Best ERP Software
What is ERP? Enterprise resource planning (ERP) is a term used to describe an end-to-end business solution that connects a variety of departments inside a company. For standard ERP offerings, these branches may include accounting, supply chain, project portfolio management, manufacturing, and human resources, among others. The tools that fall under the ERP category provide greater efficiency for professionals in accounting and finance, enterprise asset management, professional services, and project management. While aimed at enterprise-sized businesses, these products may be utilized by small and mid-market companies with high production output. Every ERP subcategory is listed below, however some crucial ERP software categories include:
Professional Service Automation
Professional service automation (PSA) software improves the processes of professional service companies by offering insights into project information and resource allocation. These products allow managers to assign projects to available resources, track the progress of projects, record time and expenses for each project, and even send invoices to clients directly from the software. By recording project financials, PSA software allows for improved forecasting of budget and resources for future products. This helps with consulting, advertising, or any other client-facing professional service company that works in a project-driven manner.
ERP systems and suites are complex and expansive software suites that touch all aspects of product-based businesses. The core application of these products is accounting modules. However, they provide functionality for budgeting and forecasting, inventory and warehouse management, manufacturing, and distribution, among others. By having all of these departments working in one centralized system, ERP suites facilitate a more transparent business. They also provide financial management professionals with observations and direct insights into how supply chain factors impact profitability.
Project-based ERP systems provide the same transparency as standard ERP offerings do, but they are specifically aimed at companies that use a project-driven business model as opposed to product-driven. These solutions offer project accounting, in a similar vein as professional service automation software, but for industries outside of professional services. Companies that use a project-based business model should not attempt to implement a standard ERP suite, which can cause a great deal of complications, and become expensive and inefficient very quickly.
Enterprise asset management (EAM) products help track the physical assets controlled by a company. These solutions help track the lifecycle of the assets to ensure that they do not become dated or inefficient. Recording the productivity of assets can help with potential maintenance of repairs, and even offer predictive maintenance solutions that will ultimately help with profitability. These systems offer businesses a large quantity of data, which can be analyzed to determine when the maintenance or replacement of assets is required.
Each of these software products offer aspects of enterprise resource planning and improve the transparency of business processes. They reach across internal departments and industries to help improve efficiency and productivity. Each of the following software categories fall under this general concept.
Procurement Software
Procurement software helps organizations automate their purchasing efforts. With procurement software, businesses are able to handle most procurement-related activities online, including raising and approving purchase orders, selecting and ordering products, receiving and matching orders and invoices, and making payments. Procurement departments are also able to use procurement products to coordinate order shipments for optimal capacity, or to engage with suppliers bidding for business. The primary benefits provided by procurement software are the reduction in time and effort spent managing purchases, increased coordination with vendors, and the ability to leverage economies of scale.
Procurement software should not be confused with software in the Warehouse Management category or Purchasing category, despite some overlap in functionalities between these categories.
Buying Considerations for Procurement Software
- Before you choose a procurement software product, you should make sure that the features you require are beyond those offered by purchasing software products. While many people use the terms procurement and purchasing interchangeably, these two software categories are in fact quite different despite sharing some characteristics. For context, the steps of the procure-to-pay (P2P) cycle are as follows:
- Identification of Requirement
- Authorization of Purchase Request
- Approval of Purchase Request
- Procurement
- Identification of Suppliers
- Inquiries/Receipt of the Quotation
- Negotiation
- Selection of the Vendor
- Purchase Order Acknowledgement
- Advance Shipment Notice
- Goods Receipt
- Invoice Recording
- 3-Way Match
- Payment to Supplier
- While procurement software is designed to cover all of the steps of the procure-to-pay cycle (P2P), purchasing software is limited to a specific subset of steps that span the purchase order acknowledgement to the receipt of goods and finally to the payment to supplier. While these steps of the P2P cycle are important, they are usually not tailored to suit the scope and size of individual businesses, and are instead routine and fundamental to good purchasing practice.
- Procurement software vs. purchasing software: Procurement software includes these steps as well as those associated with sourcing and the initial identification of requirements as well as potential suppliers. Negotiation with suppliers and the strategic sourcing of goods and services are also managed within the umbrella of procurement software, whereas they are not typically handled by purchasing software.
- Ease of sourcing with the procurement product: Procurement software products should be able to properly facilitate the sourcing process within the P2P cycle, such that market analyses, RFx, and communications, negotiations, and contracting with suppliers are all handled within the software. Furthermore, procurement software should provide easy to use macro views of the sourcing process, so that future efforts can be streamlined or adapted to changing environments.
- Does the product integrate with your existing systems?: When choosing a procurement software product, it is important to be aware of available integrations with your existing systems. If your business already uses and is happy with a purchasing software tool, a CPQ software product, or a supply chain suite, for example, you may want to maintain those systems if possible while investing in procurement software as opposed to replacing them in their entirety.
- Is the software easily scalable?: As your business and its procurement needs grow, you should be confident that the procurement software you choose will be able to scale with them. Whichever procurement tool you pick should be customizable in order to adjust to your changing circumstances and needs over time. Additionally, you should check to see whether the customizations that you’ll need are included in the software’s cost or if it requires an additional charge. If customization is not offered, you may want to look at another procurement software option in order to ensure that the product is scalable with your business.
- How are software updates managed and how strong is customer support?: Last but not least, you should consider the regularity and ease of software updates. The nature with which the procurement vendor notifies customers is important, as you do not want to be surprised one morning with a notice that due to issues with an automatic software update you might be unable to use the software for its regular functions. Furthermore, the cost of and frequency of these software updates is relevant to your decision, as is the quality of vendor support should issues arise as a result from these updates.
Key Benefits of Procurement Software
We have discussed how procurement software can help you streamline the sourcing and purchasing functions of the procure-to-pay cycle, but a successful procurement tool can directly benefit your company in other ways as well.With procurement software, you can:
- Reduce costs by leveraging supplier relationships to improve performance
- Ensure contract compliance with centralized transaction tracking
- Improve procurement staff efficiency by automating order processing
- Simplify communications and negotiations with suppliers
- Reduce rework and errors with a fully integrated procurement system
- Improve spending controls with standardized approval processes
