Blog Modular ERP: advantages and disadvantages

Modular ERP: advantages and disadvantages

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There are dozens of ERP tools available that provide various functionalities, added services, and specialized options. An ERP tool quoted to be the best in one area may not be the best choice for every kind of business. Sometimes even the most comprehensive ERP packages may not suffice your unique needs.

For instance, if you run various customer endpoint stores, having a POS system integrated with your ERP could be a great advantage for your business. So, while you may want a POS system, you may not need the generic features that you’ll barely use. Wouldn’t it be great if you could pick and choose the features you want and have the freedom to define the scope of your ERP solution without having to spend loads of money? But not every ERP solution in the market can provide you with flexible options to add or remove functionalities as you desire.

For such nuanced requirements, you need modular ERP systems like Vault. Modular ERP systems give you a choice. You can choose the features you want and only have to pay for the features you need and use. They help you implement your ERP solution in an optimized manner while keeping the door open for more improvements and additions in the future.

Modular ERP: advantages and disadvantages

In general, a good ERP system should provide you with enterprise-wide integration, run real-time operations, provide a common database, and have a consistent user experience. This vague criteria for choosing an ERP system will only work if you’re looking for a generic solution with bundled options.

For businesses that are running on a shoestring budget or are looking to optimize their spending, choosing a big, packaged solution may not be the best way forward.

Instead of picking your ERP solution and then changing your workflow to suit the solution, you should be analyzing your existing workflow and selecting the modules you need. This is made possible with a modular ERP solution.

Read on: Key benefits and drawbacks of ERP systems.

What is an ERP system? 

ERP stands for Enterprise Resource Planning. It is the integrated management of your main business processes, often in real-time and facilitated by software and technology. The ERP system will connect the dots on critical business processes, automate them and analyze gathered data. An ERP system brings various day-to-day functions together, simplifying the data flow and visibility and unifying business processes.

A complete ERP suit also includes enterprise performance management that helps plan, budget, predict and report on organization’s financial results. ERP system can be implemented on premises, but often it will be cloud-based. A cloud-based ERP allows you to collaborate with anyone from anywhere. Read more about cloud-based ERPs here

Definition of modular ERP

A modular ERP is an ERP implementation where users can choose the features and modules they want to include in their ERP system. It allows specialized features and specific requirements to be implemented at an affordable cost. It’s also designed for easy integration with new modules that can be added later down the line.

Basic modules of an ERP system

The basic modules of an ERP system are composed of some of the most commonly used business functions. These include:

Finance

This is a central part of the ERP system and includes a subset of modules such as general ledger management, payables and receivables, revenue management, billing, expense management, financial reporting and analytics. Financial data is gathered and turned into reports, profit are tracked, and data generated for financial forecasts. A finance module automates essential accounting functions and helps you manage fundamental financial processes. 

Procurement

This module manages the source-to-settle process. In simpler words, it means buying products or services and managing suppliers' relations. The system will automate quote requests and analyze them, and it will track related POs, invoices, shipment, and payments. 

Manufacturing

This module can streamline and automate all activities involved in manufacturing from sourcing and shipping to production and order fulfillment. It should allow you to synchronize bills for materials, generate quotations, ensure quality control, and provide a real-time overview of manufacturing processes’ statuses. The system can manage procurement of raw materials needed for production. The manufacturing module will assist you with inventory, quality management and the planning of material requirements. 

Inventory management

An inventory management module allows you to monitor your stock levels in real-time. The system will track incoming and outgoing stock daily and predict accurately when the inventory will be sold out completely.  

Order management

This allows you to view and manage customer orders, edit shipping information, manage returns and refunds and track orders statuses in real-time. 

Warehouse management

A warehouse management ERP module enables you to standardize inventory movements and picking methods, and manage storage space and warehouse logistics. The system will provide robust real-time analytics of warehouse operations. Good software will automate stock replenishment systems. 

Supply chain management

Suppliers, prices, and supply chains conditions have been rapidly changing lately due to market volatility. To keep track of raw materials, products and their life cycles and prices, an ERP module like this can be indispensable if you are in the manufacturing industry. 

Customer relationship management

This will help you to manage all the company’s relationships and interactions with customers, as well as their acquisition. All customer data will be stored in one place, and omnichannel communication will help you to build better customer relationships. Repetitive tasks can be automated. You can track important sales and marketing opportunities and have complete visibility into the leads pipeline. 

Project service and resource management

This is one aspect of project management that plans, manages, and automates tasks related to project resources. It will help you to allocate project resources as efficiently as possible. Resource management isn't limited to the workforce, but also needs to consider the time, cost and technology required to deliver projects. 

Workforce management

This module will help you to streamline and automate the processes that manage employees’ time, allow for tasks scheduling, and ensure the right workforce with the right skills is available at the right time and cost. 

Human resource management

HR management helps you build a workflow for HR processes, including managing recruitment, developing employees, absenteeism, and time management. Automating tasks and using a self-service platform will improve communications between leadership and the workforce and make HR processes more efficient. 

Ecommerce

An Ecommerce module allows you to streamline online shopping processes from order to delivery. Automation will handle orders and connections to customer support services. Ecommerce typically involves other technology integrations into your existing workflows, e.g. card payments, PayPal, shipping, and other channels. 

Marketing automation

Automation in marketing allows you to measure the lead’s activity and align your campaigns with your sales team. The system can send automated emails, surveys or gain feedback on services and products after pre-defined conditions have been met. Marketing material will be distributed automatically across your chosen channels. ERP software will monitor your scheduled marketing budget. It will help you to shorten the sales cycle with more targeted campaigns. 

While a packaged solution might provide all these basic functionalities, not every business will need all these modules. For instance, if you’re running a digital business with no tangible products, you may not need the supply chain management module.

Similarly, a restaurant doesn’t require the project management module or the eCommerce module unless they have an online store attached to their name.

What’s the difference between modular and packaged ERP software?

So, what makes modular ERP software different to packaged ERP software? It’s the availability of choice and flexibility to choose modules. In a packaged ERP software, the vendor bundles up the most commonly used modules or all of the modules available and implements it as a single system.

So, when you purchase the license for the ERP system, you get access to all the modules bundled in the ERP implementation and can start using them all at once. This is best suited for a mature business that wants a comprehensive packaged set of essential features and wants to implement the ERP system in a single go. The user interface is more consistent across all the modules as well.

There are advantages and disadvantages associated with both types. The decision to pick the kind of ERP you need depends on your particular needs and requirements. These are the three differentiating factors:

Setup costs

With a modular ERP, your initial investment costs will be cheaper than what you have to shell out for a packaged ERP solution. It helps you spread out your investment costs, understand the ERP services provided, and implement more modules as you wish in a phased manner as and when required.

Thus, a modular ERP has often been the first choice for cash-strapped businesses or businesses that are still looking at all the viable ERP solutions before they lock in on their long-term investment choice.

Learning curve

The learning curve with a modular ERP is also pretty low compared to that of packaged ERP solutions. This is because packaged solutions come embedded with multiple features and have complex workflows that could take some time for employees to get used to and use efficiently. Modular ERP solutions can be implemented in parts over time, allowing for a natural integration with your existing workflows which makes it easier to use.

Number of modules used

This noticeable difference means that you only pay for what you want and use in a modular ERP. Whereas in a packaged solution, you may end up having more than what you asked for and still have to pay the price for all the modules that you may end up not using at all.

Read on: The ERP selection process

Advantages of a modular ERP

A modular ERP allows you to automate processes within your budget. You can select a module that is required at a particular time and add more when your business expands. You pick components that suit your business best and leave out what you do not need. Adding or removing modules is easy. Cloud based modular ERP systems are secure and the vendors take care of upgrades and maintenance. Modular system can comfortably accommodate your company’s growth. Gradual modules integration requires less time to train users on the software. 

In short, modular ERPs benefit from:

  • Faster implementation
  • Quicker benefits
  • Scalability
  • Two-tiered implementation
  • Gradual system learning
  • A lower startup costs.

Disadvantages of a modular ERP

While a modular ERP seems to be the best choice for small businesses running on a tight budget, this isn’t always the case. Here are some reasons why it may not be the best choice

ERP systems typically come as stand-alone packages and new modules might not be compatible with cloud systems. Sometimes they may contain a large amount of redundant data, requiring a space for storage, which you pay for. Sometimes you might not need to use some of the functions and can hide them in the menu, but they still can run in the background and can have an impact on your processes. 

Modular ERP systems have scalability and offer integrations, but the customization of features and functionalities can be a weakness. It is because they do not always focus on specific industry, or the customization would take too long to implement. The singular modules might have been written at separate times by different developers, so the look between them might differ.

In summary, the disadvantages include:

  • Cloud system compatibility issues
  • Redundant data
  • Vendors still struggling to develop industry specific solutions.

Industries that could benefit from a modular ERP 

FMCG (Fast moving consumer goods)

An ERP will help you with inventory management and tracking finished goods. It supports CRM by tracking transactions between customers and industry. Additionally, an ERP will automate newsletters and promotional emails and monitor campaigns. A financial module can help you to manage and track all transactions and provide vital metrics about the financial health of your business.

Manufacturing

In manufacturing, ERP systems help with a variety of areas, including: billing for materials, production management, inventory, and order management, product configuration, material requirement planning, purchase order management, manufacturing data collection, warehouse management systems, engineering change control, and advanced planning and scheduling.

Pharmaceutical

An ERP system assists with procurement, inventory and warehouse management, production, quality management and control, sales, material and capacity planning, plant maintenance, accounting and budgeting and compliance with industry specifics.

Trading 

In trading, an ERP system helps with customer management and order processing, purchasing and supplier management, store and warehouse management, as well as financials and accounting.

Engineering

Apart from core ERP modules helping with finance, planning and project management, implementing tools like design collaboration, plant design and commissioning, and engineering change management are beneficial to the engineering industry.

Media & News

An ERP will enable seamless collaboration and centralize data across multiple channels. Additionally, an ERP can also help with multicurrency and multi tax management, advance scheduling, financial planning and reporting, contract management, scenario planning, HR management, audit trails for media & news, and more.

Construction

An ERP can help you with field operations, quality control, health and safety, plant and equipment management, work and purchase orders, drawings, maintenance, payroll, and time sheets, estimates and valuations, project management, and admin tasks.

Delivery

You will already use delivery management software to manage fleet and transport, and likely benefit from real-time driver and vehicle tracking with order and inventory management integrations in place. However, if you integrate an ERP system with your delivery management software, you can monitor data from numerous core business processes and can rely on a single dependable data source. As a result, you can improve your order fulfillment, dispatching, productivity, visibility, time management and customer service.

Real Estate

Implementing an ERP system will help you with accounting and financials, property and assets management, purchasing and leasing, inventory management, reporting and expenses management, scheduling and contracts management.

Fashion 

In fashion, an ERP system will standardize processes and procedures and cut off redundant processes. An ERP gives instant access to real-time sales, inventory, production, and finance data from any device and location and will help you manage a product lifecycle from the initial concept to order fulfillment. Furthermore, it will reduce product development costs and enable faster time to market through collaboration and streamlined information on a single platform.

Packaging & Fulfillment 

An ERP system will help you plan and control material flows, assist with production planning, improve utilization of resources, ensure quality requirements are met, and help with quoting and pricing, shipping and billing.

What are Vault’s modules?

Vault is an enterprise, cloud based, resource management tool that stands apart from its contemporaries, even among modular ERP systems. Vault overcomes the major challenges faced by modular ERP implementation.

It digitalizes your business processes without any worries regarding cloud integrations, provides a consistent user experience across all its modules, and ensures quality implementation with accurate data transactions across all modules.

Here are some of the top modules that Vault offers:

  • HR management
  • Project management
  • Operations management
  • Sales management
  • Financial management

Vault also has a multi-company setup, pay-per-you-use modularity, high customization, excellent customer care, and ongoing technical support.

Our support comes with a team of developers

Vault ERP is a modular, highly customizable solution. Each module is a program in itself, which can satisfy your missing needs in your core operations. Rare Crew’s developers are experts in ERP systems and will understand your specific requirements and goals. We can build features that make a difference to you and optimize your business operations to the full potential. A customized solution is more likely to return your investment in the long term than a readily available ERP system.

Read on: 3 unique features your ERP solution should have.

Before you determine which ERP system can meet your business needs best, it is advisable to contact a business analyst, who will gain a deep understanding of your current business processes and the goals you want to achieve. The right selection of ERP elements is vital if you want to get the optimal results and benefits of an ERP solution. 

Be sure to contact us for more information on Vault and how it can streamline your operations.

 

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