Mid-size companies need ERP now more than ever
The turbulent economic winds of the past two years forced many companies to tighten their belts and look for lower-cost labor and materials. That often meant going offshore or near shore. Gone are the days when only large, multi-billion dollar companies were globally distributed. Mid-size companies are adopting that model as well, with the average number of operating locations growing by 39 per...
The turbulent economic winds of the past two years forced many companies to tighten their belts and look for lower-cost labor and materials. That often meant going offshore or near shore. Gone are the days when only large, multi-billion dollar companies were globally distributed.
Mid-size companies are adopting that model as well, with the average number of operating locations growing by 39 percent from 4 in 2008 to 5.6 in 2009. That means the days of "simple" when a COO could walk the halls or the plant and feel the pulse of the business are also a thing of the past.
It's hard to believe today that anyone would try to run a business without the proper tools, but apparently that's still more common than you might imagine.
By the time you reach $50 million in annual sales (the threshold Aberdeen uses for "mid-size") I would categorize ERP as one of those "proper tools."
The Aberdeen Report, The State of the Market Mid-Year Insights 2009, found 31 percent of mid-size companies have yet to invest in ERP.
That's a lot of companies operating without the proper tools.
But before commenting on that, let me first define what I mean by ERP. Over the years, the term has become a bit confusing. For years I thought of ERP quite parochially and applicable primarily to manufacturers. Once upon a time there was Material Requirements Planning (MRP), which then expanded to Manufacturing Resource Planning (MRP II) and finally Enterprise Resource Planning (ERP). So the purist would argue that if an ERP solution doesn't have MRP, it isn't ERP.
A few years back I was one of those purists. But then all these solutions began emerging that didn't have MRP, that might not even be targeting manufacturers and yet their purpose was to manage the resources in the enterprise.
So I revised my definition of ERP—and here's what I came up with. ERP is a set of integrated modules that forms the operational and transactional system of record for a business—any business. Not just a manufacturing company.
Some other definitions I have seen set the bar a little lower. I've heard ERP defined as any collection of three or more modules. Well, I'm not buying that definition. That would mean you could combine sales-force automation with contact management and marketing-campaign management and call it ERP. But I call that CRM and while CRM might form the system of record for customer contact, it's not the system of record for an entire business.
So there you have it. Faced with increasing complexity, top-performing mid-size companies look to ERP solutions to add value by standardizing, streamlining, and automating business processes while providing the visibility needed to make well-informed decisions quickly and efficiently. In the quest to reduce costs while maintaining profitability and customer satisfaction, mid-size companies must maximize and standardize their ERP implementations.
They must do this in order to take advantage of features and functions—and supporting technologies—that improve visibility and transparency of all processes throughout the enterprise. This is the only way to ensure a company's ability to respond properly to changing customer demands and market conditions as environments become increasingly distributed.
Cindy Jutras oversees research and client development related to manufacturing at Boston-based AberdeenGroup, and has more than 30 years worth of ERP and supply chain-related experience. Cindy, a former director for a prominent enterprise vendor, has authored numerous white papers as well as a book titled, ERP Optimization.