In today’s hyper-competitive business environment, Enterprise Resource Planning (ERP) systems are indispensable tools for organizations aiming to integrate, manage, and streamline their operations regardless of if they are in manufacturing, distribution, or commerce. However, to ensure an ERP’s success, data quality needs to be top notch. This is because the efficacy of an ERP system is significantly compromised by what we at PC Bennett call “dirty” data. For business owners, IT managers, data analysts, and C-suite executives, understanding the negative effects of dirty data on an ERP system is crucial. This blog post will dive into these impacts while highlighting the importance of maintaining strong data integrity.
The Negative Effects of Dirty Data on ERP Systems
When it comes to the effects that dirty data can have on an ERP system, the harms are far reaching and can impact every single aspect of an organization. It causes increased costs, time wasting due to manual data entry, and poor decision making to name a few. Below is an in-depth description of the negative effects dirty data can have on an ERP system, and in extension, a business.
Increased Operational Costs
The first area where dirty data impacts an organization is that it leads to increased operational costs as people spend more time and resources identifying and correcting errors. Manual data cleaning processes are not only time-consuming but also costly. Everyone knows a story of a person spending hours, if not days or weeks, sitting at their desk and analyzing figures to find and correct dirty data. This is a time drain and discourages employees from transforming their business because they are too busy being stuck in the data. This diverts valuable resources away from core business activities, leading to higher operational expenses.
Inventory Management Issues
Dirty data can also wreak havoc on inventory management. Businesses are more prone to either overstocking or understocking items, both of which have negative financial implications. The last thing an organization wants is to tie up capital and valuable storage space unnecessarily. On the other hand, understocking can lead to missed sales opportunities and dissatisfied customers. In either case, the business suffers because there is no mechanism to forecast accurately and precisely to avoid these issues. This is crucial because ERPs are super-powerful when it comes to predicting demand and adjusting inventory based on seasonality, which you can read about here.
Fulfillment and Supply Chain Disruptions
When it comes to the supply chain, dirty data heavily impacts order fulfillment and planning. Errors in order quantities, materials, or supplier information can disrupt operations, leading to extended delays, increased shipping costs, and customer dissatisfaction. A well-functioning supply chain is critical for timely delivery of orders and cost efficiency. Dirty data undermines this, as well as limits opportunities to create repeat customers.
Decision-Making and Strategic Planning
Dirty data can also lead to gaps in reporting and analytics, making it harder for leaders to make accurate strategic, long-term plans. Additionally, leaders are more susceptible to making poor decisions based on error-filled or outdated information, putting the business at a significant disadvantage. All of this means that growing the business, which is typically why ERPs are purchased, becomes cumbersome and potentially even more challenging than prior to having the system.
Customer Relations
Customer relations is a critical aspect of any business because generating repeat customers, positive reviews, and impactful testimonials are crucial to an organization’s success. Dirty data can severely harm this because it leads to incorrect orders, delayed deliveries, and billing errors. Consistently poor customer experiences will damage a company’s reputation and lead to loss of business. In a market where customer loyalty is hard to earn and easy to lose, maintaining high data quality is crucial for maintaining a positive relationship with clientele.
Compliance and Reporting Issues
Lastly, dirty data can result in non-compliance in industries that are heavily regulated. Dirty data also seeps into financials and having inaccurate reporting will lead organizations to not meet strict industry standards. This leads to legal penalties and damaged credibility among regulators and peers. Compliance is non-negotiable, and dirty data will put the entire organization at risk.
The Benefits of “Clean” Data in an ERP System
Let’s stop dwelling on the negative and instead spend the rest of this blog post focusing on the immense benefits an organization will feel when implementing an ERP system with clean data or after scrubbing their system for any and all dirty data. This is an important distinction because in an ideal world, and PC Bennett strongly suggests this, a business would clean their data prior to going live with their ERP to avoid any potential roadblocks. There is an understanding that this isn’t always possible which is why data analysts and IT departments should frequently check in on the quality of their data and clean it when necessary.
Increased Efficiency
To start, clean data minimizes the need for manual data entry and constant cleaning, allowing employees to focus more on revolutionizing their business instead of trying to maintain it. This leads to improved accuracy and efficiency, as staff can trust the data they are working with and spend less time verifying, which can take days or weeks jumping from system to system to validate all necessary data points.
Cost Savings
Clean data (which automatically improves system performance due to the right data being in the right place and not potentially rows and rows of unnecessary information) translates to cost savings. Instead of having a team member constantly staring at their screen filtering out dirty data, the information available will simply need to be validated every so often with soft check-ins. That leads to fewer errors to correct and more streamlined operations. With that, organizations can reduce their operational costs and allocate resources more effectively.
Improved Decision-Making
Accurate and comprehensive data in an ERP provides a solid foundation for reporting and analytics as well, empowering leaders to make well-informed decisions faster and easier. With clean data, businesses can identify opportunities effectively and efficiently, mitigate risks, and develop strategies that drive growth and competitive advantage. That means the C-suite at an organization will have an easier time leading their organization to new heights instead of simply maintaining where it is at.
Enhanced Customer Relations
By ensuring accurate and timely order fulfillment and billing, clean data enhances customer satisfaction and loyalty. Positive customer experiences build a strong brand reputation and foster long-term relationships, which are essential for sustained business success. Imagine a world where there are little to no erroneous orders and the impact that could have on an organization. Profits and sustainable growth could be so much more easily achieved!
Compliance and Credibility
Maintaining clean data ensures compliance with regulatory requirements and industry standards. This protects organizations from legal penalties and reputational damage amongst regulators and peers. Good data quality enhances the credibility of financial reporting and other critical business processes, which means there will be less disruptions when audit season rolls around.
Conclusion
Data integrity and quality are not just technical issues; they are business imperatives. The negative effects of bad data on an ERP system — ranging from increased operational costs to disrupted supply chains and damaged customer relations — highlight the importance of maintaining clean data. For business owners, IT managers, data analysts, and C-suite executives, investing in data integrity is crucial for cost savings, better decision-making, and sustained business success.
By prioritizing data quality, organizations can unlock the full potential of their ERP systems and navigate the complexities of today’s business environment with confidence. Don’t let bad data hold your organization back; take proactive steps to ensure data integrity and enjoy the myriad of benefits a reliable, efficient, and compliant ERP system can provide.
