By Lou Washington

In my real job I work with our sales and marketing folks in our enterprise system group. We’ve been selling software for as long as anyone on the planet and after nearly 40 years of selling ERP software, you might be wondering why I would be asking this question at all.

I assure you, I am quite serious about this question. Enterprise Resource Planning (ERP) is an umbrella term covering a wide variety of software solutions that facilitate the management of a given enterprise. As the words imply, the idea is that resources must be carefully managed to maximize the efficient and profitable use of those resources to achieve the goals of the enterprise.

There was a time when there were maybe 20 vendors in total selling ERP solutions. These companies addressed a market that was made up of 1) giant multi-billion dollar companies with worldwide coverage, 2) medium size companies that were less than a billion dollars in sales but more than 100 million and 3) the rest of the companies making up the lower end of the market with sales under the 100 million dollar threshold.

These companies typically had one thing in common, they made things. They were manufacturers. They maintained plants that transformed raw material or parts into products.

Each year, corporate planners would ask (or tell) the sales group what they were going to sell during the coming year and how much of it they would sell. The answers to these questions drove the purchasing decisions as far as what the company would need to buy in order to fulfill the orders planned by sales.

ERP systems developed to facilitate the efficient management of this deceptively simple process. The systems reinforced the decision-making processes associated with purchasing supplies, scheduling delivery of supplies, production scheduling, staffing and finished goods delivery scheduling. That is essentially how I see ERP in my manufacturing centric view.

ERP beyond Manufacturing

What about other types of businesses? What about retailers, wholesale or distribution businesses? How about services like accounting firms, maintenance providers, transportation services or insurance companies? The more I read about these businesses the more I would see references to their use of ERP. Even churches and governments seem to be in this arena.

Luckily, LinkedIn has a large collection of member communities associated with various aspects of ERP. I find that posing a question in the right LinkedIn Group will usually result in a series of responses and counter responses that offer great insight into how others see things.

So, I put some of my questions to my online friends in one of the LinkedIn ERP groups.

As I suspected, there really is no hard definition of ERP. It means different things to different people. While many of the responses were manufacturing centric, a large number were not. People had no trouble expounding on the benefits of ERP in a pure distribution environment. Services oriented advocates were just as convincing.

But this has negative implications for marketing folks. We spend huge amounts of time trying to establish the identity of our buyers. We look at the market in terms of who influences buying decisions, who chooses and who uses our products. We agonize over the types of businesses, what vertical markets they address, what types of products they make or sell.

When you market a product that “does everything for everybody” it may be a sales persons dream, but, it’s a marketing nightmare.  You can’t focus your message, you can’t isolate a specific group and establish their pain points to address with your strengths and you can’t afford to talk to everybody. Believe me, it’s a challenge.

What you used to be is Important

One of the folks I talked to put me onto a great concept. The vast majority of ERP systems on the market today, started out as something else.

The original product may have been a set of financial reporting tools, perhaps a warehouse management system or a system for handling human resources. Vendors love to build up product features. How many times have you bought something because it “now includes . . . .” whatever?

As the enterprises became more complex, more geographically wide-spread, more diverse in products offered, they drove their suppliers to add functionality to help take them wherever it was they wanted to go. Software vendors responded by pushing out their comfort zones and adding functionality which in turn expanded their own market reach.

Now, here we are with literally hundreds, if not thousands, of software products under the very diverse and increasingly generic ERP banner.

Most of these products were not built from scratch. What was finance/accounting software is now an ERP system. What was a human resources system is now ERP. A product that was formerly used to control inventory in a warehouse setting as evolved into ERP.

Oddly, many of these systems are rather weak in the traditional home of ERP; manufacturing. ERP was born of MRP or Manufacturing Requirements Planning. Software that scheduled production runs, supply of work stations and handled the acquisition of parts and raw material.

So the main message of this piece is to be careful if you are evaluating ERP systems, give strong consideration to what that system evolved from.  Be cognizant of what you really need. In some cases you may not need full-blown ERP, you may need accounting software.

But, if you are a manufacturer and you are looking for real ERP, make sure that is where your vendor came from. Make sure your buying a manufacturing centric system.