An ERP (Enterprise resource planning) is the process management software that is used to manage the back office processes of companies. The software automates the typical process flow of the business from sales, to provisioning, to billing as well as tracking financials.
There are many companies that provide ERP solutions, so how do you choose the right one for your business?
Many businesses rely on a broad focused ERPs that are designed to support the processes common to most businesses. Solutions like SAP, Oracle and Infor are designed to support common processes for average businesses. However, if you are a specialty business, like a rental business, you might be better served with a company that specializes in supporting unique rental processes.
So let’s start with some of the broad reasons why the rental industry struggles with generic ERP software:
The rental industry is huge, it cuts across many disciplines and business strategies. The big ERP players like Oracle, SAP, JD Edwards, Infor and IFS think in huge vertical industry blocks. If you approach them as a rental business the chances are you are as likely to find yourself talking to someone in their banking division because leasing is as close as they can get to the concept of rental. The chances are you’ll end up explaining the difference between a lease (which is a purely financial transaction) and a rental (which is very definitely not!).
This vertical market approach makes it very difficult for the big ERP players like SAP, Oracle and JD Edwards to truly appreciate the requirements of the rental industry. Rental goes across so many of their verticals that no-one within the ERP software company actually fully grasps it as a market on its own. For those that have crossed the threshold and are starting to look at the rental space, they are targeting equipment dealers (ie: the people who may already use their software for manufacturing or sales) as a potential segue into the rental industry. What they are looking at delivering are bastardized dealer management systems or even bastardized work order systems, not systems designed for rental from the ground up.
Having sat through a demo from one ERP player it was clear that they had basically used their maintenance system as a billing engine for rental with very limited charging options. More importantly, they hadn’t considered many of the day-to-day activities which rental companies expect from their software. Like being able to effectively reserve something for a future order (except by essentially stopping anyone else from using it during the intervening period), manage a re-rental (except by processing a purchase order to buy the asset and then eventually crediting it back when the equipment was returned) or even do something as simple as a partial return leaving the remaining equipment on rent.
The real issue is that because of that broad business focus none of the big ERP vendors have a genuine or consistent strategy for rental. Instead, rental is something that they find themselves tacking onto deals. It often becomes a special project or later phase project that never happens or is short sighted.
As a quick example, let’s take billing complexities: automatically billing customers based on their preferences is a key driver within the rental industry. You may bill some customers weekly, some monthly, some on certain days of the month and some when they get to a certain dollar amount. Customers might also be billed different rates for using the machine more than the allotted daily rate. Many rental businesses charge double and triple shift for using equipment more than 8 hours a day. Charges can also vary due to inclement weather days, swap outs of equipment and non-productive weekend hours. Add to that the common occurrence of having only part of the equipment returned at pickup and making sure that your billing all still makes sense at the individual asset level.
Rental charges and billing are more complex for rental companies versus many other industries. Make sure your ERP that can support those billing complexities These billing situations are all unique to the rental industry and tough for a broad process ERP to handle.
When it comes to selecting your rental software for your rental business, make sure it supports your business needs. Don’t be sold on an ERP due to its sheer size and scale and use in other industries. Demand to see the functionality for yourself. Not a power-point presentation but the actual functioning software. Make sure you ask to see enough to judge for yourself whether a generic solution can ever meet the complexity you need for your rental equipment management solution.
To read more about the differences in a rental ERP versus broad-spectrum, check out this executive briefing paper.