An Enterprise Resource Planning (ERP) software is a comprehensive platform that integrates various business processes in an organisation into a one central platform.
ERPs’ allow integration across several and different business processes of an organisation such as: sales, finance, purchasing, supply chain, customer service, human resources, marketing, inventory management, sales and operations planning, plant maintenance management etc.
Through the integration provided, the impact of business process activities in one part of the organisation is immediately reflected in the other, for example, when a company sells 5 phones from their warehouse, a number of things happen immediately within an ERP system
a) the warehouse stock is reduced by 5 phones,
b) the total value of assets in the warehouse is reduced by the value of the 5 phones,
c) 5 phones are recorded in the sales register,
d) an invoice is created, which automatically creates a receivable record in Finance awaiting payment receipt,
e) when payment is made, a receipt is issues which closes the sales transaction as finally completed). Other processes such as credit matching, bank reconciliation, and many more, also take place afterwards.
ERP systems, therefore, enable businesses streamline their operations, improve efficiency, and enhance collaboration across departments.
SAP ECC or SAP S/4 Hana software, is a very good example of an ERP system with a very strong global reputation for it’s robustness, flexibility, and versatility.
SAP is a recognized global leader in the ERP space, and offers a suite of modules and features that help businesses manage a very wide range of important business processes, while providing a real-time view of business operations and enabling data-driven decisions.
However, despite these immense benefits, businesses often grapple with unforeseen challenges during SAP implementation.
SAP is also often perceived as expensive, complex and lengthy duration to implement, and in some cases, organisations don’t realise value from their investments, making it dicey for executives to decide if SAP is the right ERP solution for their business or not.
Here are some key considerations executives must factor in, while trying to make this critical decision:
Your Vision and the Current Business Problems You are Trying to Solve – Are you trying to solve basic business problems such as being able to account financially for your business operations, or solving critical business control problems, or your business has expanded to the point where it has become difficult to manage multiple moving parts?
If you are just trying to solve simple business problems, such as financial accounting only, or enforcing some basic business controls, SAP may be an overkill in this case! If your business has however expanded and you are dealing with multiple moving parts that are becoming more and more difficult to control, then SAP is a good candidate to consider for the long haul.
Size of your Organisation – Do you have a multi country and / or multi geographical business structure, where the business is subject to varying legal and statutory requirements in the different jurisdictions you are operating (For example, some countries may require different Financial Reporting Structures / Standards different from the Company’s home country)? In addition, do you have a complex WM structure? If any of these questions are “YES” for your situation, then SAP may be a strong candidate to consider.
No of Active Business Process Areas – Aside from Finance Management, does your business actively operate across several business process areas such as Procurement, Warehouse / Inventory Management, Product Costing, Sales, Asset Maintenance, Projects, Transport Management, Production Planning, Customer Service, Human Resource Management etc where a significant part of your OPEX / CAPEX budget is spent? If this is a “strong YES” for your situation, then is well worth considering, otherwise, you may be good with an alternative ERP solution.
Complexity of sub business process break down and sub business process variants – Do your business processes break down into multiple subprocesses, and do those sub processes further break down into multiple variants, for example, in Procurement, do you have sub processes such as Procurement of raw materials, Procurement of Consumables, Procurement of Services, Procurement of spare parts, Procurement of chemicals and hazardous materials etc., and do you have further sub process variants such as Procurement of Raw Materials locally, Procurement of Raw Materials via Importation, Internal Procurement of Raw Materials, 3rd party procurement of raw materials and more? If this is a YES for your situation, then you should definitely be thinking SAP as it gives you much more flexibility.
Type of operations performed at your organizational locations (e.g. Factory, Warehouse etc.) – Does your business operation involve sub contracting or contract manufacturing? Are you big on Service Procurement? Do you use 3rd Party Distribution Logistics parties (3PL) in your supply chain process? Do you use or require automation such as RFID etc.?
Do you run short, but costly and / or multi year Projects? Do you integrate Transport Management you’re your Sales and Procurement operations?
Do you need to manage international procurement and shipping and desire to track the associated customs and regulatory compliance requirements?
Do you have a dynamic credit management system where the credit rules differ depending on the type of customer?
If most of these questions are YES for your situation, then SAP is simply the way to go. SAP simply provides strong functionalities and integration across these areas!
Product Costing – Do you have multiple inputs that go into your product costing, and do you require a granular view of your cost breakdown per product you sell such as cost of power, cost of labour, cost of maintenance to understand how the cost rolls up? If this is a strong YES, then SAP is simply the way to go!
Conclusion
In general, If you’re a large organization with significant complexity, then SAP ERP would be a good fit as it provides more flexibility with standard business processes you can already adopt and just simply configure to your own specific needs.
However, if you’re a smaller organization with no immediate plans significant growth plans, then SAP ERP will not be the way to go. In this case others such as SAGE, MS Dynamics etc may be considered.
*Olubunmi Abegunde is the CEO of Thamani Consulting
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