Mid-market firms can now enjoy enterprise resource planning benefits (page 1 of 2)

Early adopters of ERP systems might be forgiven for thinking that the whole of the Western world had long since embraced some form of enterprise software. Those same visionaries may now be debating the merits of blade servers or looking forward to the brave new world of grid computing.

However, it is worth remembering that a lot of businesses are only now beginning to come to terms with the need for an ERP strategy. Motoring enthusiasts in Britain may remember the mid-90s episode of the BBC TV series Troubleshooter, in which business guru and former ICI chairman Sir John Harvey-Jones visited the Morgan factory.

Morgans are small sports cars, still largely based on 1930s designs and much revered by enthusiasts. So much so, in fact, that at that time you had to wait eight years for delivery. Harvey-Jones was brought in to see whether the company could do anything to improve its business efficiency.

In the parts department of the rambling factory, he asked the stores manager what system he used for ordering components for the assembly line. The man looked up at some shelves over his head, filled with a few silencers and sundry lengths of exhaust pipe. "Well," he replied, "I look up and if I see that stocks are running a bit low, I order some more."

The knighted guru stared back with incredulity, not knowing whether to laugh or cry. Ultimately, his recommendations to Morgan's management were deemed so radical and downright disrespectful that they were dismissed out of hand and his request for a follow-up visit a year later was turned down flat.

Unfortunately, there are lots of Morgan-style companies across the length and breadth of Europe, Middle East and Africa resisting the winds of change and preferring to stick to tried and tested largely manual methods of running their businesses. Some may be forgiven, since the large up-front investment needed was simply not an option for most, and the software vendors have focused primarily on larger businesses whose needs were greater and pockets deeper.

Now, however, they are turning their attention to smaller companies in the "mid-market": those employing up to 500 people and with turnover up to $100 million. Squeezed on one side by an adverse economic climate and on the other by competition from low-cost countries, they see the need to optimise every aspect of their businesses, from procurement and recruitment to accounting and the whole supply chain. Their needs can now be met for a relatively small investment of $100,000 or less, which makes state-of-the-art solutions not only available but also affordable.

Before these new entrants bite off the arm of the nearest software salesman, however, how have their larger counterparts been faring since they embraced ERP in general and supply chain management in particular? The results speak for themselves: research by Accenture has shown that the stock prices of public companies that invested in getting their operating model right with the aid of ERP and supply chain technology outperformed their rivals by 20 to 25%.

This demonstrates that companies with the right supply chain model will win in their vertical markets, because the overall cost of serving their customers will be lower. They will have the most efficient turns of inventory and the highest working return on assets. Leveraging that advantage delivers better market results.

Companies that complain that ERP or SCM have not delivered against their expectations - and there are some - are suffering primarily from one of two problems: either the expectations were unrealistic in the first place, or they have failed to optimize their business processes and take advantage of those provided by best in class ERP solutions.