unstruct.org My unstructured thoughts and rants

27Sep/120

Does Your Small Business Need an ERP?

Since the early 90s, most large companies have made the choice to implement an Enterprise Resource Planning (ERP) system.  In short, the purpose of an ERP is to link together the data from the various functions of the company so that they can be leveraged to the company's advantage.  For example, if the sales team has real time access to inventory levels, they can make real-time decisions about which products to push harder.  The advent of web based ERP, with it's lower cost and simpler implementation, has pushed adoption further, with many mid-sized businesses now reaping the same benefits as the big boys.   This raises of the question of whether an ERP might have benefits for a truly small business.

While our initial answer is yes, there are some caveats.   The decision as to whether a small business needs an ERP, and which ERP would work well for them is going to be very dependent on their business needs.   In the big company space, products have matured to the point where there are obvious choices for different business types like manufacturing, service, and so forth.   In the smaller space, the choices are less mature, and more granular, and so making the right choice is paramount.

For example, a small company that does most of it's business via e-commerce would likely get the biggest benefit from tying together their shopping cart with a crm feature, and potentially order management.   They could move to a fully ERP type solution, such as that offered by NetSuite, or they may decide that the pain of migrating their existing systems makes an integration of their existing shopping cart with dedicated order management and CRM an easier path.

Similarly, a small retailer may have the most gain in getting their sales, inventory, and financials integrated.  They would have to weigh the costs and duration of an ERP migration against the potentially high costs of their current manual reconciliation, or a custom integration of their current systems.   The ERP route will, of course, have soft benefits that other solutions may not offer, like the ability to integrate other systems like payroll into the fold.

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