ERP software is the tool to execute company's business strategy. Company need to have an IT strategy in today's market to stay in competition and to execute its business strategy, ERP software is one of the components of IT strategy of a company. Alignment of ERP software with business strategy of the company is a must for proper and smooth functioning and getting maximum ROI on ERP.
Company workout its strategy for coming few years, in which it normally include the stage at which they would like to see the company after x number of years, statement of mission for these years, annual targets and goals, detailed plans to achieve annual goals and objectives, strategies, plans and actions, SWOT analysis and analysis of competition and market with critical success factors. After complete analysis and working out the business strategy of the company these results shall be treated as benchmark for selection of ERP. The ERP software that can help in execution of plans for achieving set targets and can contribute in enhancing the processes in their working and achieving objectives is the best suited ERP for the company.
Usually it is sought that what ERP software can offer to the user, but actually the question shall be, that what company expects ERP software to do. Business strategy of any organization is made by keeping in mind all the factors and aspects of the company and also after making some realistic assumptions about the future. Since ERP software is the tool of IT strategy to execute business strategy, its capacity to support the business strategy is vital for its successful operation.
Before defining business strategy first of all company shall decide its corporate strategy and objectives which are to be achieved in definite time frame. Later for achieving corporate strategy, operational strategy shall be worked out, which will have detailed plans, methods and processes to achieve desired objectives. Once these documents are done and over, then alignment of ERP through customization or add on tools can be done to execute operational strategy by using components of ERP and using its advantages for quicker and better results.
If a company wants to apply a check on the credit sales to those customers whose payment performance has been below par then how ERP can align with business strategy to help in its execution can be shown by this illustration. The business strategy in this case is, to stop selling of products on credit to those who have previous outstanding more than 45 days old.
This will need an ERP which allows such checks to be applied at invoice level by the administrator of the ERP, after verifying the authority of the person and his position in the company. If ERP has such a feature then whenever a credit bill will be raised program control will automatically approach accounts to verify the payment performance and the credit limit of the buyer, if it finds correct it will allow the invoice to go through else it will raise a warning and will stop the feeding of invoice. Such help from ERP software in executing business strategy of the company can smoothen the functioning and increase productivity of the company immensely.