Investing in an ERP system typically requires businesses to carefully research and evaluate many different factors. This is not just a technological decision, but one that directly impacts how the business operates in the long term.

When choosing an ERP system, businesses typically need to consider many factors, such as:

• The IT structure of a business.
• The software's business capabilities
• Vendor's deployment capabilities
• Total cost of owning the system
• Future scalability

In this article, Mr. Tran Quoc Hung (Senior ERP Solution Implementation Consultant, 1C Vietnam) will analyze the business capability of an ERP system, a crucial factor when choosing a solution that suits a company's operational needs.

1. CRITERIA 1: The core business model of the enterprise

In most cases, accurately defining a business's operating model directly impacts the business needs and core functionalities of an ERP system. Simultaneously, this factor is closely related to future scalability and the necessary IT infrastructure architecture to support that growth.

Business operating models can vary greatly between companies, for example:

• A business can produce goods on a mass scale or produce goods to order/project.
• Businesses can be classified as discrete manufacturers (furniture, machinery) or continuous manufacturers (food, pharmaceuticals).
• Businesses involved in the distribution of fast-moving consumer goods (FMCG) or electrical appliances.
• Businesses provide services on a recurring basis or on a project-by-project basis.
• Traditional retail or e-commerce businesses.
• Can a business operate in multiple sectors or focus on a specific field?

No single ERP system is a perfect fit for every business model. Each industry will have different business requirements for its management system. Below are some ERP system requirements in a few specific sectors:

a. Furniture manufacturing or mechanical engineering

Businesses that manufacture components in bulk, such as furniture or mechanical engineering, often have many individual parts and semi-finished products. Therefore, an ERP system needs to meet requirements such as:

• Multi-level BOM management.
• Manage multiple product variations and production variations.
• Arrange and coordinate production orders and process orders.
• Control production execution on-site.

Multi-level BOM diagrams are a mandatory requirement for ERP systems designed for discrete manufacturing businesses.

These capabilities help businesses precisely control product structure and production processes, reduce errors in material calculations, and optimize production planning and coordination when managing multiple product configurations. This is also one of the common requirements when discrete manufacturing businesses evaluate the suitability of an ERP system.

b. Food and pharmaceutical manufacturing sector

For food or pharmaceutical manufacturing businesses, production often takes place on assembly lines. Therefore, ERP systems need to support functions such as:

• Production is done in batches.
• The BOM is a formula in the form of a recipe with a list of ingredients.
• Managing production capacity.
• Product traceability.
• Manage the raw material supply plan.
• Quality Management (QC).

ERP systems for the food or pharmaceutical manufacturing sector need to support a Bill of Materials (BOM) function that defines the ingredient list (recipe).

These capabilities enable businesses to tightly control batch production processes, ensuring product formulation consistency while supporting traceability of raw materials and finished products throughout the entire production chain. This is especially important for industries with high quality standards and regulatory compliance requirements, such as food and pharmaceuticals.

c. Import and distribution of consumer goods

For businesses importing and distributing fast-moving consumer goods, the main requirements typically focus on:

• Managing multiple partners and distributors.
• Manage multiple sales and payment terms.
• Set up flexible promotional programs.
• Develop supply and sales plans based on multiple scenarios.

These capabilities enable businesses to flexibly manage sales policies and promotional programs, while also supporting supply and distribution planning under various scenarios. As a result, businesses can respond more quickly to market fluctuations and consumer demand changes.

2. CRITERIA 2: Business operating procedures

It's important to understand that implementing an ERP system doesn't mean the software has to perfectly match 100% of the company's existing processes.

In fact, according to expert Tran Quoc Hung, the way businesses operate usually changes after implementing ERP, because the system helps standardize and optimize many processes.

For example:

• With the purchasing process, instead of the traditional process (Proposal → Approval → Purchase), businesses can shift to: Needs calculation → Supply planning → Proactive purchasing.
• With the sales process, instead of requiring multiple levels of approval for all orders, an ERP system can allow the establishment of standard sales conditions, only requiring approval when there is a difference from the established conditions.
• In terms of production processes, many businesses are shifting from a production-to-stock model to a production-to-demand model to reduce inventory and optimize resources.

Illustrating the features of an ERP system in identifying production needs and capabilities.

Optimizing operational processes often yields significant results, but these are difficult to measure immediately. Therefore, many businesses often underestimate the importance of this factor when choosing an ERP system.

An effective ERP system should help businesses improve their operational processes, rather than simply digitizing outdated work habits.

3. CRITERIA 3: Business Rules and Requirements

In many ERP system implementation projects, departments often only provide basic business requirements without clearly defining business rules. However, these business rules are often the cause of problems during implementation.

During the survey phase, if the vendor does not fully utilize the available resources or the company has not systematized them into clear regulations, then during implementation, each department may create different rules, causing difficulties for the ERP project.

Examples of the differences between BUSINESS REQUIREMENTS and BUSINESS RULES:

-Business requirement: Ability to set up promotional programs based on delivery terms.

-Business rules: For delivery distances under 20 km, a 5% discount applies. For delivery distances over 20 km, a 3% discount applies.

Clearly defining business rules and implementation priorities helps businesses:

- More accurate ERP system configuration.

- Minimize issues arising during implementation.

- Effectively control project scope.

4. Conclusion

Choosing the right ERP system for a business requires evaluating many factors, not just software brand, investment cost, or system demonstrations. Therefore, businesses need to carefully consider:

- Business operating model.

- Operating procedures.

- Business rules and requirements.

Only by understanding these factors can businesses choose an ERP system that suits their operations and future development direction.

Businesses in need of ERP system implementation should contact 1C Vietnam for consultation on the 1C:ERP system. Built according to ISO and IATF operating standards, with in-depth business processes on a stable platform, businesses that have or want to standardize and optimize their operations, as well as vendor businesses in various industries, will find a solution that suits their operations without requiring extensive customization.

With 1C:ERP, businesses have access to deep business processes on a stable platform, alongside powerful solution customization capabilities. Enjoy direct, one-on-one support from the manufacturer in the Vietnamese market. Talk directly with our experienced experts HERE .