4 Benefits of an ERP System

• Process definition/automation

• Reports

• Reviews

• Analysis

80% of business owners are unaware of or do not fully utilise their ERP systems.They simply assume that the ERP system will enhance productivity. However, it is better to understand the benefits of an ERP system separately so that you can understand to what extent you are using your ERP system.

Process Automation/Definition:

I had been consulting for an FMCG company that sells packaged food items. The representative manually takes an order, calls their backend team, dictates the order while on the bus, the order is typed out, printed, approved by the owner, and sent to the factory for packing before being dispatched to the stores.Imagine the plight of the rep who dictates an order containing 320 SKUs five times a day. Most aspects of the process are non-value-adding, i.e., the client doesn’t pay for anything. They just pay for the food product! Currently, they have an order-taking app with short code-based search; they place the order then and there; there is no dictation, no typing; the owner skims through the order in his system, approves; the order is moved to the factory; and the details of the dispatch are fed into the system to give visibility to the rep.

One of the key aspects of an ERP system is to make sure that we eliminate non-value-adding parts of the process to the maximum possible extent, standardise it, and create a system to manage it. Yes, simplify a process, standardise it, and create a system to manage it.

Reports:

The second most important aspect of an ERP system is the reports. When you digitise the process and store the information, you can pull out the information and create the meaningful reports you want. Several entrepreneurs don’t use the reports in spite of asking for fancy dashboards during development. This is because they don’t have a structured approach to the process. An entrepreneur thinks about different parameters based on different units of time.

The information that he or she wants on a daily, weekly, and monthly basis will differ. Eg., one might want sales and collections on a daily basis, stores yet to be covered on a weekly basis so that the reps can plan their routes efficiently, and one might want sales, collections, returns, scheme performance, etc. on a monthly basis. Taking the unit of time into account will help an entrepreneur generate simple, useful reports. If you have more information than you use, you tend to stop using the reports due to clutter.

Have simple, usable reports based on the information you want or the decisions you take on a daily, weekly, and monthly basis.

Review:

Most entrepreneurs don’t use this powerful aspect of the ERP system. In the previous section, we saw how to use key reports. Reviews are an extension of reports. For most of the roles in the organization, you have key metrics that should be tracked to ensure performance. Eg., take the sales representative. Let them present the sales to date, returns to date, stores not covered, and scheme performance to the management team on a weekly basis with concrete reports.

Once people are present, we question the variations and start driving performance. Remember, questioning is one of the key aspects of management. Questioning based on the same set of metrics on a regular basis is the best way to communicate your vision and goals in a concrete manner to your management team. You will be surprised with the kind of improvement in output and visibility you get into ground-level issues and new ideas generated in the process. Most SMEs fail to use this aspect of an ERP system. Remember, reviewing your reports is the best way to use them effectively.

Analytics :

Analytics is completely different from reports and reviews. Reports and reviews are used on the go. The purpose of analytics is to get key insights based on data. Reports and reviews are based on key numbers. Analytics is based on patterns over a period of time. In the FMCG company example we saw previously, even before designing the ERP system, we took the last three years' report they generated based on manual entries and analysed them in Power BI. There were extraordinary insights that we got from the process.

Out of 320 SKUs, 60 SKUs were resulting in a net loss, i.e., the returns were very high compared to sales. Most of these items were removed from the portfolio in a half-hour meeting with the management team. For seasonal items, there was a significant stock dump even in the last month of the season, which could be easily avoided. Certain high-performing categories with low competition weren’t given the focus that they needed. We also got a good idea of region-wise category preferences.

When it comes to analytics, you dive deep into patterns and fish for key insights. This is completely different from reports and reviews.

If you have an existing ERP system or are planning to put one up, it is better to do so after understanding these benefits so that you can get the most bang for your buck.

About the Author

SN PALANIAPPAN

Alumni, IIM, Bangalore; Co-Founder, StratWorks Consulting LLP; Zoho Implementation Partner.

His consulting firm, StratWorks Consulting LLP, specialises in SME consulting and has been involved in the design and implementation of multiple ERP systems across several industries, including trading, manufacturing, FMCG, food retail, IT, etc. The author can be reached at can be reached at palani@strat-works.com, LinkedIn ID.

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