The three primary reasons that people become an entrepreneur and start their own firms are 1- To be their own boss, 2- Pursue their own ideas, and 3- Realize financial rewards. So if you are reading this and you already have started your small business ,congratulations.
Running your own business comes with as many plusses as there are many challenges. The volume of tasks is immense – from operations, payroll, accounting, and employee engagement – to sales, marketing, strategy and more.
The beginning is more focused on the idea, product, pricing and marketing and that shifts the focus from the operational side to the sales side, this what makes us as entrepreneurs feels safe and successful; but with the excitement of growth comes another set of challenges. The ones we see the most, are technology issues. Under that title “technology issues” there are usually a countless of areas that can be summed up in two main problems:
1- Your business software -if you have it in the first place- no longer fully supports your business, normally entrepreneurs in startup mode depends on spreadsheets.
2- You have a mix of software that are built in silos and isolation, and don’t “talk” to each other.
This is what typically sets small businesses on the path that eventually leads to missed up operations and sometimes failure of achieving the desired quality of product or services. This is when they think of (ERP) Enterprise Resource Planning systems. Does it exists … can I be still the boss?!
Inventory Management & Control – 1960’s
Inventory Management and control is the combination of information technology and business processes of maintaining the appropriate level of stock in a warehouse. The activities of inventory management include identifying inventory requirements, setting targets, providing replenishment techniques and options, monitoring item usages, reconciling the inventory balances, and reporting inventory status.
Material Requirement Planning (MRP) – 1970’s
Materials Requirement Planning (MRP) utilizes software applications for scheduling production processes. MRP generates schedules for the operations and raw material purchases based on the production requirements of finished goods, the structure of the production system, the current inventories levels and the lot sizing procedure for each operation.
MRP was created initially to supply the Polaris program in 1964, as a response to the Toyota Manufacturing Program, Joseph Orlicky developed material requirements planning (MRP). The first company to use MRP was Black & Decker in 1964, with Dick Alban as project leader.
Orlicky’s 1975 book Material Requirements Planning has the subtitle The New Way of Life in Production and Inventory Management. By 1975, MRP was implemented in 700 companies. This number had grown to about 8,000 by 1981.
Manufacturing Requirements Planning (MRP II) – 1980’s
Manufacturing resource planning (MRP II) is defined as a method for the effective planning of all resources of manufacturing company.
Ideally, it addresses operational planning in units, financial planning, and has a simulation capability to answer “what-if” questions and extension of closed-loop MRP.
In 1983, Oliver Wight developed the known MRP into manufacturing resource planning (MRP II). And in the 1980s, Joe Orlicky’s MRP evolved into Oliver Wight’s manufacturing resource planning (MRP II) which brings master scheduling, rough-cut capacity planning, and the capacity requirements planning,
By 1989, about one third of the software industry started using MRP II software.
Enterprise Resource Planning (ERP) – 1990’s*
Research firm Gartner coined the term “enterprise resource planning.” The new name recognized that many businesses—not just manufacturing—were now using this technology to increase the efficiency of their entire operations.
This is when ERP systems took on their current identity: a unified database for information from across the company. ERP systems brought in other business functions, like accounting, sales, engineering and human resources (HR), to serve as a single source of accurate data for all employees.
Enterprise Resource Planning or ERP uses multi-module application software for improving the performance of the internal business processes.
ERP systems often integrates business activities across functional departments, from product planning, parts purchasing, inventory control, product distribution, fulfillment, to order tracking.
ERP software systems may include application modules for supporting marketing, finance, accounting and human resources..
ERP systems continued to evolve throughout the ’90s. One major breakthrough was the advent of cloud ERP, first offered by NetSuite in 1998. With cloud ERP, widely seen as an improvement over on-premises systems, businesses could access critical business data through the web from any device with an internet connection. Cloud solutions meant companies no longer needed to purchase and maintain hardware, reducing the need for IT staffers and leading to easier implementations.
This cloud model made ERP systems, once limited to enterprises, accessible to smaller companies that lacked the capital to launch and support a resource-intensive on-premises solution. Small and midsize businesses across industries could enjoy the same benefits as their larger counterparts, including automated processes, improved data accuracy and greater efficiency.
Extended ERP – 2000’S*
In 2000, Gartner introduced the idea of ERP II to refer to internet-enabled systems that could pull data from other sources, including front-office applications, like customer relationship management (CRM), ecommerce and marketing automation, and back-end applications like supply chain management (SCM) and human capital management (HCM).
This was a significant advance because the more information that feeds into the ERP system, the easier it is to identify and resolve issues and capitalize on opportunities for improvement.
Today, leading ERP systems are vast repositories of information able to generate reports that can spotlight the performance of every aspect of the business, from sales and marketing to product development to HR and operations.
There are countless applications available, designed for different industries, business models and challenges, and ERP acts as command central for what can be a vast network of software.
*Sources Oracle Institute and JEFFRIN MICHAEL,2017250012
Top reasons that small businesses choose to implement ERP software include*:
*Mint Jutras 2016 Enterprise Solution Study
Is a software that helps you run your entire business. It integrates the core processes of a company in one place. These processes include finance, accounting, HR, sales, supply chain, services and manufacturing among others. The software generally functions in real-time. It uses a common database for all its actions. Varied computer hardware and network configurations run such systems. Simply put, an ERP is a type of management software.
Essentially, ERP for Small business is different than the ERP for large organizations. While comparing ERPs of small and big businesses, you need to acknowledge that ERPs for big businesses have been around for longer. ERPs were only an option for small businesses when the complex functions and costs came down a notch. There are mainly two reasons for this. To begin with, small businesses do not require extremely advanced, enterprise-level functions. Moreover, they cannot afford the high prices of big business ERPs. Again, small businesses are more adaptive to change. This is in contrast to how big businesses work. They generally follow a routine. Naturally, their ERPs are designed differently. The two businesses differ in their implementation methodology as well. Time is a vital factor in implementation as well as documentation. Big businesses way more documents for implementing an ERP software.
In fact some major players in the ERP arena are always tight up with huge investment and the perception it is not suitable for the SME. For example, the moment you hear SAP, you think of large enterprises. While it is true that SAP caters to Fortune 500 companies, the fact remains that the majority (80%) of its clients are actually SME (small business and medium enterprises). SAP says it has a track record of helping more than 250,000 SMEs.
Major technology trends, like artificial intelligence (AI) and the internet of things (IoT), will shape the future of ERP systems. ERP solutions can take advantage of machine learning—a subset of AI where a system learns to identify patterns in data to draw conclusions—to eliminate manual tasks and predict future business trends. Machine learning assimilates new data and feedback to become smarter and more effective over time.
Machine learning requires a large volume of data that is both granular and diverse, which an ERP solution provides, and leading ERP providers already leverage this capability. When an ERP system can mimic human behavior, it creates new opportunities for automated reporting, reconciliation and error detection.
The tremendous amount of data a machine can process and analyze generates a treasure trove of new insights. Think reviewing customer buying patterns to predict future shifts in demand or suggesting optimization opportunities, like personalized emails or site experiences, that will increase conversion.
On the back end, an ERP with this capability can quickly detect differences that could signal fraudulent transactions or identify processes that are responsible for a disproportionate amount of damaged goods. In short, machine learning empowers businesses to make rapid adjustments that drive success.
Connected IoT devices like sensors, cameras, tracking systems and scanners have become another key source of information for ERP systems. IoT has started to carve out a place among manufacturers and distributors because it helps businesses assemble a comprehensive, real-time picture of their supply chains. For example, IoT devices can monitor the status and usage of industrial machinery to quickly alert managers to broken equipment so they can fix it before it becomes a bigger problem. An IoT scanner can automatically track products as they enter or leave the warehouse. That not only ensures accurate inventory counts but can trigger restocking by an employee or automatic reorders from suppliers.
ERP systems have come a long way, and machine learning, IoT and other innovations will lead to continued advancements and shape ERP history in the years to come—65% of CIOs anticipate integrating AI into their ERPs by 2022.
*Sources Oracle Institute and JEFFRIN MICHAEL,2017250012
Enterprise resource planning software is the way to go even for small business. It takes a lot of load off your business needs, mitigating business risks, insure easier collaborations between your team members, and help you establish a great customer relation, and most importantly help you estimate and plan the future of your company. Who does not want to be a forecaster, right?
Sensing when you need an ERP is essential, so, consider your company’s strength, funds, and demand. Find some of the best cost-effective ERP for small business.
Pinnacle ERP Strategic team is ready to take you through the process of well-defined assessment and business modeling which will enable you to determine your best fit solution for ERP that can help you in your current stage and the future of your organization with expected growth.