Whether you're already a global company or you plan to expand internationally in the future, you know that your business is only as efficient and effective as the systems you use to manage it. The further your business branches out to the various parts of the world, the more complex your end-to-end operations will become.
International businesses need an enterprise resource planning system for the same reasons businesses based in one location do: It's a means to integrate key business processes into one system for better management and more efficient operations both now and in the future. The difference is that an international company will need a good ERP system to not only handle the operation of one location, but many - all with different requirements and local needs. Paul Hemmings, vice president of professional services at abas USA, noted that an ERP system should be powerful enough to help you manage a global business.
Interested in global business topics? Check out these additional articles on understanding the importance of localization:
- Managing local relationships within a global organizational context
- Overcoming language barriers
- Dealing with different laws in various regions
- Taking care of details
"An ERP system is the central infrastructure that will allow you to manage your business both at the local and global levels," Hemmings said. "It shouldn't satisfy only your current requirements, but should also give you the flexibility to adapt any future changes that will come as your business expands internationally.
Here are four reasons why global companies must invest in a high-quality ERP system:
1. Centralize local and global data and workflows into one centralized system
A good ERP system will give you the ability to drill down into highly specific local data for one of your locations while still making it easy to access company data in aggregate. Your system should make it just as easy to see what's going on with one individual business unit as it is to get the big picture status of your whole company.
From a coordination standpoint, an ERP system lets you coordinate sales, manufacturing and distribution both locally and globally to make sure every stakeholder in your supply chain stays connected and working together as efficiently as possible.
For example, if a U.S.-based customer places an order, and you have a production facility in China, your production team needs to be able to get the data from the purchasing order - design requirements, capacity needed, shipping info, etc. - as quickly and accurately as possible to start manufacturing.
"Managing inventory is complex in a global manufacturing environment. You need to be able to have a global view of inventory at all levels - raw materials, work in process, and so on," Hemmings said. "You also need to be able to see every facet of your operations. It's not enough to just look at static inventory levels. You should understand how materials, finished goods and shipments flow through the channels between your global subsidiaries and also your customers. It's all about making sure you have the right goods in the right place at the right time. A solid global supply chain capability is essential."
An ERP system is the backbone of any global operation.
2. Effectively manage costs in a complex supply chain
One of the more underrated aspects of ERP systems is the visibility you get into your financials. Just as a global company needs to be able to easily pull supply chain data for individual unit and get a consolidated view of companywide information, it's also extremely important to get a clear picture of the financial implications of every decision as you’re making it.
Often, the businesses that struggle to maintain profitability are the same ones that don't really know what their costs are. It's difficult, if not impossible, to find ways to improve efficiency and reduce expenses if you don't know where to begin.
To that end, a good ERP system will let you see data, including cost of materials, cost of finished goods and cost of goods sold, alongside your payables and receivables. By understanding the financial performance of your individual business units, as well as your entire global operation as a whole, you will be in a much better position to make sound decisions for improving your company.
3. Break down language, currency and cultural barriers
A global company will have to contend with handling business in different currencies and exchange rates. An ERP system can be a powerful facilitator for translating currencies across national borders, while still allowing users to see financial data presented in their local currencies.
For example, a regional manager in China will want to see his or her finances presented in RMB when analyzing that particular unit. But if someone in the U.S. or European corporate office needs to access that data, they can easily convert financial data displayed as RMB into dollars or Euros.
Similarly, a good ERP system will allow you to set up local language requirements. For example, a U.S.-based office should be able to set its display language as English, while a production facility in South America can use the same system with the display language set to Spanish. Again, they're working with the same system and data, but are using local language requirements to ensure that everyone can work in the language they're most comfortable with.
How is abas ERP different from other ERP systems? Find out in this video:
Some differences between geographic regions can be accommodated by ERP localizations. For example, when it comes to the presentation of data for decision-making purposes: "Your system should allow you to customize your dashboards based on the preferences of each region or location," Hemmings said.
Culture can also play a role in the way project implementations are done. International or regional differences in business processes, structure, management, and communications style must be taken into account for an optimal ERP implementation.
4. Foster adaptability and growth
Perhaps most importantly, businesses with a global presence, or those that aspire to be one, need a system that will grow with them. Many businesses enter a period of impressive growth only to find out that their ERP systems aren't designed to handle such a complex global operation.
"As your business grows and changes, your system should make it easy to adapt," Hemmings said. "Whether you're talking about a new country, new regulations, new product lines or new processes, an ERP system should make it seamless to grow your business."