Role of ERP in Digital Transformation

Take a close look at the role of the ERP in digital transformation — and discover why DX can’t happen without it

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    A successful digital transformation hinges on having a consolidated view of all people, processes, and operations across the entire business. That, in turn, enables you to make decisions that drive success at every stage in the value stream, manage resources on a holistic level, and continually optimize the customer experience.

    While implementation projects are technically business transformations, it’s better to look at the ERP as this essential first step in the transformation journey. In other words, the ERP drives the bigger transformations that generate value and create a competitive advantage.

    Below, we take a closer look at the role of the ERP in digital transformation — and explain why DX can’t happen without it.

    How the ERP Supports Digital Transformation

    We talk about this in another piece, Digital Transformation with Dynamics 365, but essentially, the ERP is the foundation you need to operationalize data, make informed business decisions, and act on opportunities as they emerge.

    It’s the first step toward realizing the bigger, better transformations that analysts and sales reps describe to sell people on “the promise” of big data, AI, and other DX hallmarks.

    Now, there are a couple of key elements that need to be in place before anything transformative can happen.

    1. A complete, accurate, and connected data ecosystem.
    2. A centralized ERP system for managing all that data – and the business activities, processes, and decisions that depend on it.

    These two components work together to form this sort of “skeleton” that supports the entire digital business. And, only when those “bones” are fully-intact, healthy, and strong can you start adding more layers. Think – AI analytics, robotic process automation (RPA), or predictive machine learning models.

    Why Your ERP Needs to Cover the Entire Business Process

    In order to “transform,” all data, people, and processes must be united inside your ERP solution.

    Modern ERP systems are built on unified, extensible platforms. All apps within the broader ERP suite are tightly integrated with one another so that critical data syncs across the platform in real-time across all processes and reporting tools.

    This eliminates the need for employees to waste time on manual tasks like double data entry and enables orgs to automate core processes across the entire business — accounting, finance, sales, supply chain, HR, and so on.

    A unified ERP allows you to do much more with the data you already have because, well, everything is connected.

    Finance and operational data drive decisions about inventory, sales strategies, DX investments – all of these different parts of your business are connected, both to each other and the bottom line.

    According to a recent InformationWeek piece, a strong master data strategy, combined with a fully-integrated system is key to driving transformations like using RPA to boost productivity or orchestrating personalized customer journeys at scale.

    Conversely, building on a fractured or incomplete system, the whole thing falls apart – or worse, creates a mess that’s harder and more expensive to clean up.

    You don’t have the data you need to make informed decisions or understand your customers. If you automate processes containing bad or incomplete data sets, errors quickly blow up into big problems.

    Consolidating all data, processes, and business functions into one unified system enables you to find and fix the “low-hanging fruit” among your biggest waste centers — and immediately start reaping the benefits of your efforts.

    In a recent blog post, we explain how moving from single-purpose, niche software to a unified ERP system can transform all aspects of a business. While this post focuses specifically on the cannabis industry, the lessons are universal.

    When supply chain and inventory processes are siloed-off from the rest of the business – particularly core financials – you can’t leverage data from one business unit to another. That, in turn, creates regulatory problems, project delays, and inaccurate forecasting, among many other issues.

    It Also Needs to Be Cloud-Based

    Organizations are increasingly ditching on-premises systems for the cloud out of necessity.

    Look at the last generation of Microsoft Dynamics. NAV and GP feature many of the same features as their cloud-based counterparts, but can’t deliver the same speed, insights, or business outcomes.

    Upgrading to D365 allows businesses to tap into a long list of benefits: increased agility, lower operating costs, support for remote work, and the ability to take advantage of AI, ML, and intelligent automation.

    According to IDC’s Operational Excellence and Resilience report, cloud-based systems can also serve as data management tools that help organizations realize the full value of their operational data.

    Analysts say there’s a clear connection between decision-making and moving operational data to the cloud. Centralizing that data in a single cloud-based platform supports better data management, analysis, and decisions. What’s more, it enables orgs to unlock the full benefits of advanced analytics and AI/ML-based tools.

    Consider the example of Peet’s Coffee. In early 2020, Peet’s was in the middle of a major digital transformation project — they had just implemented Dynamics 365 Finance and Supply Chain Management and were working through the process of replacing work that had historically been done in Excel.

    In March, COVID hit and business needs changed dramatically overnight. Lockdowns forced Peet’s to modify its warehouse operations to accommodate new safety protocols and social distancing. Direct-to-consumer (DTC) and e-commerce sales doubled as customers cut back on trips to the coffee shop and supermarket.

    All of these changes meant that Peet’s had to scrap the original game plan and pivot to a new strategy based on immediate business needs.

    D365’s cloud-based infrastructure allowed Peet’s Coffee to centralize data management to facilitate real-time decision-making and better collaboration, and adapt complex supply chain operations to current conditions. The company was also able to streamline and automate critical supply chain processes, optimize production, and scale its distribution network to keep pace with new demands.

    Ultimately, it’s infrastructure, not individual features or capabilities that makes the biggest difference here.

    Final Thoughts

    These days, the ERP must do more than simply capture and analyze data, automate workflows, and organize information. It should function as this connected framework capable of using AI and ML to augment decision-making, provide guidance, and generate accurate forecasts and predictions that help business leaders get ready for future unknowns.

    And, while the ERP itself isn’t exactly “disruptive,” it does lay the groundwork for future transformations and innovations with the potential to disrupt entire industries and business models. Basically, you’re trying to build a firm foundation that can support rapid scaling, quick pivots, and many layers of algorithmic optimization – without buckling under pressure or creating roadblocks.

    Velosio offers a wide range of solutions and services that help clients drive powerful ERP transformations from the earliest stages of planning to implementation and beyond. Get in touch with an expert today to learn more.

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