The right ERP system for your multi-entity corporation
Some ERP systems are excellent at allowing very different business types to be linked together and others excel at standardizing all business processes across all companies. The kind of ERP software you need depends first on your company business model.
The types of companies you own impact your ERP buying decision.
Here are three different business models and their related requirements
Companies with similar business models
Companies with similar business models can be chain restaurants, box stores, and retail outlets selling similar services and products. Examples of this would be an operator of hotel chains across the world. They do best with an ERP system that will allow them to easily replicate business process across subsidiaries. It forces standardization which in this situation is a positive.
What they need:
Standardization across the entire enterprise
Easy to create/copy new companies for growth
Often finance is controlled from headquarters and expenses needed to be charged back to subsidiaries
Solutions: Look for an ERP system with global settings, shared items, and shared processes. Make sure the intercompany can handle transactions from a centralized finance team to be expensed across the subsidiaries. At the corporate level there should be consolidated reporting and reports that show the total sales by item across the organization.
Holding companies with diverse businesses
A diverse company portfolio helps to protect against business cycles. A diet food manufacturer might own a bakery chain or a ski hill might own a boat rental business. These types of companies need an ERP system that allows each company to be set-up with different items, processes and system set-up options. Trying to standardize across the organization will frustrate the subsidiaries.
What they need:
Ability to have unique items specific to their business unit
Company specific set-up options over global set-up options
Ability to control cash and payments at the subsidiary level
Solutions: Look for an ERP solution were each company can have its own database and set-up options. Companies can operate with a custom fit on the ground level. Consolidated reporting at headquarters will allow visibility over all the business units. The intercompany should allow for transactions from the parent company to the children and between the sister companies.
Related global companies that buy and sell from each other
These can be companies that hold inventory for each other and they buy and sell amongst each other. Alternately they are related companies that own the entire process from raw material to distribution. For example, one company processes the raw material in Australia, the next creates the goods in China, and the third distributes to end users.
The features that these companies are looking for tend to center around these requirements:
Functionality around the buying and selling between related companies. For example: the creation of a purchase order to in one company will automatically give rise to the corresponding sales order in the sister company
The ability to handle multicurrency and taxes across global enterprises
Company specific set-up options over global set-up options
Standardization on items numbers so the same item can be bought and sold across companies
Solution: Look for an ERP system that has purchase order to sale order capability between related companies. Look for features such as drop ship, multi-currency, and international editions. Make sure that the subsidiaries can get the specific functionality they need while being able to share items across the organization. Local tax requirements must be supported. Reporting needs to be available at the subsidiary level in its source currency and at headquarters in its operating currency.
Written by Kim Haythornthwaite - Nolan Business Solutions Inc.
