As the stock market makes sharp moves up and down and news agencies report about financial issues, businesses are left to

wonder about the state of the economy.  Are we driving towards a recession or are we already in one?  The answer depends on whom you ask; forcing management to make decisions without certainty.  Too often, the decision is to ride out the storm by tightening the budget.  Although watching expenses is prudent in any economy, knowing where and how to spend the budget dollars can be the determining factor between thriving and faltering.

In such a scenario, there are two key strategies of addressing the bottom line.   One is to increase efficiency through automation – re-processing the work flow procedures and other methods that directly impact the internal functions of an organization.   A second strategy is to improve customer service so that you retain the customers that you have which may also lead to more business with that customer.  An effective way to address both of these methods is to implement an Enterprise Resource Planning (ERP) program. 

An ERP provides defined procedures that collect data and automate many processes, sharing the information across many functions through a unified interface.  This resource is made available to the departments to improve efficiency, accuracy and efficacy.  Some of the key benefits are processes that have been streamlined and automated to reduce costs and improve scheduled performance resulting in administrative efficiencies to either fuel growth or improve customer service. 

To illustrate this, we will follow the process of a typical order.  In a non-ERP environment, the customer places the order and initiates a process to either create a new customer account or check an existing customer’s credit status and billing cycle with the accounting department.  This information is then keyed-in and passed to the next department which may be the warehouse that can check for availability and perhaps compatibility.  The order is then processed and sent to the shipping department which hopefully has the correct mailing information.  After the shipping, the accounting department takes over.  The entire process can be hindered with delays for a number of reasons including the wrong information (either keyed or initially received) and waiting to traverse from inbox to inbox.  All the while the customer is unsure of status and calling customer service may not be of much use.  Tracking down order information can be a frustrating experience for customer service as they try and determine which department has the order, and also for the customer who is unsure of the status of their order.

An ERP program focuses to mitigate the delays and inaccuracies by integrating the different departments.  The single point of data entry will already have the information about the customer which will electronically flow from department to department greatly increasing the efficiency and eliminating errors.  When customer service receives the order, they already have the pertinent information; customer information, their credit status, the availability of items and shipping estimates.  The order flows from department to department with the required information resulting in an inefficient and accurate transaction.   With cross-function integration and a pre-determined information flow it is very easy to respond to a customer inquiry.  The ERP system provides real-time information about the status of a particular order so that the customer can get an accurate update with legitimate answers.  Customer retention is promoted on two fronts – firstly, the automation of business processes means fewer errors and less lag-time in order-processing and secondly, customer service is able to communicate clearly with real-time updates and concrete timelines, making for an effective exchange.

In the SMB marketplace a company must consider an ERP implementation as part of their growth strategy in order to leverage efficiencies.  In addition to laying a solid foundation for growth, a successful ERP implementation has many benefits. 

• Integrate Customer Information- As the above example illustrates, the ERP system can take ownership of an order and guide it from the initial order placement to the successful fulfillment.  By having the information in one location, the different departments can track and be alerted and prepared when it is their turn in the process.  Informational integrity is maintained as the information is entered once and flows through the various functions. 
• Standardize Processes- During the implementation, management is required to assess its own business/workflow processes and standardize them where possible.  This exercise often results in eliminating inefficient or redundant procedures. 
• Inventory Management- Since the entire business process is made more efficient, the need to store additional inventory is reduced.   With a more precise view of the fulfillment process, management is able to determine what will be needed and is able to allocate resources in a predictable manner.
• Reports- With a unified collection of data, an ERP system can provide customized reports to management, human resources, sales and every other division of the business and provide the proper tools to make knowledgeable and informed decisions.  Real-time reporting allows for time-sensitive decisions to be made swiftly and also creates visibility and accountability.
• Cost Avoidance- An often under expressed benefit is the ability to avoid unnecessary costs. Although reducing costs by automating processes and increasing administrative efficiencies will directly impact the bottom line, what proves more valuable is the fact that reduction in an expense in one place can free up capital and resources for more productive uses elsewhere. For example, consider that a company that implemented an ERP system was able to reduce three administrative personnel as a result of the new streamlined workflow process.   With the cost savings realized on the administrative side they were able to hire more people in the sales department which is a revenue-increasing function.  Implementation of the ERP helped mitigate or eliminate the cost of hiring new salespeople by a redirection of existing resources.

There are many benefits of implementing an Enterprise Resource Planning suite.  However, one must be aware that it alone is not the “magic solution” to all your needs.  In order for the software to do its job, management and the entire staff must do theirs.  It starts with proper planning where management evaluates the company, industry and its own procedures.  The key benefit of an ERP is the streamlining of the workflow process to eliminate redundancies and reduce inefficiencies while increasing cross-functional collaboration and visibility.  In order to do this, management must be able to clearly cite the current workflow process and be willing to work with the ERP provider to modify this to become more efficient.  This task is not as easy as it might seem, since it often requires a “grass-roots” change in the employee and management mindset.

Often an ERP implementation requires a structural reorganization at some levels as some functions are eliminated and job responsibilities are changed.  Employees resist this change as new tasks seem like an added burden or an increase in workload –in fact if deployed correctly, an ERP should relieve the workload by eliminating unnecessary processes.  The automation of processes and the scheduling efficiencies that are realized should in fact make tasks and functions more visible and predictable. From management’s standpoint this is a great benefit since it increases transparency and promotes accountability and responsibility.

In describing one of the common factors of why some companies accelerate from just being a good company to becoming a great company, Jim Collins said in his book “Good to Great” that “Good-to-Great companies think differently about the role of technology.  They never use technology as the primary means of igniting a transformation.  Yet, paradoxically, they are pioneers in the application of carefully selected technologies…”

Regardless of the economic projections on the news, management must take action to assure its survival and growth.  The proper use of resources can be the determining factor in assuring the health and prosperity of a company.  An effective ERP deployment in recessionary times could mean a company is better positioned to accelerate and thrive when the economy recovers.

For further information pertaining to this article, or any other IT-related questions, please contact me, Qahim Moosavi, at 610-784-0155 or email me at: qmoosavi@marg.com