Which companies don't use ERP?

ERP systems: which companies are they suitable for?

ERP systems are now used across the board in the economy. This is because they can save companies time and money in a wide variety of areas. ERP systems make a valuable contribution when it comes to digitally networking companies. However, it is not always worthwhile for every company to use an ERP solution.

How sensible it is to introduce such software depends to a large extent on the type of your company, the industry in which you are active and other factors. But what exactly does ERP software do and is it actually suitable for your company? The answers to these questions are quite complex. In the following, however, we endeavor to provide you with guidelines that will make your decision-making easier.

What do ERP systems actually do?

ERP systems or enterprise resource planning systems support companies with administration - that is, with all organizational processes. This is what ERP programs do by:

  • Create a common database:

ERP systems enable all departments and employees in the company to access a common data store. This shortens the way to work and makes it easier for users to communicate with one another.

  • Standardize processes:

Many companies use different tools and software for different work areas and tasks. Purchasing, for example, uses a specific merchandise management system, or bookkeeping uses special bookkeeping software for accounting. The great advantage of ERP software is that it covers functions for all important business areas. So they replace isolated program solutions that may not be compatible or only to a limited extent compatible.

So-called On-premise systemswhich limit the access options. In this case, users can often only work with internal company data if they are connected to the company network - i.e. they are within the office space.

In summary, ERP software makes it easier for users to exchange information and automatically take on a large number of tasks that arise in company administration. Companies work much more efficiently because they save time, shorten commutes and thus minimize costs.

The introduction of an ERP system should be part of a comprehensive IT strategy for companies. Another advantage is that companies use ERP systems not only for internal exchange, but also for communication with offices and administrative offices facilitate.

Example:In Germany, companies with an export volume of EUR 500,000 or more are required to report their transactions electronically to the Federal Statistical Office.

ERP systems perform these or similar tasks at the push of a button by independently compiling a corresponding report and then submitting it to the authorities.

In addition, companies must be able to give a contact all of their stored data or delete them from the system. ERP systems make it possible to query, extract or delete contact data with a simple filter search.

Advantages of ERP systems at a glance:

  1. Common database
  2. Shortened commutes
  3. Uniformity and transparency
  4. Easier communication and access to data
  5. Process optimization
  6. Facilitates the creation of forms for authorities

Disadvantages of ERP systems - which companies are they suitable for?

However, ERP systems can also have disadvantages and risks. The introduction of such software means an enormous investment of time and money for companies. Not only do companies have to convert their entire IT system, they also have to train employees to use the new software. If the program is too complex, it can mean that employees never fully adapt to the new circumstances and therefore work less efficiently than before.

Apart from that, however, there are company models that do not require ERP systems (at least up to a certain company size). First and foremost, this applies to companies that are not in the manufacturing industry, but in the Service industry are active. Companies in the field Professional Services are seldom dependent on ERP systems because the general processes are less standardized.

Service providers benefit from functions that relate to the areas of financial accounting, controlling or human resource management, but ERP software does not cover the primarily value-adding processes.

As soon as a service company receives the data from a very large number of employees and have to connect different company locations with each other, an introduction can be worthwhile. How effective this is depends on many factors - including the size of the company and the turnover generated.

For small and medium-sized companies, it usually makes more sense if they forego an expensive, comprehensive ERP solution and instead use inexpensive individual solutions. The necessity stands and falls with the organizational effort that a company makes.

A rule of thumb: Companies need an ERP system as soon as their process structures can no longer cope with the increasing complexity of the business environment.

Industry-specific requirements:

To find out which system is suitable for your particular needs, you should get an overview of the requirements of the individual industries. You will find a selection below:

Especially in the manufacturing industry every company Benefit from the advantages that ERP systems bring, regardless of whether it is a startup or a large corporation. Essential processes such as production planning, invoicing or warehouse management must also be present in small businesses. Most ERP systems provide reliable support for these. In this way, startups can make their business processes as efficient as possible right from the start - as soon as they produce or sell - and thus be sure that the foundation will be successful. This especially makes sense for manufacturing companies that grow very quickly.

Most important for companies that are active in this branch are the functions:

  • Powerful project management for the planning steps and budget monitoring
  • Technician control and contract management for maintenance and malfunctions
  • Financial accounting and purchasing
  • Sales and personnel planning

Construction companies can benefit enormously from powerful ERP systems.

Companies can use the results of the financial accounting (after taxes and duties have been deducted) as a basis for budgeting. The ERP system can accept any production inquiries directly. In addition, it can track materials used by production and correct low inventory levels by re-ordering.

Construction companies can also profitably use ERP systems for vehicle management, as they can, for example, automatically assign company vehicles to employees.

ERP software therefore manages both personnel and material and automatically transfers the costs to the accounting department.

ERP systems in retail have to come up with powerful functions in the sales process and ordering. Systems with a modular structure are ideal. For example, a smaller retailer can start with the basic version for inventory management and - if the company grows - buy more powerful modules later.

The focal point in retail are the cash registers. To ensure that these connect seamlessly to the ERP system, retailers should first after the introduction the software.

ERP programs make work in retail easier by, for example, automatically checking incoming invoices and comparing them with the quantities at the time of incoming goods and the prices of the orders. This reduces the effort involved in managing goods to a minimum. Basically, they record all incoming and outgoing payments and stock movements. They also provide support in many areas of financial accounting.

ERP systems in the textile trade help, for example, to link the cash register system with online shop systems. In this way, ERP software can fulfill the following functions in the online textile trade:

  • Management of fully integrated eShops (Magneto or Oxid) and marketplaces (Amazon or eBay)
  • Automated ordering
  • Article management including variant articles with characteristics such as size, color, etc.
  • Allows tracking of processes such as delivery, ordering and payment
  • Integrated cash register system for stationary trade

In connection with an online shop, ERP systems in the textile industry practically form a closed unit. The software records customer orders, duplicate checks, payment comparisons and credit checks are carried out automatically. Companies that are active in the textile trade benefit primarily from having ERP systems highly efficient merchandise management system enable.