Chapter 2: Why use an ERP and what is it?
Why use an ERP?
Dealing with customers, gathering order data, creating production plans, and ensuring employee productivity is costing not just money, but Saf and Mel's time too. They have no time to do the smart work which would lead to Spindl's growth like
- study the numbers (or have accurate reports) to find out which product is doing best
- which region they are getting the most sales from
- if machinery productivity level can be optimised
- creating production plans for deliveries in the next week etc
On one hand, they were happy to see increasing operational problems since it's a sign of growth. On the other hand, they seriously needed something to help manage this never-ending series of operations. Simple accounting tools, spreadsheets and a hotchpotch of many apps were no longer cutting it. Saf and Mel realize if they keep this up, they’ll be stuck trying to keep their business functional.
Looking for solutions, they reach out far and wide. What’s something they can use to manage their business? What’s something that will give them the time to focus on profitability and growth? Of course, while there isn’t a miraculous solution, their research leads them to a place they can start with: an ERP system.
Small businesses and large businesses share a lot of complexities— even if it doesn’t appear that way. The fundamental problem is that the processes small businesses utilize early on aren’t built to scale. As the business grows, it becomes harder to maintain consistently and efficiently. ERP software eliminates that problem. It is designed to improve the company.
It seems like setting up an ERP system is the answer, but it requires time— a resource they are short of already.
Is it worth investing time in then? And why?
The role of an ERP system
Running a business like a well-oiled machine requires organizational processes. If there’s no scalable system followed from the get-go, these processes can become a resource hog. (A scalable system is something that can be used despite the size of the operation. It doesn’t matter if the business has 1,000 or 10,000 customers; the system remains just as viable)
Small businesses often lack these scalable systems. Almost everything happens on an ad-hoc basis. It may work initially, but a business's growth and the volume of tasks are directly proportional. What remains constant, however, is the lack of appropriate resources. A company cannot sustain itself on a single innovative discovery. The profit and sustenance come from the repeatability of their innovation. And innovation requires time and resources— things that get lost in maintaining suboptimal processes.
This is why it is vital to have a tool that allows your business to grow sustainably, not merely function.
That’s where Enterprise Resource Planning comes in.
What is an ERP?
Spindl is using QuickBooks for accounting. Spreadsheets for order management. Slack for internal discussions. Post-Its for reminders. Pigeons for mailing. Each of these is a business-critical process, yet completely disjointed. It’s like using tape to hold shards of glass together. Functional, but not efficient.
Cue: an ERP!
An ERP consolidates all your business operations in a single, central monolithic application and acts as the single source of truth.
ERP enables you and your team to view, analyze, and manage all your business operations from one system which can be accessed from anywhere in real time, provided it is cloud-based. No jumping from one app to a spreadsheet to another app to make sure one job gets done. All data that you enter into an ERP speaks to the other—if you’ve just made a sale, you can use that information directly within the system to update your inventory as well.
With an ERP, you can:
- Manage sales, purchases, inventory, billing, manufacturing, leads, customers, payroll, and much more.
- Have your data safely stored in one place- No running around like a headless chicken looking for stuff from spreadsheets or emails or different apps.
- Eliminate redundancy and repetitiveness- Because everything is integrated, you’re not entering the same data in multiple places. Your processes are streamlined and industry best practices can be easily followed.
- Have everyone on the same page- The data updates for every single user in the system, so there are no discrepancies. A central integrated system improves team efficiency and collaboration.
- Maintain track of things and remain transparent- A full history of all processes, available at all times.
- Use standard reports, charts, calendar views created automatically based on the data you record.
You can now set the pigeons free! That said, an ERP is a tool for a business to utilize. It’s only as efficient as its users make it. It cannot automatically enter accurate information and create records like purchase orders, receipts, and invoices but it can create reports and trend graphs in real time for you to analyse the historic data and make better business decisions. It cannot automatically send chocolates to employees on their birthdays and work anniversaries but can remind you to.
What an ERP will help you accomplish
When all your processes are in one place, the ERP becomes the backbone of your business. Everything is accounted for, all data is in the same place, and everyone is on the same page. No matter how much your business grows, the workflow remains consistent. Because of how much control an ERP system offers, you can:
- Avoid the slog of redundant work and reduce operational costs
- Drastically improve employee productivity
- Make better decisions readily
- Focus on innovation and profitability.
“The key is in not spending time, but in investing it.”
--Stephen R. Covey (Educator, Author, and Businessman)
An ERP is an investment in growth. With an ERP assisting Spindl, Saf and Mel can start spending significantly less amount of time slogging away. They would be eliminating factors like manual maintenance, data duplication, communication difficulties, firefighting coordination/planning issues, and a lot more simply by using it. When team Spindl is not spending time updating every single spreadsheet, they can invest it in growing the company.