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What Is Enterprise Resource Planning (ERP) and How Does It Work?

What Is Enterprise Resource Planning (ERP) and How Does It Work?

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From accounting to procurement, from regulatory compliance to supply chain operations, managing the day-to-day activities of running a business is an intricate juggling act.

Thankfully, there are ERP systems to help.

ERP stands for enterprise resource planning, which is the process of managing and integrating these business practices. Usually, this is done in real-time and with the aid of ERP software, which is used to collect, store, and manage organizational data. 

For many businesses, ERP software implementation isn’t just a priority; it’s a necessity to increase sales and keep business organized. And because ERP software integrates with other programs and applications like Shopify, Quickbooks and Amazon, it can also ensure that consistent information is shared while it automates workflows.

How ERP Systems Work

Generally, ERP systems have a central database that houses all relevant data, information, and processes. They are typically automated so data can be updated in real-time and people can easily access the most accurate information possible whenever they need to. Some ERP software solutions have mobile functionality to keep your business moving on the go.

When choosing an ERP solution that’s right for your business, it’s important to know the three types of ERP systems and how they can benefit your business:

Cloud

In-the-cloud ERP solutions are ideal for a rapidly expanding business looking for maximum scalability. A cloud solution is often more affordable, as you only pay for what you use. On the down side, IT and support resources can be less immediately available.

On-Premise

An on-premise ERP solution offers more flexibility if you have specific needs or unique processes because of its adaptability. The cost of this option is higher and typically requires dedicated IT to manage, but the ability to manage compliance-related issues is an advantage

Hybrid

The hybrid solution combines cloud and on-premise functionality by giving users access to cloud-based components to add to their on-premise system. This is an agile ERP system ideal for organizations with a main branch and satellite offices, with the pricing often falling between the two standard options.

Benefits of Enterprise Resource Planning

Though creating and implementing your ERP system will likely be one of the most complex projects you undertake, the benefits outweigh the risks. These include improvements in all the following:

Visibility

Keeping an eye on the “big picture” requires real-time access to data from all departments. Your executive, sales, customer service, accounting, production, distribution, and HR teams will all have a 360-degree view of operations. Real-time access to data means these departments can make better business decisions.

Productivity and Efficiency

ERP systems streamline business processes and make it easier and more efficient for companies to collect data, no matter what department they’re working in. By eliminating repetitive processes and greatly reducing the need to manually enter information, ERP boosts efficiency and gives everyone more time to devote to mission-critical projects and tasks.

Reports and Forecasts

Modern ERP systems make reporting and custom forecasting easier. You won’t have to depend on IT for data requests, so they can spend their time on critical projects. ERP users and managers also have the tools and resources needed in order to create more efficient/effective demand forecasts.

Customer Service

ERP systems deliver accurate access to customers’ information and history, improving relationships with the end customer and helping you build loyalty and repeat business.

Flexibility and Scalability

Modern ERP systems are robust, flexible and can be tailored to the unique needs of your operation. ERP software is also able to adapt to the changing needs of a growing business, so you won’t need to purchase a new solution when you grow. It’s easy to add new users and functions. As your business grows, you’ll grow your ERP implementation to meet your needs over time.

Collaboration

Collaboration between departments is a crucial part of an apparel business operation. Systematizing the flow of up-to-date data makes it easy to notify everyone when a schedule or product changes, so they can work together with better communication and unity of purpose. An integrated, centralized ERP database facilitates collaboration and decision-making while reducing administrative and operations costs.

Signs Your Business Needs an ERP System

ERP systems may not be the right choice for every business, but there are a few signs that can indicate your need for one.

Use of Multiple Systems

Using multiple software solutions for different business processes can lead to confusion and make it more difficult for your business to run smoothly. However, when everyone can access the information they need from a single location, everything becomes less confusing and more efficient.

Difficulties Accessing Information

Consider how long it takes you to find the information you need, such as orders per day or your sales figures. If information and organizational data are difficult to find, manage, and use, you can likely benefit from using an ERP system.

Complicated Accounting

Doing accounting and financial reporting for your business in spreadsheets or on paper is highly inefficient and makes the process more difficult than it needs to be. ERP systems can automate accounting processes that can take a person hours to do manually. Some ERP software has accounting functionality or can integrate with other platforms that do.

Inaccurate Inventory

Similarly, doing inventory in a spreadsheet is inefficient and leaves plenty of room for error. Inventory errors can lead to massive issues down the line that affects everything from customer satisfaction to your business’s budget. An ERP system can help you avoid many common issues with inventory management by providing real-time updates to prevent stockouts, overproduction, and inadequate forecasting.

Poor Customer Experiences

Implementing an ERP system is one way to improve your online customer service. Your difficulties with finding the right information quickly will affect your ability to ensure a positive experience for your customers. Without satisfied customers, your business will suffer. Modern ERP systems can help you keep your customers happy and your business thriving.

With so many ERP solutions available to the apparel industry, it can be hard to choose the right business management software, but finding the best ERP solution for your needs is worth spending the time it takes to research and compare the options available to you.

Demand Forecasting in the Apparel Industry: 4 Challenges & Solutions

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In the apparel business, there’s no such thing as a crystal ball.

But demand forecasting gives you the next best thing.

Making educated guesses about how customers will behave in the future is crucial for any business. This is particularly true for fashion and apparel retailers, as it is key for overall apparel inventory management. Huge inventories, trends that change quickly, and unpredictable consumer preferences make it all but impossible for apparel retailers to perfect demand forecasting. However, if you work in the apparel industry, there are a few things you can do to improve the accuracy of your predictions.

Consumer Habits Are Hard to Predict

Consumer behavior is always difficult to measure and predict, but because of how quickly fashion trends come and go, it’s even more difficult in the apparel industry. Every product is “new” and essentially has no sales history. Last season’s popular products that are similar may not be as viable this year. Incorrectly predicting customers’ habits can create problems for your apparel supply chain by leaving you with excess stock that can’t be sold.

Here’s the solution. Collect as much data surrounding products’ sales histories as you can. Collect by item, by week, and by location; additionally, consider creating multiple forecasts and be sure to track their accuracy. The more data you have, the better the predictions you’ll be able to make. CRM software can make it easier to manage relationships with customers and obtain accurate consumer data and help in organizing this data to more accurately predict future demand.

Consumer Preferences Are Volatile

In addition to quickly changing fashion trends, customers’ demands for certain styles or products can change virtually overnight. These preferences are influenced heavily by uncontrollable external factors, such as the media, the economy, and even the weather.

You cannot predict when something will suddenly go out of style or become the next trendy item, no matter how good your forecasting is. Continue to collect as much data as you can, and pay attention to your business’ marketing strategies to see how they respond to and capitalize upon these external opportunities. Inform yourself about the political, economic, and social/cultural environments you operate in. That way you’ll stay one step ahead of fickle markets.

Products and Fashion Trends Have Short Life Cycles

As we already said, fast-changing fashion trends result in products having much shorter life cycles than products in other industries and effective product lifecycle management is crucial in the apparel industry. This makes it difficult to gather enough sales history and data for forecasting before the product is obsolete or out of style. It also doesn’t leave you much room for error.

Once again, the solution comes down to collecting as much data as possible so you can determine what specific attributes or characteristics of your products sold well. If your customers seem to prefer anything — such as a certain fabric, color, price point, or neckline — you may be able to replicate its success in a future product.

Forecasts Are Difficult to Automate

Forecasts have too many contributing factors to automate. They require human interpretation and judgment calls. Unfortunately, this leaves room for error. Predictions tend to be influenced by whoever has the loudest argument. 

Using a reliable apparel inventory management solution, you can make multiple forecasts, and pay attention to which forecasts are the most accurate. Give those models more weight over time. Always adjust and update your forecasts when you have real sales data for that product. An apparel sales order management solution can assist in forecasting by tracking profits and royalties from multiple channels at once.

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