Digitalisering
12. januar 2023
Advantages and disadvantages of an ERP system
ERP systems most often become the heart of the business, so before you embark on selecting and implementing an ERP system, you should be clear about the advantages and disadvantages of such a system.
There are, of course, many more advantages and disadvantages than we cover in this post, but we have focused on the primary ones and on the aspects that provide the most value for you.
The advantages of an ERP system
1 – You can increase efficiency in the company
By automating many of the company’s routine tasks, an ERP system can increase efficiency throughout your entire value chain. The time and resources you save can instead be used for tasks that require “hands-on” work or a creative mind—or simply to increase your capacity.
2 – Improved collaboration across the organisation
By having one central system that distributes information and data across the organisation, you ensure that everyone is looking at the same things, and that human errors in operations are reduced, as there is a system that defines routines and workflows.
Hvad er forskellen på systemer (ERP, PIM & CRM)?
Vælg system nedenfor, og læs mere om, hvad de forskellige systemer er, og hvad de er gode til.
ERP
ERP is an abbreviation of ‘Enterprise Resource Planning’ and is a term for software platforms from which you manage and handle key parts of a company’s processes and resources, such as products, finance and order management.
ERP systems are most often used by companies where data and information must be managed across sales, inventory, purchasing, production, and much more.
Good for:
- Inventory management
- Financial management
- Order management processes
PIM
PIM is an abbreviation for ‘Product Information Management’, and as the name indicates, a PIM system is a central system where companies collect, organise and maintain all product information.
A PIM system is used to have one place where product information is maintained and distributed to other systems such as webshop, apps, catalogues, etc.
Good for:
- Managing product information
- Distributing product information to external systems
- Reducing marketing debt by maintaining product information
CRM
CRM is an abbreviation for “Customer Relationship Management”. CRM systems are therefore systems from which you manage all information about your customers, such as documents, dialogues, history, and information about the customers.
The purpose of a CRM system is to help companies understand their customers better and improve customer satisfaction, thereby increasing revenue by building a larger and more loyal customer base founded on long-term customer relationships.
Good for:
- Consolidation of customer data
- Systematically working with and managing existing and potential customers
- Increasing sales (share of wallet) to existing customers
3 – Ability to integrate your business logic with external systems
Most ERP systems come with a wide range of integration options, allowing you to integrate your business logic (what is managed from the ERP) with the other external software you use to run your business.
In this way, you can also “power up” workflows that sit outside the ERP system.
4 – Reduce errors in the flow
As data flows are automated and workflows are digitised with an ERP system, you also remove the possibility of a wide range of error 40s (human errors), as the system will handle all information consistently every time—whether it is a “good” or “bad” day.
5 – Easier scaling
The more manual workflows you can digitise, the easier it is to scale the business, as more business processes happen automatically.
It almost goes without saying. It also means that if you want to scale, you do not need to hire as many new hands to handle higher revenue.
6 – Greater overview of the business
An ERP system gives you a consolidated overview of your business processes and their performance. You will therefore also have insight into how to scale further in the future.
Surely there must be a downside?
Oh yes! With big decisions come big consequences.
1 – The price
ERP systems generally come with high costs, especially for implementation, development, operations, and onboarding staff.
You must not, under any circumstances, underestimate the latter. The dangerous part of that cost is that it is difficult to track—efficiency “just” drops in your team for a period while they learn the system.
Therefore, implementing an ERP system should always be viewed as an investment, and you should budget DKK 300,000+ for the task in both internal and external costs.
2 – You become quite tied to a system
In addition, it is not easy to switch ERP once you have implemented a solution, as it is, as mentioned, costly and time-consuming to implement a solution.
3 – It takes a long time
Do not underestimate the time required to implement an ERP system. The process—from mapping your business logic to having implemented a solution and onboarded the material—can quickly take 1–3 years.
4 – Risk of data corruption
When you gather all business logic in one place, you also risk data errors that then create errors in all processes and systems that the ERP system communicates with. In other words, data errors are amplified with an ERP system, as the system suddenly controls all your processes.
5 – Risk of security breaches
This only applies if the solution is not configured correctly, but there is a risk of security breaches when you power up your business logic.
That was a lot—I am still confused
You will always need an ERP vendor if you want an ERP solution. Therefore, consult them before you choose, align expectations about who is responsible if something goes wrong, have your challenges and potential drawbacks mapped out, so you are prepared.
There will always be friction when implementing new business logic, a process, or a system. But there are also many advantages, so do not lose heart.
I hope that this post has, at the very least, given you some information and inspiration.
