use enterprise software to do things like track inventory, manage sales and payments and store customer information and employee records.
When people talk about the cloud, they are referring to a server or a group of servers that are accessed over the internet.
When you have several business functions that you want accessible on an enterprise system, an ERP software package often makes the most sense. Just as Microsoft bundles its desktop applications like Word, Excel and Powerpoint into a single package, which can all work together, ERP software bundles enterprise applications into one package that can also work together. These applications, usually called modules, can be purchased in bundles and then, as you need more functionality, additional modules can be added.
ERP systems can usually incorporate customer relationship and supply chain management systems in their modules.
CRM software is similar to ERP, but as its name implies, it’s focused on customer data. It’s most often used for sales, customer service and marketing. Any details about your customers can be entered into the CRM system, which is made available to anyone else in your business. Personal contact information for different people at the customer's organization can all be stored, as well as buying history, complaints and returns. Once this data is entered, the CRM system can be used to forecast sales and help you pinpoint marketing opportunities.
CSM software revolves around the resources and logistics required to get products out to your customers. A common supply chain would include sourcing raw materials from suppliers, ordering them and tracking shipments, then tracking the items being produced through the manufacturing process, storing them in a warehouse and then shipping them out to customers. Properly optimized, a CSM system could automatically place orders with suppliers before raw materials are needed, as well as track the efficiency of each department when it's being manufactured.
The different modules can then access that data and present it to employees as needed. Without such a system, an accounting department may use one system, the sales department another system, while the warehouse uses a third system. Each department’s information would remain in its own silo, inaccessible to the other departments.
Suppose, for example, you owned a company that made rain boots. Without an enterprise system, each department would run independently of each other. If the sales department landed a new client, they would have to contact accounting to get the client set up and approved for credit. Once approved, the accounting department would then have to notify the sales department that the first order could be processed. Then someone would have to coordinate with the warehouse and the production department, while the purchasing department and human resource departments would each need to be brought in to ensure there were enough supplies and workers to process the order. Each of these steps would involve emails and phone calls throughout the company, as well as to the client until the order was shipped.
Using an enterprise system, through various modules, all of this could be done automatically and much of it without any human interaction, which speeds up the process and reduces human error.
Sales Module: Your sales rep lands a new client, a retail clothing chain located in Canada, wanting to buy 1,000 boots of the same design and varying sizes. She enters the client information into the sales module.
Accounting Module: The accounting department receives notification that a new client has been added. They verify the client’s information and run a credit check. Once the client’s order is approved, the sales rep gets confirmation, including the sales price and client discount.
Inventory Module: As the sales rep is confirming the order, the system tells her that there are 200 of these boots in stock, which can be shipped immediately. The remaining boots need to be manufactured and can be shipped in two weeks.
Production Module: Once the order is confirmed, the production manager is notified that he needs to have 800 boots of the required sizes made.
Human Resources Module: With the latest order, human resources is notified that they have hit a new threshold and, based on the updated sales forecast for the quarter, two more employees should be hired.
Purchasing Module: New orders for boots automatically trigger an order to the company’s rubber manufacturer to keep stock at its minimum threshold.
Order Tracking Module: The new Canadian client can log into your company website to see when the order will be shipped. The system also displays other products that similar retailers have been ordering in the past month.
Decision Support Module: You see that orders to Canada have been booming, giving you the data you need to decide whether or not to hire a sales rep for that country. Looking at the specific styles that are selling there, you realize there may be markets for similar style boots for this new market.
Selecting the right enterprise software can improve productivity, decrease costs, increase sales and make management decisions much more efficient. In an age of global commerce, if your competitors are already using enterprise solutions to streamline their information flow, not having an enterprise platform could make you less competitive and could put your business at risk.
On the other hand, adopting an enterprise solution is much like putting all of your data eggs in one basket. A problem with the installation could paralyze every department. In a 2015 survey, 21 percent of respondents described the rollout of their ERP solution as a failure. Problems can include:
- Improperly training staff to operate the new system.
- Failing to understand staff requirements.
- Improperly configuring the required data for the system to access.
- Failure to protect sensitive data from being accessed by hackers.
While some problems may cause headaches for just a few weeks, others may last for several years. Historically, poor enterprise implementations have been known to bring down billion dollar corporations. A classic case study in a bad ERP implementation once caused Hershey’s failure to bring chocolate to the retail market in time for Halloween, causing its share prices to fall dramatically. In recent years, Target’s botched entry into Canada was also blamed on a poorly organized ERP implementation.