Although we advise clients on it every day, ERP software isn’t a commonly known term outside of the IT and consulting industry. Understanding the basics of what ERP software is and how it works is something that we often take for granted as independent ERP consultants.
With this in mind, I set out to teach my kids a bit more about ERP systems and how they work. For this to work, I couldn’t focus on integration, applications, databases, machine learning, and other techno-speak. I had to make it simpler than that.
This video documents our adventure of visiting a big box retailer to better understand what ERP software is and how it works:
While filming this video, a number of things came to mind:
It can be difficult to simplify ERP software
I actually had a bit of trouble keeping the explanation of ERP software simple in a way that kids and other non-ERP experts can understand. In every day conversations with executives, project teams, and consultants, it’s easy to get caught up in debates around best of breed ERP systems, architecture, big data, and all the other innerworkings of
But at the end of the day, if we can’t explain our ERP software to a child, then what is the point of going through such a transformation? This should be a good reminder for us as we seek to establish and communicate a clear vision for the transformation to the masses.
ERP software automates businesses
In a nutshell, ERP software automates all (or most) of the functions in a business. It automates and systematizes things like order entry, inventory management, point of sale, warehouse management and other critical business functions. The intent is to consolidate business processes and data into a central repository. This may be accomplished via a single ERP system across the entire enterprise, or a number of different systems that are integrated.
Getting to this end state is more difficult than it sounds, even if you are deploying one of the top ERP systems in the market. It is also the topic of many other blogs and videos that you can find on the Third Stage website.
ERP systems touch everything in a business
As my kids and I walked through the retail store, it became clear (even to me) that ERP systems touch everything that a business does. From marketing automation to demand forecasting to plan-o-grams to financials and accounting, a good ERP system touches every nook and cranny of a business – or at least it should!
This is especially true for a complex and global supply chain. Orders, inventory, money, vendors, customers, and business intelligence can come from all over the world, so understanding and looking at the entire supply and value chain of a business is key to making ERP software work for your business.
The Amazon Effect
I intentionally didn’t prepare my kids for this video because I wanted to get their kneejerk reactions without giving them too much time to think. It was interesting to hear their thoughts on Amazon and how it affects retailers. Even children with no formal business training have a sense of how disruptive Amazon and eCommerce is to retailers. This is something we covered in a recent article about digital transformation in the retail industry.
Even outside the retail industry, customers are struggling with the Amazon effect. My older son even mentioned that “Amazon is a threat to everyone,” which is very true.
For example, we are working with a number of business to business manufacturing and distribution companies that are struggling to provide the same level of responsiveness and data analytical capabilities as Amazon, mainly because it’s just the way the world is heading now – not necessarily because Amazon is a direct competitor.
ERP software: forget the technology!
My kids have known what I do for a long time (or they at least sort of do), but it was interesting to hear their knee-jerk explanation of what it is my company and I do. They mentioned how we help make businesses better and more profitable, but they don’t view our work as being focused on technology.
This may seem ironic since we are indeed an ERP software consulting firm, but their basic instincts are true: first and foremost, we help businesses be better. It just so happens that technology is often part of the solution. Interestingly, it is not always part of the solution. Sometimes process improvements, people alignment, and better use of existing tools are what the doctor ordered – not a complete overhaul or implementation of new technology.
Summary: ERP software has not changed much in 20 years
As I was describing ERP software to my kids, I realized that it didn’t sound much different than I would have described it 20 years ago. OK, maybe the technology itself has changed: artificial intelligence, machine learning, internet of things, and other emerging technologies weren’t around then. But the core purpose of ERP software has not changed much. It is still about how to make your business more efficient and effective.
How ERP software is deployed – or should be deployed – has changed even less over 20 years. Companies struggle with the exact same things they did back when I started my career in the 1990s. This is both good news and bad news for organizations looking to embark on an ERP implementation or digital transformation.
Feel free to contact me if you are looking for help to make technology work better for your business. I am happy to be an independent and technology-agnostic sounding board as you begin or continue your transformation journey!