Implementing an Enterprise Resource Planning (ERP) system is a major step for any business. While ERP solutions promise to streamline operations and enhance productivity, the road to successful implementation is complex. From aligning the system with your business needs to ensuring that your team is prepared for the transition, it's crucial to consider key factors to avoid costly missteps.
In this article, we’ll cover all the key factors you need to consider before deciding whether to implement ERP in your business and, if so, how to go about it.
ERP, which stands for Enterprise Resource Planning, literally means the planning and management of all business resources.
ERP software is an all-in-one technology solution that integrates various applications into modules within a single software package. ERP software aims to create a unified and streamlined data system across departments and functions, such as purchasing, production, and human resource management.
A complete ERP system typically consists of the following modules:
Some modern ERP software also includes integrations with devices like mobile phones, barcode scanners, handheld computers, etc., to enhance functionality.
The power of ERP lies in the "unified database", from which business leaders can extract insights from their operations while minimizing risks of data errors.
ERP helps control financial information
Usually, financial data is compiled from different departments, leading to discrepancies. With ERP, all finance-related data is consolidated in one place, ensuring a single, unified version across all departments and locations. When a number changes, all related information is automatically recalculated and updated to ensure consistency, reducing the risk of financial errors.
Thanks to ERP, large and complex companies no longer need to wait until the end of the month or quarter to compile data. Whenever management needs an accurate, up-to-date financial report, they can simply check the live data in the ERP system.
ERP reduces errors when multiple people handle the same data
In reality, businesses often face data mistakes as information passes through different departments. For example, handwritten “14” boxes can easily be mistaken for “19,” or a typo may turn customer “Micheal” into “Michelle.” Such errors slow down the workflow, harm the company’s image, reduce transparency, and cause internal friction among employees.
With ERP, data only needs to be entered once by the first person, and it’s stored intact in the system. Any employee accessing the data will see the original version, not a “third-hand copy.”
ERP makes it easier to monitor employee workflow
A centralized database with standardized business processes makes it easier for companies to implement internal controls. ERP software allows you to quickly trace the origin of any transaction and identify which employees were involved.
Managers can stay in one place, open the unified ERP interface, and instantly view the results of all employees’ work, even down to the smallest details—such as which products were sold this morning and how much revenue was generated.
Some ERP systems also have automatic data analysis features that assign tasks to employees based on their strengths, saving managers time in task delegation.
ERP creates an internal social network for the company
ERP software often integrates internal communication features for users within the system. This can include private chats or status updates, functioning similarly to an internal social network for the company.
A business should consider implementing ERP software if it finds itself in one of the following three situations:
- Having frequent errors in data transfer and coordination across departments, such as issues with shipping, invoice mismatches, or inaccurate inventory tracking. ERP ensures real-time updates and unified data flow, improving accuracy and customer satisfaction.
For example, a sales representative confirms an order for 20 items, but the warehouse only has 10 in stock. This forces the rep to go back to the customer and reissue the invoice, wasting time and damaging trust. With ERP, real-time updates ensure sales reps have accurate inventory data, improving service quality and decision-making.
- Are experiencing rapid growth in transactions. When the company’s products and operations expand beyond its management capabilities, it leads to fragmented and scattered information. ERP helps centralize and streamline departmental functions for better oversight and control.
For example: A small food production company expands rapidly after two years, requiring it to split functions like inventory, accounting, and marketing into separate departments. ERP modules help centralize this information, making it easier to manage across all departments.
- Are operating with low efficiency and cumbersome management systems, where manual processes and downtime create hidden costs.
For example, in manual order processing, creating, submitting, and approving orders takes time, while ERP automates these tasks and generates detailed reports. This helps the company identify inefficiencies and optimize its workflow.
The cost of implementing an Enterprise Resource Planning (ERP) system can vary widely, typically ranging from $50,000 to several million dollars. The total investment depends on numerous factors, including the size of your organization, the complexity of your processes, the specific ERP solution chosen, and the extent of customization and integration required.
1. Software licensing fees
2. Implementation and consulting services
3. Hardware and infrastructure
4. Data migration
Data cleaning and transfer: The process of moving data from old systems to the new ERP can be time-consuming and costly, especially if data quality is poor.
5. Training and change management
6. Maintenance and support
7. Additional modules and features
Modules for specialized needs like advanced analytics, supply chain management, or international operations can increase costs.
| Small to medium-sized businesses (SMBs) | Large enterprises | |
| Initial implementation cost | $50,000 to $500,000 | $1 million to $10 million or more |
| Annual costs | $5,000 to $50,000 for subscriptions and support | $100,000 to $1 million for ongoing services |
The time required to implement an Enterprise Resource Planning (ERP) system can vary significantly, typically ranging from a few months to several years. The duration depends on several factors:
| Small to medium-sized businesses (SMBs) | Large enterprises | |
| Time | 3 to 6 months | 2 to 5 years |
| Note | Typically have fewer users and simpler processes. May opt for cloud-based ERP solutions with standard configurations. |
Involve complex, multi-site operations. Require extensive customization and integration with other systems. |
Businesses should keep the following points in mind when implementing ERP:
When implementing an ERP system, businesses need to carefully plan for costs, resources, and time because:
As previously discussed and according to Panorama's 2022 ERP Report, the total cost for ERP implementation in a medium-sized business ranges from $150,000 to $750,000. This price covers a full system with all ERP modules included. However, most companies don't require every module, and ERP systems generally don't allow businesses to select specific applications for individual processes.
ERP systems can be overwhelming to implement and maintain, requiring skilled IT staff or external consultants to manage.
A lengthy implementation process could make the system outdated by the time it's fully deployed, potentially misaligning with the company's current needs. Moreover, extended implementation times can lead to downtime and productivity loss during the transition period.
While ERP improves accuracy and helps optimize business processes, it also comes with significant technical risks. For example, if a problem arises in one step, it can bottleneck the entire process and delay subsequent operations.
In an ERP system, all modules—such as finance, production planning, purchasing, sales, and project management—use the same data stream. This means that a slight change in one area impacts the entire system, and a minor process error could escalate into a larger issue when handled through ERP.
Once implemented, ERPs can be difficult to change or scale for some reasons:
Poor customization or implementation can lead to a system that does not fully meet the company’s needs, resulting in underutilization and a wasted investment. Therefore, businesses must carefully evaluate whether an ERP system is the right fit for their operation system and long-term goals.
While ERP systems excel in providing a unified source of truth and automating transactional processes, they often fail to meet the dynamic communication and collaboration needs of modern businesses. That's why they are referred to as systems of record, focusing mostly on centralizing and managing critical business data such as finance, inventory, and supply chain operations.
This is where ERP systems fall short—they are not designed as systems of engagement. Real-time collaboration, cross-functional communication, and task management are often left unsupported, leading to silos, bottlenecks, and inefficient internal processes.
By combining ERP with Rework.com, businesses can bridge this gap and create a more well-rounded solution that addresses both data management and internal collaboration.
Here’s why this combination is crucial:
ERP systems are often rigid and difficult to adapt as businesses evolve. Rework, however, offers the flexibility needed to customize workflows and processes as companies grow. Each aspect of your operation on Rework comes with customization and permission settings for you to design, and it requires no coding experience. You can always create-execute-monitor-adjust on the go, which is especially useful for businesses undergoing rapid changes or entering new markets.
ERP systems do not provide tools for real-time team collaboration, leaving teams to rely on external platforms, which can cause inefficiencies. Rework functions as a system of engagement, where employees can communicate, share updates, collaborate on tasks, and track progress all in one place. This real-time interaction ensures smoother workflows and better coordination across departments, closing the gap that ERP systems often leave open.
Always communicate with context - Centralize all discussion related to projects, decisions or processes
Rework is particularly ideal for smaller teams in both terms of investment cost and user-friendliness. You can always enhance your collaboration efforts without the heavy administrative burden of a full-scale ERP.
ERP systems typically have fixed approval flows for large, routine purchase orders. However, smaller, ad-hoc requests, like additional materials or protective gear, can get delayed by unnecessary approval steps.
For urgent or low-value purchases, businesses can use Rework Requests alongside their ERP. This app streamlines the process by:
ERP systems typically only capture the final supplier interaction during the purchase request phase, leaving out earlier steps like workload measurement, order tracking, supplier search, and negotiations, which require flexibility.
For more adaptable workflows, businesses can use Rework Flows to complement their ERP.
ERP is a powerful system and remains a top choice for solving business challenges. However, like any system, ERP has its imperfections. Businesses must be prepared with solutions to overcome these limitations to ensure smooth operations and achieve the highest efficiency. I hope this article has provided useful insights into ERP systems for you and your business, and that you can consider other options that add to the ERP values.