Key Questions Before Choosing an ERP

More than 8 years ago, I had my first contact with the world of ERP (Enterprise Resource Planning). What is an ERP? This was the first question that came to mind when I applied for a job offer.

Over the years, I have understood that an ERP has a technical definition. In reality, the problem it tries to solve gets distorted. ERP providers and implementers often confuse the end client, either consciously or unconsciously.

In this article, I will focus on answering several important questions that, from my point of view, will help you better understand what an ERP is if you are a company.

What is the purpose of an ERP?

Beyond improving business processes, my opinion is that an ERP should primarily improve three things:

Monetary benefits: The implementation of an ERP should be backed by an increase in profits at the end of the year. This argues that an ERP is not an expense, but an investment that translates into positive results for the company.
Time optimization: Your employees or colleagues can abandon repetitive tasks and rely on the system to automate processes. This allows you to focus on what really matters: adding value to your business.
Improvement of relationships with third parties: The implementation of an ERP fosters stronger relationships with suppliers and customers. This helps to significantly improve the company’s environment.

What do I need before looking for an ERP?

Some time ago, I discovered the consultant and YouTuber Erik Kimberling. In his book The Final Countdown, he describes three essential steps for any company that wants to digitize, which I fully agree with:

Business Strategy: Define a clear vision and mission that align the company’s medium- and long-term goals. This includes identifying target markets, analyzing competition, and formulating an action plan. This corresponds to general management.
Work team: Have a competent and adaptable team that is aligned with the company’s vision. Look for interdisciplinary people who have a global vision of the company. It’s not about age or experience. These are people who build bridges beyond their area.
Implement technology: This step comes last. In my case, I look for technological solutions that optimize operational processes and improve efficiency. This may include the implementation of an ERP system, integrations, CRM, MES… or simply more inter-departmental communication.

What should I do if someone tries to sell me one?

First of all, be honest with yourself. If you haven’t defined a business strategy and a work team, you will hardly be clear about what you need. If you are not at this point, politely tell them that you are not interested yet and that they should come back later. Believe me, they will come back.

Secondly, hire an independent consultant to accompany you throughout the process. The ERP partner or provider comes to sell you as much as possible. This is legitimate, and you should be advised by an expert whose priorities align with yours.

Will an ERP do everything?

Let me give you an example of an automotive client I had. They were dedicated to injecting interior parts for vehicles. These people used the ERP only for orders, delivery notes, and invoices.

At that time, I was shocked. Over the years, I realized they weren’t so crazy. They had a system for everything. For production, they used an MES. For the warehouse, a WMS. For customer tracking, a CRM.

If they had been in the retail sector with a similar volume, the structure would have been similar but with the addition of a web portal where customer orders were entered. The order would likely go to the ERP and then travel to a CRM for customer tracking and better data exploitation.

Does an SME need an ERP?

Apply this to an industrial SME that currently manages items, orders, delivery notes, invoices, and production orders through shared Excel files on network drives with 10 copies on the desktop?

I am I and my circumstance, and if I do not save it, I do not save myself - Ortega y Gasset

Ortega y Gasset’s phrase can be applied without error to your company. Your company makes you unique, and so does the context. Not understanding one of the parts will make you know the answer halfway. Therefore, an SME sometimes needs an ERP and sometimes does not.