8 ERP use cases to consider before buying an ERP system
Choosing the right ERP system requires considering a dizzying array of factors from company size to business goals. Here are eight common use cases that can simplify your research.
For organizations struggling with disparate data and systems, communication disconnects among departments, operational inefficiencies and time lags, buying an ERP system is a potential remedy.
Organizations look to ERP to solve any number of issues ranging from gaining visibility into inventory and supply chains to improving project management and compliance monitoring. ERP software is also seen as a powerful tool that helps companies make more informed decisions.
Beyond that, there are other factors to consider before starting the ERP product selection process. ERP software is extremely varied in features, deployment options and price, and usually provides businesses enormous flexibility. But that flexibility also makes the buying decision difficult.
Because there are so many different types of ERP systems, knowing a company's specific operational, IT and business goals is paramount before looking at the options.
If a company's initial goal is to start with one component of ERP, such as CRM or human capital management, and add other modules as it grows, it should pay close attention to each ERP product's expandability and scalability.
ERP use cases and systems are complex, and that complexity increases the risk for any implementation. For this reason, getting the right business partners or integrators to help with ERP implementation is as important as selecting the right system.
Here are eight common types of ERP use cases that can help with choosing ERP software.
1. Business automation
Let's say a small to midsize company wants to improve its business processes, eliminate the costs and data inconsistencies of multiple systems and improve operational efficiencies.
It might choose cloud-based ERP software, which enables it to replace its systems without having to invest in ERP hardware and software for its data center. Instead, the cloud vendor runs the ERP infrastructure, which the company effectively pays for in a monthly subscription.
With finance teams, sales reps and other business users all logging in to the same system and working with consistent, up-to-date data, the company can make quicker and better-informed decisions. What's more, the ERP investment can create a multiplier effect as better decision-making drives revenue growth, which can lead to expanded use of the ERP system, which in turn can enable more growth.
2. Industry-specific business processes
A company in a highly specialized industry -- for example, food and beverage -- will typically want ERP tailored to its specific business needs and pressures.
Having a specialized ERP system saves the company time in adapting the ERP to its business environment and provides the right infrastructure and workflows for running the business processes that are unique to its industry.
3. Corporate integration
A large enterprise that has an on-premises ERP system for its internal processes, typically at corporate headquarters and other domestic locations, might need a quick way to onboard global offices or newly acquired subsidiaries.
The best option is likely to be a two-tier ERP approach that combines a cloud-based version of the company's on-premises ERP system -- or compatible software from a different vendor -- with localization features for its facilities in different countries. The remote sites can get started more quickly on the cloud, giving the parent company time to integrate them into the on-premises ERP.
Over time, the company can decide whether to move its remote offices and subsidiaries over to its on-premises ERP or migrate corporate to the cloud version. Given today's strong bias toward the cloud, the latter choice is more likely.
4. Manufacturing
What if a manufacturer wants to integrate its production processes, improve efficiency, and get rid of the data discrepancies and licensing costs from using a different system for each function?
It will probably opt for an ERP system with strong material requirements planning features to solve typical MRP issues, such as buying and managing components and raw materials, as well as tracking orders. By also using the ERP's order management features, the company can begin processing orders all the way through manufacturing, distribution and delivery, ending with order fulfillment and payment.
Such a system can also help to automate such important functions as inventory management, materials purchasing and asset management.
The manufacturer could eventually expand the ERP to other areas, such as predictive maintenance, by using digital twin technology and IoT sensors to monitor equipment performance and ultimately reduce downtime.
5. Financial management and accounting
In another common scenario, a company that uses basic accounting software might be expanding globally and need to automate processes, such as currency conversion, that otherwise would have to be done manually. It might also want more visibility into its finances, timely reporting and remote access.
For its first ERP system, the company will likely choose an ERP system that can automatically convert different countries' currencies and integrate with the company's other systems for credit card processing and payroll, thereby producing further efficiencies. The company can then generate detailed and accurate reports from the ERP system and enable faster decision-making.
What's more, the tight financial integration goes a long way toward getting finance teams, business users and sales reps on the same page.
6. Service management
A professional services organization that wants better coordination of its finance, sales and operations teams and to reduce errors by ensuring that everyone is using the same data, will likely opt for a service-oriented ERP system.
The company will use the ERP to track service engagements and record activities, resource consumption and costs as they occur. The system can also alert field operations to new service requests based on who is nearby, reducing resource waste. Additionally, the new ERP system can support CRM processes and help employees address customer needs in a timely fashion.
7. BI and analytics
Let's say a medium-sized company wants to expand its existing ERP to have better analytics and improve operational efficiencies. To do that, it could simply add a business intelligence component to the ERP.
But what if it also wants to shorten its financial close cycles, improve accounting accuracy and take advantage of advanced financial modeling and risk assessment?
In that case, the business should buy an ERP product that has strong financial management capabilities, as well as AI, machine learning and predictive analytics to provide real-time insights for more informed decision-making. If the company sells products online, it can also use the analytics capabilities to improve customers' e-commerce experience.
8. E-commerce
It is also common for a company to upgrade its ERP system -- or buy its first ERP -- expressly to support selling online. Cloud ERP is almost always the chosen vehicle because the connectivity of the cloud is essential not just for running an e-commerce site, but for integrating the many suppliers and manufacturing sites involved in making and delivering products.
An e-commerce-centric cloud ERP system can handle most or all of the stages of an omnichannel strategy and support various delivery models, such as direct-to-consumer and retail. Some companies acquire the cloud-enabled capabilities by adding a cloud CRM module or e-commerce apps to an on-premises ERP they use for manufacturing, but all-cloud deployment models are becoming increasingly common as cloud ERP gets closer to functional parity with on-premises ERP.
These eight use cases involve not only the ERP functions and modules that a company needs, but the all-important question of whether to deploy the system on premises, strictly in the cloud or a hybrid of both. The deployment issues can't be disentangled from the functional questions, in part because they often affect the feature richness and usability of the ERP system.
Editor's note: This article was edited, reorganized and reformatted in 2024 to improve comprehension and readability.
Mary E. Shacklett is president of Transworld Data, a technology analytics, market research and consulting firm.
Christine Campbell and Tony Kontzer contributed to this report.
