One of the biggest challenges a business can face has nothing to do with production, sales or profit. Instead, it’s about logistics. Ensuring that a company’s many departments can work together in sync – from procurement to financing to operations and maintenance – is a difficult thing to do without help from some broader link that connects all these departments. The ideal solution for integrating business modules and helping streamline logistical processes is a suite of software known as an enterprise system.
What Are Enterprise Systems?
An enterprise system is a software package that helps a business perform and oversee certain processes, gathers data about these processes for analytics and maintains clear transparent records of these transactions.
The system is usually a large software package that integrates lots of other individual applications. A key feature of an enterprise system is that its modules are designed for each department’s processes. For example, the purchasing department’s module might include purchase orders, approvals and receiving records as well as links to accounting and finance.
Three Types of Enterprise Systems
There are three main areas where businesses apply enterprise systems.
- CRM (customer relationship management) systems focus on integrating customer data to help customer interactions run consistently and smoothly across the organization. The database manages details about customers including contacts, order history, complaints and returns. All of this information can then be accessed together and can help forecast sales or identify marketing strategies. These types of systems are usually used by sales, marketing and customer service departments.
- SCM (supply chain management) systems focus on integrating and automating pieces of the supply chain to keep production flowing and to keep delivering goods to customers. This sort of system will start by pulling together raw material supplier information, ordering and tracking raw material shipments and then tracking production and manufacturing rates and processes. The system then tracks the shipment of products to customers as well as warehousing storage. The integration of all of these pieces into an enterprise system can help automate raw materials orders, increase inventory efficiency and provide valuable data on the manufacturing process.
- ERP (enterprise resource planning) systems are collections of different modules that can include the above two types. An ERP system integrates a number of software modules that help specific business functions, such as accounting, purchasing, inventory management and production. Specialized systems can also integrate maintenance or engineering for plants or manufacturing sites. This enterprise system helps these different business nodes work together, passing information from one to the next in real time.
Enterprise Resource Planning and Modular Approach
Since ERP systems can be the most complex, it’s important to understand the main characteristics of an ERP software suite. While each enterprise system will work slightly differently, ERP systems share some common ground in the way they are set up to integrate business functions.
ERP systems are effectively divided into a set of modules that communicate with one another. Each module represents a particular business function or department, such as accounting, production, finance procurement and so on. While these modules are separate functions, they should all be integrated and use data and terminology consistently.
Centralized Database and Real-Time Operation
ERP systems should pull from a centralized database where all data comes from a single source, meaning each piece of data is stored only once and is used by the varying modules simultaneously. This reduces the chance of redundancy and inconsistency.
The system should operate in or near real time so that all modules are working with data that is current and accurate.
More Characteristics of Enterprise Systems
Business needs vary, so ERP systems need to be flexible enough to capture new business best practices and standards. The system should be customizable to a point in order to manage any processes that are unique to that particular department.
A good ERP will be able to deliver reports with the click of a button, allowing users to look at their data strategically in real time. This allows departments to understand the current status and to forecast, optimize and report their own internal results.
The enterprise systems used in businesses today vary from large, comprehensive, commercially offered software suites to small, unique, handcrafted internal systems. Commercially available software offerings include Oracle/NetSuite, IQMS, SYSPRO, SAP, Sage Intacct and a number of others catering to specific customer needs.
Costs and Benefits of Enterprise Systems
The fundamental purpose of an enterprise system is the advantage of business module integration. This seems straightforward enough but is reflected in many aspects of the business:
- Management can easily access information to make data-driven decisions quickly.
- Data becomes visible and accessible across the entire organization.
- Automation of transactions brings more efficiency to day-to-day processes.
- There is improved transparency of data and department practices.
- There is ease of obtaining records for audits and compliance.
Disadvantages to Implementation
However, due to the sheer scope of an enterprise system, there can be a number of disadvantages to implementation that should be thoroughly reviewed before a system is selected:
- A broad ERP can cost more than smaller, less-comprehensive systems.
- Implementation of a full software suite requires the business to compromise between the way their processes work now and the way they are designed to work within the system. Gaps between what is needed and what is offered can cause employees to spend extra time using workarounds to meet their unique needs.
- Implementation itself is a complicated process that will cost a company a large amount of money, time and resources to be successful. Recreating business processes, planning, implementation and training will be a huge drain on company operations and can interfere with other critical issues.
- Customization of the enterprise system is not only costly but can then lock a company into a certain vendor, decreasing competitiveness of services offered.
Where Enterprise Systems Are Useful
Enterprise systems are best suited to larger businesses with lots of moving parts, where the streamlined efficiency that the integration offers outweighs the costs of purchase, implementation and ongoing maintenance. Most businesses in manufacturing, distribution, construction and other industrial services use some sort of enterprise system to manage their production, finances, supply chain and sales. Other businesses that need to manage a good deal of data across multiple business modules include health care and professional services that use enterprise systems for project planning and execution as well as customer services.
Small to medium businesses will need to carefully weigh the costs of the system and its implementation and the ongoing costs of upkeep and monthly payments. They should also consider system complexity, as many off-the-shelf enterprise systems may offer more than the business needs, making it more costly and harder to integrate. This doesn’t mean that enterprise systems aren’t good for smaller businesses. They offer the same types of benefits and just require a closer examination of business needs before making the decision.
Enterprise systems can help greatly improve a company’s internal logistics, but it isn’t a simple decision to make nor is it an instant success. Extensive planning and evaluation is needed in order to get the most out of an enterprise system. If the work can be done to match the functions the system offers, the needs of the users and the overall goals for the company, the advantages of this system can be clearly seen in the company’s bottom line for years.