Enterprise Resource Planning (ERP) software products have become increasingly popular among businesses. According to ERP Market Statistics, 50% of companies plan to acquire or update ERP systems, and the total ERP market size is expected to exceed $49.5 billion by 2025 (Biel, 2021). In this regard, it is important to understand the benefits provided by the ERPs, recognize potential challenges in their implementation, and review a real-life case of ERP application.
Understanding ERP
ERP can be defined as a complex software product that integrates the day-to-day operations of an organization into a cohesive digital environment. As a result, several business platforms, such as supply chain, customer relationship, and financial management, can be accessed via a single portal (Biel, 2021). In this regard, the ERP system facilitates communication between various divisions within the organization and facilitates access to valuable information. In theory, a shared database created by the ERP directly enhances performance since line employees and key decision-makers can communicate more efficiently and receive prompt informational support.
From a practical perspective, ERP systems offer several lucrative benefits to enterprises. Most importantly, the ERPs can assist in revamping the suboptimal manufacturing chains, making them simpler and more efficient. For instance, Carlton (2021) provides an example of Cadbury, a large confectioner owned by Modelez International. Cadbury faced issues with meeting its production and distribution requirements. However, the SAP-implemented ERP allowed the company to completely revamp the existing warehouse system and distribution processes (Carlton, 2021). Therefore, a well-performing ERP has the potential to optimize performance across the manufacturing and distribution chains.
In addition, ERP saves valuable time by improving communication across the company. According to Biel (2021), businesses that use ERPs listed reduced process time, increased collaboration, and data centralization as the top three benefits gained from their systems. The probability of miscommunication and subsequent errors on employees’ part becomes lower since ERP integrates all information into a comprehensive digital space. Due to the ERP assistance, the representatives of different departments within a company gain quick access to clear and accurate data. As a result, the company experiences an overall improvement in coordination across its divisions.
ERP: Pros and Cons
The increasing popularity of ERPs logically stems from potential benefits, such as improved performance and communication across the company. However, one should realize that ERP is a complex software product that requires precision in implementation and use. In addition, even the perfectly implemented ERP may disappoint its owner if the platform choice is wrong. Given these considerations, it is necessary to provide a short overview of the pros and cons associated with ERP implementation.
Regarding the ERP pros, professional industry reports frequently mention the improvement of various business processes. For instance, 49% of companies that implemented ERPs noticed an improvement in all business processes (Biel, 2021). ERPs were also found beneficial for Return on Investment (ROI) in certain areas. In particular, 40% of respondents mentioned a reduction in IT costs, 38% experienced a reduction in inventory levels, and 33% reduced cycle time (Biel, 2021). Carlton (2021) offers an example of Nestle SA, a candy-making giant that enhanced accounting and communications throughout its supply chain by integrating SAP ERP. Overall, a correctly selected and implemented ERP can be considered a versatile solution capable of improving performance in various areas.
The cons of ERP are primarily associated with two factors — wrong system and vendor selection and incorrect implementation. Most problems occur at the launch stage, as 51% of companies experience operational disruption (Biel, 2021). In addition, mistakes in selection and implementation may lead to overspending — 65% of new ERP users went over the budget as they had to spend extra funds to improve usability (Biel, 2021). In this regard, communication with the vendor is crucial since software companies often insist on self-serving terms and conditions (Dilling, 2022). As such, most ERPs’ cons can be attributed to users’ mistakes and vendors’ greed rather than to poor software quality.
Company Application; The Case of Bortoli Wines
Winemaking can be a challenging business for ERP implementation due to the specific mindset of the industry. Whereas companies that make wine technically “manufacture” the product from raw material, their owners do not think of themselves as manufacturers (Dombroski, 2020). As a result, winemakers set high demands for their ERPs since wineries have to manage various agricultural issues in addition to the standard accounting and distribution. In particular, ingredient attribute visibility and cost control require specific attention from winemaking-tailored ERP (Dombroski, 2020). Mistakes in such critical aspects as vineyard management, grape contracting, and winemaking may result in subpar wine quality, reputational damage, and financial losses.
Given these circumstances, an ERP system suitable for application in winery must integrate three aspects of wine production into a comprehensive framework. De Bortoli Wines, one of the largest family-owned wineries in Australia, partnered with QAD to satisfy the industry’s strict standards. According to Poulton (2019), De Bortoli Wines implemented QAD ERP in order to improve product quality through compliance and traceability. The complex supply chain set by the company required a flexible solution for tracing the winemaking process from grape to customers’ glass.
With the assistance of QAD ERP, De Bortoli Wines managed to incorporate just-in-time scheduling into all steps of winemaking. According to QAD (2019), just-in-time scheduling ensures quality, compliance with standards, and optimization. All crucial aspects of winemaking become interconnected via the ERP. For example, just-in-time scheduling of grapes optimizes deliveries for De Bortoli’s growers and improves the quality of raw material. Keeping the spray diaries, or the data on the application of agrochemicals, online ensures compliance with the standards and optimizes the spraying process. Finally, the traceability of blends assists with achieving and maintaining the necessary product quality (QAD, 2019). Overall, one can conclude that the successful implementation of the ERP system provided De Bortoli Wines with a competitive advantage directly connected to the vital aspects of winemaking.
Conclusion
ERP systems serve as a versatile tool for improving various business aspects, such as coordination, accounting, and supply chain efficiency. However, a company that installs an ERP must be aware that incorrect vendor and system selection may hinder the implementation process and cause additional costs. In this regard, De Bortoli Wines is an example of success since the winery and its ERP vendor maximized the system’s effectiveness and improved aspects vital for the winemaking industry.
References
Biel, J. (2021). 60 critical ERP statistics: 2021 market trends, data and analysis. Oracle NetSuite. Web.
Carlton, R. (2021). Four ERP implementation case studies you can learn from. ERP Focus. Web.
Dombroski, S. (2020). Wineries need an ERP that provides “stem to stem” visibility in today’s market. VinRoutes. Web.
Poulton, K. (2019). De Bortoli Wines improves grape to glass traceability with QAD. QAD. Web.
QAD. (2019). Customer case study: De Bortoli Wines. Web.