A young worker in a shipping warehouse prepares an order for shipment. Behind her are shelves stacked with boxes and various shipping materials.
ERP software is designed to help standardize and automate several business processes to streamline efficiency. You can begin with a base program and purchase add-on modules later. — Getty Images/coffekai

Enterprise resource planning (ERP) software is a big investment that can deliver equally substantial returns. ERP benefits run the gamut from reduced operational costs to better customer experiences. Indeed, over 80% of organizations told Panorama Consulting Group that "their project met their ROI (return on investment) expectations."

An ERP enables business efficiency and decision-making improvements by centralizing analytics, data, and backend processes. Use this guide to understand the advantages of ERP systems and decide if your company would benefit.

At a glance: Core benefits of ERP systems

The advantages of ERP software extend to nearly every part of your operations. Datix stated, "95% of businesses achieve major improvements after their implementation through reducing process times, increasing collaboration, and centralizing enterprise data." It's important to explore the benefits of ERP to decide if your company needs one and to develop an implementation strategy.

Organizations surveyed by Panorama Consulting Group achieved improvements in the following areas:

  • Inventory levels.
  • Compliance.
  • Supplier interactions.
  • Productivity and efficiency.
  • Standardization.
  • Real-time data.
  • Information technology maintenance costs.
  • Removing silos.
  • Operating and labor costs.
  • New operating models.
  • The customer experience.

1. Improve and scale business processes

Repeatable workflows are critical to sustainable business growth. An ERP solution standardizes and automates processes, helping companies expand with fewer growing pains. Over half of the companies surveyed by Panorama improved key processes, and 45% said they improved most processes.

ERPs grow with your business. You can implement an ERP in phases and add modules to the framework. The software provides a consistent user interface, whether it is working with finance or order fulfillment tools. This aspect streamlines training and supports standardization objectives.

2. Better resource management

A key benefit of ERP software is improved visibility into your workforce, assets, inventory, and more. An ERP's central database pulls information from many business departments. Its reporting and analytics tools provide a high-level understanding of how various resources are connected and used.

For instance, ERP software can analyze sales to determine your best-selling products. Supplier modules highlight price drops or discounts, and inventory features alert you when essential items run low. Project management software also assists with resource allocation, though it may not provide the complete picture that executives require.

3. Increase supply chain visibility

ERPs have long been a favorite of manufacturers and distributors because the software assists with supply chain management. Panorama said 90% of businesses in distribution and manufacturing industries "achieved full benefits realization regarding interactions with suppliers."

Modern ERPs leverage artificial intelligence to analyze real-time data. The software can suggest transportation routes and predict demand fluctuations. Real-time metrics improve your ability to respond to market changes or potential disruptions.

Moreover, you can optimize inventory levels. Microsoft noted that ERP supply chain modules offer "dashboards, business intelligence, and Internet of Things (IoT) technology to further simplify processes such as inventory management."

[Read more: Big Brands’ Inventory Management Partners Share Top Tips to Slay Supply Chain Snarls]

4. Boost productivity and efficiency

Productivity and efficiency gains are advantages of ERP software. According to Software Path, "Gaining functionality and increasing efficiency accounted for over 33% of companies' main reasons when combined."

Automation is a crucial function of ERPs. It allows staff to complete more tasks with fewer resources. Reducing manual data entry can improve accuracy and project completion time. Plus, managers spend less time finding and fixing mistakes.

Aberdeen reported that top-performing businesses realized the following productivity-enhancing ERP benefits:

  • Seventy-five percent could access and personalize reports using self-service tools.
  • Seventy-five percent leveraged machine-learning capabilities to “learn from users and provide suggested actions.”
  • Seventy percent benefited from automatic notifications "when scheduled activities fail to occur on time or when certain conditions occur."

An integrated ERP system streamlines many processes that impact customer satisfaction. ERP e-commerce modules can improve order tracking and communication capabilities.

5. Robust insights and forecasts

Most Panorama Consulting Group clients said "their primary reason for implementing enterprise software is needing access to real-time data." According to NetSuite, ERP analytics enables businesses to "identify patterns, trends, and anomalies, and use this information to optimize its operations, improve efficiency, reduce costs, and increase profitability."

Instead of searching for information in multiple systems, executives can view operational and financial metrics from a single hub. User-friendly dashboards and reporting tools display data from various departments and divisions.

6. Streamline compliance

Managing complex regulations across HR, accounting, and manufacturing is challenging. Global businesses benefit from ERP software because it supports compliance across multiple regions. ERP tools handle standard compliance tasks, like employee data management and tax calculations.

In an example provided by SAP, a company manages human resources (HR) through an ERP. HR managers use audit trail capabilities to create a "traceable record for compliance verification and potential audits." Notifications inform them of labor law and regulation updates. And training modules ensure teams understand the latest regulations and policy changes.

[Read more: Email Marketing Laws: What Small Businesses Need to Know About Compliance]

7. Eliminate silos

Generally, business operations and outcomes improve when departments share knowledge and collaborate. However, all too often, a customer service team uses one platform, an inventory manager looks at another, and sales and marketing teams may use one or more third-party services. Unless these systems are perfectly integrated, there are communication and data-sharing barriers.

With an ERP as your central hub, a customer support employee can view real-time inventory details, as can the salesperson. Both individuals can make better decisions based on data when interacting with customers or leads.

8. Decrease business costs

Businesses reduce costs with an ERP using HR, asset management, and financial planning tools. With full visibility into day-to-day operations, your company can identify and respond quickly to factors affecting your budget.

ERP benefits include the following:

  • Consolidated software: Since an ERP can replace other software, you can eliminate monthly fees to multiple vendors, which in turn can result in lower overall software costs.
  • Reduced IT costs: By replacing several software programs with a single ERP, your information technology (IT) team has fewer systems to manage and update.
  • Lower labor expenses: Improving employee productivity and automating menial tasks allows staff to complete more work without hiring additional team members.
  • Decreased operational costs: Asset and resource management capabilities help businesses optimize usage and track preventative maintenance, lowering their operational costs.

9. Enhance customer experiences

An integrated ERP system streamlines many processes that impact customer satisfaction. ERP e-commerce modules can improve order tracking and communication capabilities. Some ERPs have customer relationship management (CRM) features, allowing businesses to personalize interactions and understand customer needs.

For instance, Microsoft reported that fashion retailer Aubainerie increased customer conversions by 25% after adopting an ERP. The ERP solution’s real-time data helped Aubainerie personalize customer experiences and manage “massive amounts of inventory data.”

[Read more: 12 Most Common CRM Questions, Answered]

10. Improve data security

ERPs have robust security measures. Many systems provide data encryption, automatic backups, and malware protection. Instead of monitoring data collection and access permissions across multiple software systems, an ERP centralizes data and administration tools.

Do you need ERP software?

Software Path reported that "over 30% of businesses were implementing an ERP to support their company's growth." In addition, "most companies were migrating from QuickBooks to their first ERP system."

Here are a few signs that you need an ERP system:

  • You have outgrown your accounting software.
  • Supply chain issues have negatively affected production and inventory levels.
  • Leaders can't find and compare information easily.
  • Your IT team spends too much time integrating third-party tools.
  • Data discrepancies and reporting issues show disparities between your general ledger and inventory software.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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