Enterprise Resource Planning (ERP) systems have a long history, existing before SaaS applications took over the world. They have become fundamental systems for manufacturing and distribution businesses due to the meticulous nature of their various detail-orientated modules. These systems are built to address all angles of a company’s business workflows from finance and logistics to production, planning, and order processing. With the global populations’ growing dependence on connectivity, it is no surprise that the demands of businesses have become more and more demanding. Businesses overseas are adapting to these advancements in technology by adopting an ERP system tailored for their industry.
The introduction of SaaS has not been a hindrance to companies seeking a modern ERP. In addition, with the growing number of companies now integrating ERP software into their businesses, different implementations can now be tailored towards specific industries with varying degrees of customization. This article will discuss how the adoption of alternative ERP models differs from that of traditional enterprise-focused systems as well as various ways they can be utilized for various business sectors.
There are three major models of ERP software: ERP, Supply Chain Management (SCM), and PeopleSoft. ERP is the oldest of the three models; this software was originally developed in the 1970s. The next oldest is SCM, which was created in the 1980s by IBM. This model is often referred to as “classic” because it has four basic modules which include finance, production, sales, and service management. The third model introduced in 1984 is peopleSoft. This system differs from its other two counterparts because it focuses on customer service, while also providing many traditional enterprise-focused modules that other ERP solutions do not have. After peopleSoft’s birth, many other companies rolled out different models of their own. For example, Oracle bought PeopleSoft in 1998. Since then, Oracle has modified the system to focus on new areas such as product development and customer service.
There are four ways that ERP software can be customized to fit the needs of a specific business sector: feature selection, process design, data segmentation, and system management integration (SMI). These four aspects are key in deciding how an ERP system is tailored towards the needs of a specific industry or vertical market.
Feature selection is where specific features are chosen for each module of an ERP system to accommodate the specific needs of the company’s business sector. This is often the first step in deciding if certain software is a good fit for a business or not. To select features for an ERP system, one must analyze each module to see if each feature will be beneficial to the success of the company. There are nine necessary features that one should consider before selecting which modules they want to include in their ERP solution.
These features are crucial to the business and they must be tailored to fit the needs of each business sector and industry.
The customization option is process design, which includes both top-down and bottom-up approaches. The top-down approach includes defining processes at a high level, followed by tailoring them for specific industries or vertical markets. The bottom-up approach is the opposite and works by starting with individual customer workflows and then tailoring them to fit an overall enterprise-oriented model. These two approaches also involve the two different types of processes one can choose from: captive and native.
A captive process is designed to meet the needs of a specific industry or vertical market, such as a healthcare company. This process is often built for this particular business sector, but it can be used by others if necessary. A native process has been designed to meet the generic needs of most businesses like most ERP systems do. Native processes are designed based on industry standards and best practices.
Segmentation is the third customization option and involves segmenting data for each module across an organization. Data can be separated into segments based on different types of information such as time, location, and products. Some organizations will segment data based on their individual business processes. These processes include sales cycle management, supply chain optimization, and order processing. Other segments may include customer management or supply chain inventory management.
The fourth customization option is SMI or system management integration. This step involves connecting the ERP software to different systems in a company’s IT infrastructures such as a document management system or a quality control system. These systems are often vital for businesses to maintain high levels of standardization, efficiency, and effectiveness throughout their daily operations. However, these systems often lack integration with other company programs and applications. But with the use of SMI, all of these systems can be connected to a common goal.
Cloud computing is a relatively new concept that has been growing rapidly over the last decade. Cloud computing allows companies to store all their data on an external server instead of an internal server, which can be more cost-effective and reliable for businesses. A cloud-based ERP system takes advantage of this concept, allowing customers to access their data from anywhere at any time from any device that may have a compatible connection to a computer network or internet connection. This system also allows for businesses to save on their IT infrastructure costs, which can be more than 50% of a company’s total operational costs.
However, cloud-based ERP systems have a few disadvantages when compared with their traditional counterparts. First is the business’ adoption of new technology. The process of getting employees to use a new system takes time and effort, but in the end it will be a success if everyone in a company is on board. The second disadvantage is that not all companies can afford or have enough capital to invest in an ERP system through cloud computing, especially if the company does not have any major capital purchases yet. However, cloud computing is a relatively new concept, and it is developing at a rapid pace with increased capabilities for businesses.
An Enterprise Resource Planning (ERP) system can help companies become more efficient in terms of standardization, efficiency, and effectiveness. Standardization allows companies to improve their daily operations by following industry best practices that are implemented into their ERP systems. Efficiency is all about producing the highest quality goods or services at the lowest possible cost. The use of an ERP system will allow companies to achieve high levels of efficiency based on the factors stated above. Effectiveness is an overall goal for any business sector or industry, but it can be achieved using ERP systems as well.
Interested in reading more about ERP systems used today? Intelligent ERP – Why CFOs Are Migrating To It discusses the advancements in technology used for ERP systems and why CFOs are using it today.
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