ERP Selection in the Context of the Covid-19 Crisis: What SMEs Should Consider
The ongoing Covid-19 crisis poses major challenges for numerous medium-sized companies. Just a few examples are disruptions in supply chains, slumps in sales, new legal requirements, and staff shortages. Anyone who relies on a modern and flexible ERP system in these times has clear advantages. Those who are researching a new ERP selection can draw some important conclusions from the current circumstances. Covid-19 shows us very clearly which ERP selection criteria should have priority.
ERP and the Covid-19 Crisis: What We Learned
SMEs have been in a state of emergency since March 2020. In some cases, companies have had to learn how fragile markets and international supply chains are. The crisis also revealed organizational deficiencies and weaknesses in the IT landscape. Rigid, poorly defined manual processes have been a massive problem. At the executive and managerial level, difficulties also arise due to a lack of transparency. The cause is often the timeliness and accuracy of data from distributed systems.
The rapid pace with which the crisis led to changes was particularly problematic. Among other things, the following scenarios occurred almost overnight:
- Strong fluctuations in demand
- Delivery bottlenecks, failure of suppliers
- Internal capacity bottlenecks (also due to new quarantine and hygiene rules)
- Change in legal framework (e.g. temporary reduction in sales tax)
- Sudden need to work digitally
Anyone who is undertaking an ERP selection can draw very interesting conclusions from what has occurred. Read on for more detail which ERP selection criteria come into focus due to the crisis.
Fluctuations in Demand: Reliable Data and Flexible Production Planning are Required
Certain fluctuations in demand are part of normal operation - but the extreme fluctuations due to the Covid-19 pandemic are not. Many companies recorded a significant decline in demand, while others booked additional large orders. Fluctuations of this kind are problematic in several respects. First of all, they require production to be adjusted at short notice. Adjustments to stocks and changes to replenishment deliveries are required to match this. So every decision has a step-by-step effect on the entire supply chain and also on liquidity. It is therefore necessary to plan accordingly.
In order to make the right decision under these difficult circumstances, important key data such as open orders, forecast order volume, stocks and delivery capacity of the upstream suppliers should be available in real time, if possible. It is just as important that the current state of production is transparent at all times and that short-term changes can be implemented.
This leads to several conclusions for the ERP selection. First of all, the software should provide all relevant data from the areas of order management, production, warehouse, and purchasing. Forecasting orders can also be helpful. In the best case scenario, the system also includes functions for production planning and control. This allows the effects of short-term adjustments to be simulated, which enables better decisions to be made. Last but not least, function modules for supply chain management (SCM) are helpful. In this context, it is ideal if all partners along the supply chain can be digitally networked.
Delivery Bottlenecks: ERP-Based Supplier Management and SRM in Focus
Covid-19 has also brought new insights into the supply chain. In particular, it became clear that regional proximity to suppliers pays off in times of crisis. It was also shown how great the risks of a single-sourcing strategy are. Many companies will adapt their purchasing strategy in the future based on this knowledge.
For an upcoming ERP implementation, this means that the following functions should be included:
- Support of multi-supplier strategies
- SRM functions (Supplier Relationship Management) to assess the current situation of important suppliers
- Evaluations, key figures and (BI) reports on purchasing-relevant data such as supplier risks, ability to deliver and delivery reliability
Capacity Bottlenecks: ERP Should Support Detailed Planning
In addition to the challenges of costs and a thin staffing level, the pandemic added additional challenges in production. In many places, production is only carried out with a reduced workforce. In addition, strict hygiene and distance rules must be observed. This requires careful consideration of the limited capacities.
The list of ERP selection criteria should therefore contain detailed planning or an APS (Advanced Planning and Scheduling) component. Corresponding tools support production planners with analyzes, visualizations, and simulations in making the right decisions even in challenging situations.
Change in Legal Framework: Flexibility as an Important ERP Selection Criterion
Another effect of major crises such as the pandemic is short-term government intervention. One example is the reduction in sales tax to support the economy. For an upcoming ERP implementation, it follows that potential systems should be easily adaptable to changes of this type. Challenges like change in the tax code, adjust invoice layout, reconfigure tax determination, change cash register systems, create new balance sheet accounts if necessary. These are just a few items on the to-do list in the event of tax changes. High-performance ERP providers usually support their customers with updates and instructions.
Necessity of Digital Work: ERP as a Covid-19 Crisis Tool
Flexible, location-independent work has so far been seen as a luxury or a vision of the future in many companies.
In the course of the pandemic crisis, however, the “new world of work” suddenly became the only way to keep businesses running. Digitized work processes and mobile accessible systems have proven to be a necessity.
In general, it can be assumed that digitization and the flexible workforce will be given an enormous boost by the crisis. The following must be applied to ERP selection - The new software should enabled regardless of location and device. The availability of mobile apps is also often an ERP selection must have. Last but not least, intuitive usability and clearly structured workflows are essential to ensure smooth collaboration between distributed teams.
ERP Implementation During the Crisis? ?
Overall, the Covid-19 crisis acts like a kind of catalyst for digitization and modernization projects that have been postponed up to now. And it once again proves the fact that ERP is the backbone of digitization. But when should companies initiate the introduction of ERP?
Perhaps now is the right time to start an ERP project. It is now clear which criteria ERP software must meet in order to make companies crisis-proof. There is currently an opportunity with the slowdown to begin the ERP selection as well as the digitization and optimization of processes. Concentrated, detailed training is also possible due to the reduced workload. Last but not least, companies that are now implementing a modern ERP solution are optimally prepared for the re-start and the digital future.
It is important to define all requirements in a structured manner as the ERP specification is compiled. The specifications should include the learning's from the pandemic. These considerations maximize the success of the upcoming ERP implementation.