Does an ERP still have its place in modern business?


How often have you heard people talk ERP and thought that’s great but it’s not very exciting or interesting?

You aren’t alone. When you think digital transformation is ERP what you think about? Or are you thinking about the moving to the cloud or Agile/DevOps etc?

Ok, so let’s assume you do think about ERP. Like me you’re probably thinking don’t most companies already have an ERP system? And if they didn’t already It can’t be that important?

Last year implementing ERP was the number one tech change operating partners made. Number two on the list was introducing a ServiceNow type platform.

There are some obvious benefits for doing this. Integrating applications into one place. Integrating the management of all business processes. Giving business leaders a real-time view of core business processes. 

With this predicted to continue into 2021 does that make 2021 the year of the ERP? 

To find out more on this topic and cut through the noise I sat down with two ERP experts, Gorilla ERP MD, Dean Harrison and Alisdair Bach, One Eighty Advisory.

Why should I be interested in ERP?

ERP systems integrate the management of all business processes, affording managers a real-time view of core business processes. Essentially, an ERP system unifies the whole business into one software platform.

Harrison said ‘Most organisations that are of a certain size, need to have a series of processes and actions that are across the business, streamlined, automated, where possible and integrated into the business. It’s really taken hold in the last probably I’d say 20 years that is the evolution of the ERP’.

Take the case of an automobile manufacturing plant. “I could break down a car, it’s got 200,00 pieces in it,” Bach said. With SAP ERP, “I can see that point in time where every piece of that car came from. I can see the quality stamp, the warranty stamp, inventory, even the revenue and cost associated with that car.”

“That’s what the ERP gives you,” he said, “total oversight over your enterprise.”

Leading ERP systems like SAP ERP make extensive use of artificial intelligence and machine learning technology. This enables even vast and complex organisations to streamline their operations, removing the need for human input on many levels.

Why is it important?

Harrison said ‘You’ve got to remember as well, that as ERP has grown so has data aspect of business. So before ERP, what might have happened is finance would talk separately to sales and separately to HR, and they talk separately to ordering or manufacturing. What you quite often had is the same business talking a different language to each other, giving different information.’ This underpins the need to create that integration between the different divisions across the business, so as a central hub effectively.

‘For example, SAP consider a small Tier Business, anything below £1billion in revenue’

Most of the ERP systems are on the top tier. This is the other important thing that as it’s a bit like football teams, you’ve got different tiers of the ERP.

So for example, you’ve got the mid-level tier that would suit a smaller organisation, it isn’t as complex isn’t or international and maybe doesn’t have as many processes. Harrison said ‘you’d probably look to Microsoft Dynamics if you were a mid-level organisation, although Dynamics itself is becoming more top tier. Unless you’re a Goliath and a Top Tier Business, some of the other ERP platforms in particular Microsoft Dynamics, will fulfil your needs

Today your top tier is really SAP and Oracle.

The shift from industry 3.0 to 4.0

This is the essence of “Industry 4.0,” thought leaders’ moniker for the fourth phase of the Industrial Revolution. Whereas digitisation was the hallmark technology of Industry 3.0, automation is the pole technology of Industry 4.0.

“The change from 3.0 to 4.0 is probably the biggest change since the start of industrialisation and Industry 4.0 is a significant change in relation to ERP” said Harrison.

As an example of Industry 4.0, Bach cites the Coca Cola bottling plant in Kent.

“If you go in there and have a look,” Bach said, “there’s a warehouse there that is brand new, fully automated. No one works there. Full AI. They didn’t need many people at all to keep it going. Because it’s so fully automated.”

This is a valuable asset in times of a pandemic, of course. “You don’t need many people, you’ve got full social distancing. All the leadership and management are working from home on laptops, fully connected, fully intelligent … no one even notices it. No disruption at all.”

Bach even credits Industry 4.0 for sparing us from a new Dark Age during the COVID-19 lockdowns.

“If it had been ten years ago, and we were still in Industry 3.0, it would have been a Shaun of the Dead-style apocalypse,” Bach chuckled. “You get this situation where most of the Fortune 1000 is working on autopilot, supply chains on autopilot.”

This is the crux of the matter—unable to invest in ERP, 90% of the UK economy is shut out of this new industrial revolution. They are stuck in old, inefficient modes of doing business, which require way too much human input.

Bach finds this frustrating, especially considering his mentorship of startups who adopt ERP systems early and prosper as a result. 

“‘Digital’ is a legacy concept,” he said. “Anybody who’s anybody doesn’t talk about digital. We’ve been on digital for 30 years. Who cares, right?”

“You go abroad, go to America, go to Europe,” he continued. “They’ll talk about Industry 4.0 and it’s all about machine learning. And the UK problem is we don’t have many big companies. Most companies are small. There’s nothing in the middle.”

Harrsion thinks 4.0 changes the game when it comes to services businesses.

For example, if you’ve got a services business, look at Serco for example. Serco are a huge, huge adopter of SAP. They’ve got it across the whole business. They’ve not got a physical project product as such, so how and why do they use SAP? Well, it manages their accounts, it used for workforce management, they use it to manage HR aspects to their employees.

The ERP is the Company

Failing to adopt ERP systems doesn’t just reduce efficiency. It also prevents companies from being players on an international scale.

VCs prefer to buy and sell companies that have invested in ERP because it makes them easier to carve out.

Consider Unilever and the recent divestiture of their margarine and cooking oil interests, which went on to form the new company Upfield.

“[Unilever] physically removed the [Upfield] ERP and stuck it on an Amazon cloud,” Bach noted. “When they divest the organisation, they divest the ERP.”

“The reason they want to divest the ERP is because the ERP system is the living and breathing image of the organisation. Enterprise architecture is the framework that sits around it.”

The service-oriented economic base of UK SMBs will need help them access resources like ERP systems for the first time, streamlining operations and giving them a boost.

Harrison and Bach both refer to ERP as the digital core of a business. Harrison goes on to say ‘ this is how business can support all key business functions, and without this core businesses will struggle to compete on a global scale.

Summary

Automation, machine learning and AI are here to stay. Is your business ready for the revolution?

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