Five Misconceptions About ERP Systems

Since its introduction in the 1990s, Enterprise Resource Planning (ERP) software has become a multi-billion dollar business and is now considered a necessary management tool. It facilitates and informs the planning and decision-making processes. Its transactional database is viewed through management portals called dashboards. However, misconceptions about ERP have evolved along with its evolution and development. Here, we discuss five myths about ERP.

The System is Expensive

Licensing ERP software is only a small percentage of the total cost of implementing the system. What drives the price up is inadequate preparation when setting business requirements and choosing the wrong system for an organization—one that includes unneeded functionality. Managers may set too broad a scope, require changes along the way, over-think solutions, or promise too much to internal stakeholders. These mistakes inevitably hinder success and run up costs. Consider this: it may be more expensive to continue to run your business using Excel spreadsheets instead of employing an integrated solution across your firm.

ERP Only Suits Larger Companies

Initially, it was larger organizations that embraced ERP, as is often the case with new technology. However, current ERP system designs work just as effectively for large and small firms; they are highly adaptable for a wide range of customer sizes because most companies are more similar than they are different. There is always a purchasing function, an accounting function, a manufacturing floor, customer service needs, transportation requirements, no matter the size of an organization. The basic concept of integrating data from a variety of functions across an organization is universal.

Customization is Difficult

The evolution of ERP software has included the recognition that there is a need for adaptability. Once a company has implemented an ERP system, and it is working well, new insights into ways of working may surface. Modern systems not only record but analyze operations. After implementation, the production manager may decide the organization requires an additional material planning module. ERP is all about change and growing along with new ideas.

Implementation Cannot be Handled Internally

Choosing an ERP system also means choosing an implementation team. Software providers work closely with IT individuals to facilitate the implementation in-house; an ERP implementation partner knows what is needed to lessen the stress for everyone involved. Vendor choice should include the ability to test a sample of the system before purchasing it, available technical support, continuing training sessions, and software upgrades.

ERP Delivers Benefits

An ERP system can uncover new ways of working and hidden capabilities with its transparency and analyses. But those benefits don't amount to much if departments don't establish common goals. Many organizations assume that investing in ERP means that it will magically solve problems, when in reality, it empowers employees to make better decisions.

A robust ERP system will generate operational improvements, closer relationships between business functions, and business insights that will increase profitability and cost reduction through data transparency.