Fighting against the global recession – ERP Way
We are facing one of the world’s worst economic crises. Everyone is struggling to find a safe haven for their money. The first reaction of the company to the economic downturn is usually to cut costs across the board.
Enterprise Resource Planning (ERP) is a business support package and many companies still consider it a necessary evil rather than an investment. Therefore, if the business is down, the need for ERP seems to have diminished and the first reaction is to drastically reduce ERP expenses.
But is cost reduction the only strategy to minimize the impact of the global recession, at a time when companies have already begun to consider ERP as a good investment and a driver of business growth?
The global economy has its own cycle. After each boom it also goes through a recession and after each recession it has to go back to the boom period.
Therefore, ERP managers should consider this business lean period as an opportunity to improve ERP and increase the rate of return on ERP investment in the long run. The economic cycle has to see bright days again. So, the sage is the one who uses the bearish phase to prepare for the bullish phase. Reducing costs without affecting ERP performance should be just one part of the strategy rather than the only strategy.
To survive in the global recession, ERP strategy can be broadly classified into 2 parts 1) Cost reduction without affecting ERP performance, 2) Utilizing lean economy period to increase ROI of ERP investment
Costs reduction:
ERP support: There are 3 forms of ERP support:
o Internal support
o On-site support by external resources
o Remote support delivered over the Internet
The best approach might be a combination of on-site support and remote support over the Internet, as 70-80% of issues can be resolved by remote support. The remaining issues can be resolved on site. Server Maintenance – Setting up and maintaining your own server can be very expensive, considering the various costs incurred for things like staff, electricity, air conditioning, space, etc. Outsourcing servers to a data center seems like a better option AMC and license cost – You can also renegotiate with the ERP vendor the license fee and AMC based on the most recent or forecasted counts
Using the Lean Business period:
Normally, the turnover is reduced in the recession period. With the business reduced, the availability of resources is easier. Due to the reduced workload, management can also focus on the “important but not urgent matters” that are normally ignored when business is in full swing.
Therefore, these resources, along with management attention, can be used in many ways to increase the rate of return on ERP investment and better prepare ERP for the next boom period.
Some of the suggested ways are:
ERP optimization: This lean period can be used to optimize ERP processes or introduce new processes based on present and future business requirements.
Data cleaning: This lean period can be used to eliminate data duplication and eliminate data inconsistencies.
End user training: Most end users might experience a certain amount of downtime. Therefore, this downtime can be used to improve your ERP skills. They can be trained for advanced ERP functionality. This training could pay off very well once business is back in full swing.
Supplier/customer training: Some of the ERP applications may also require training for external agencies such as vendors or customers. These external agencies can also be trained in this period.
Compilation check: In a running business and years of high profitability, companies do not pay attention to the areas of control and risk in the system. This may one day cause huge financial losses. We have many examples like the $7 billion fraud of Société Générale SA, one of the largest banks in Europe, by junior staff simply due to insufficient controls in the system.
Therefore, ERP administrators should also focus on the gaps/risk-prone areas in the system, such as excessive or inappropriate access of activities or fields, to avoid any unforeseen disasters.
Analysis of data: ERP managers must also analyze data generated over the past few years to uncover any data inconsistencies or fraud throughout the system.
Implementation of ERP or new applications for ERP: When there is no business in the market, you can get the best deal in all aspects. To survive in this period, providers give the best discount. In addition, due to the smaller number of projects, you can get the best resources that would otherwise be occupied in more lucrative foreign projects. Selection of ERP: When ERP is implemented in the company, it becomes the backbone of the company’s business. It can affect your business positively or negatively depending on the quality and suitability of the ERP for your business. However, companies select ERP as if they were buying any other product.
Each company has a unique business model. So, before selecting the ERP, the suitability of the ERP for the business should be analyzed. There are many ERP available in the market with very low cost at very high cost. Companies should conduct a cost-benefit analysis of the ERP based on the size of the company before finalizing the most suitable ERP.
There may be many other strategies to survive the recession period depending on the individual business. But the focus should not only revolve around cost reduction, it should also be seen as an opportunity to strengthen the muscles of the business to get the most out of it and achieve the fastest growth once the boom period returns.