When a Two-Tier ERP Solution Makes Business Sense

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If you are researching a new enterprise resource planning (ERP) software solution like Microsoft Dynamics AX, you have likely already read about the best practice of choosing a single ERP system (from a single ERP software vendor) in order to simplify and standardize your data and processes throughout your organization.  A single ERP system has historically been advised as the best way to give you and your company executives superior transparency, simplicity, and visibility.

That said there are times when a two-tiered ERP approach may be the better solution.  A two-tiered ERP solution is when you have a main, global ERP software system to run most of your business but you have an additional, supporting ERP solution for specific parts, units, or regional offices where transactional and operational data rolls up into the main, global, Tier 1 ERP system.  This approach can result in simplified field-level operations, improved management functionality, and at the same time provide the necessary operational and financial visibility  to key staff and executive.

Let’s explore the three business drivers that may make a two-tier ERP approach the better way to go.

  1. Two-Tier for Functional/Operational Reasons -If your organization does many different functions, like manufacturing, distribution, warehousing, and retail for example, having a system that best runs your manufacturing division may be the best solution for your manufacturing division but not necessarily for the enterprise. Manufacturing compliance may also factor into the decision.  If, for example, one of your manufacturing divisions has strict or unique compliance regulatory requirements that must be followed, it may make the most sense for that division to have its own ERP system.
  2. Two-Tier for Location/Geographic Reasons - Location might also play an important role in deciding to use a two-tiered ERP system.  For example, if you have acquired a plant in a different country, it is important that those employees have an ERP system that they are able to use effectively.
  3. Two-Tier for Acquisition/Expansion Reasons - A third situation that may trigger the need to consider the two-tier ERP approach is where headquarters is acquiring businesses to support strategic, inorganic growth initiatives.  If resourcing a conversion of the acquisition’s existing ERP solution means big costs, or timing challenges due to a lack of available skills, then sticking with the existing ERP solution or putting in a more modern, simplified, user-friendly ERP system that communicates back up into HQ’s ERP system may make the two-tier approach the better decision.

A two-tier ERP deployment strategy is still a fairly new approach to doing business and this type of an IT initiative is not something to take lightly. Such an initiative will have visibility at the executive level as it will ultimately hit the General Ledger (GL) and be a part of the consolidated financial statements. You will want to speak with someone who has had some experience with this such as a Microsoft Partner. Can it work?  Absolutely.  Do you want to have experts on your side to ensure success?  Again, absolutely.  Although it’s not for every organization, these types of innovative approaches can empower your organization.

By Encore Business Solutions, a Microsoft Dynamics GP and AX reseller servicing BC, AB, SK, and MB.

 

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