When it comes to ensuring smooth operations, enterprise-scale companies can often draw on enormous resources to tame unruly inventory issues, solve purchasing and supply chain problems, and other resource management challenges. However, small to midsize enterprises (SMEs) trying to stay afloat in today's shifting economic tides often just try to ride it out with what they have and hope growth will sustain them.
As many SMEs find out too late, that can be a disastrous course to follow. Those that can't rise above their operational inefficiencies often just quietly sink out of sight. But new tools and technologies developed for large enterprises are now appearing in scaled-down versions that can be readily adopted to help manage the business systems, services, shelves and storehouses of smaller companies. And experts are finding a consistent trend: SMEs that quickly adopt these technologies and best practices stand the best chance of achieving long-term success.
Identifying the SMEs "Most Likely to Succeed"
In its benchmark August 2010 report, "ERP in SME: Fueling Growth and Profits," the Aberdeen Group surveyed 578 SMEs, and found that the most successful of them had already taken a page or two from the playbooks of their largest competitors regarding enterprise resource planning (ERP) and related technologies. In fact, the study noted that best-in-class SMEs were:
- 50 percent more likely than average SMEs to have real-time visibility into the status of all critical business processes, "from quote to cash"
- 80 percent more likely to regularly quantify the business benefits of deploying an ERP solution
- 80 percent more likely to provide key executives with access to ERP data via mobile devices
In each case, the smaller companies at the top of the performance heap were long established in displaying traits and best practices that were more commonly found among larger enterprise organizations.
The Role of ERP in Determining SME Survival
Aberdeen found that adopting an ERP solution was one of the main determinants of an SME's ability to rise to the top 20 percent of the sample and achieve best-in-class status. The authors reported that their analysis "demonstrates that ERP is a mission-critical component in the pursuit of corporate goals, including growth of revenue and profits."
The Aberdeen report also noted that there was more to achieving a best-in-class survival rate among SMEs than simply adopting enterprise-class business intelligence and ERP systems. The top-performing SMEs were also much more likely than their "laggard" SME counterparts to have implemented ERP solutions in ways that directly mimicked their Fortune 1000 competitors.
Three Steps to Achieving Best-in-Class Status
The most successful SMEs, according to the report, had learned to follow these established, enterprise-class best practices:
- Use ERP to standardize and automate business processes. First, cover your bases by implementing core business functions, such as general ledger, accounts payable and receivable, order management, purchasing and inventory control. Once you have standardized these essential business processes, you can see further efficiencies through workflow automation, event management and other, more advanced, practices. Aberdeen found that best-in-class SMEs use 23 percent more ERP functionality than the industry average, and 43 percent more than those that had not adopted these practices.
- Take advantage of the latest release. Belt-tightening has led to an alarming trend toward skipping upgrades. Don't let this happen to you! According to the report, top-performing SMEs are 112 percent more likely to be running the most current release of their vendor's ERP software.
- Establish metrics early on, and track your progress meticulously. It's important to establish a baseline before implementing ERP, then carefully identifying performance milestones and measuring your progress along the way. Aberdeen found that up to 94 percent of the top-performing SMEs in its 2010 study regularly measured cost reductions and schedule improvements that could be directly attributed to their ERP implementation.
Two More Steps to ERP Excellence
To enter into the top echelon of successful SMEs, Aberdeen researchers also advocated two further enterprise-class steps to maximize ERP capabilities and achieve better business alignment and agility:
- Make direct connections between decision makers. Aberdeen found that the best-in-class SMEs are 35 percent more likely to be able to access ERP data from any laptop or desktop, without the need for any specialized software. Making ERP data securely available for decision making any time, any place, is a key to success.
- Mobility is no longer optional. Businesses large and small no longer operate on strict 9-to-5 schedules. The global economy and stiff competition demand round-the-clock vigilance, which means that SME executives need access to data on a 24x7 basis, regardless of their location or the availability of a personal computer. Supporting connectivity with ERP data via mobile devices is not a luxury, but a requirement for top-performing companies.
Laying a Solid Foundation for Future Growth
For smaller companies, acting like a big company is often counterintuitive. Many companies are reluctant to invest in back-office systems until the demands of growth force their hands. By then, it may already be too late. Aberdeen recommends a more proactive approach.
"For those SMEs that have yet to implement ERP, the performance gap will widen as ERP solution providers continue to innovate solutions and those with ERP continue to reap the benefits. Those that aspire to best-in-class status would be well advised to turn ERP into a strategic weapon by taking full advantage of the technology, features and functions [that] continue to expand at an ever-increasing rate."