Composable ERP: Definition, Key Features, & 5 Steps to Implement a Strategy

To keep up with rapidly changing needs, companies often seek flexible technology solutions that allow them to build a simpler, smarter, and more connected system. These are capabilities a composable ERP can offer.

In this blog, we’ll explore the essential features of composable ERP and how businesses can implement a strategy to tackle key challenges and improve decision-making.

What is Composable ERP?

Composable ERP is a modern approach to ERP solutions that allow businesses to build flexible, customisable systems by combining different modules or components, rather than relying on a monolithic and rigid solution. Think of it like building blocks - you can pick and choose the tools that best suit your company’s unique needs and assemble them into a tailored ERP system.

According to Gartner, composable ERP supports growth and efficiency rather than creates barriers. It enables organisations to keep pace with rapid business changes, making it easier to achieve their goals over time.

To help you understand better, here’s a comparison of traditional ERP and composable ERP.

What Are The Key Features of Composable ERP? 

There are at least five key features of a composable ERP system that lets businesses adapt quickly to changes, lower operational costs, and easily scale as your business grows.

Modular structure

Traditional ERP systems often come with a rigid, one-size-fits-all structure. Businesses are forced to implement a complete system, even if they only need certain functionalities. 

In contrast, composable ERP allows you to build a tailored system by choosing only the needed modules, like finance or supply chain, with the ability to add extra functionalities later. For instance, a manufacturing business might start with production and inventory modules and later integrate CRM for sales and customer relationship management without any disruption. This approach enhances flexibility and cost-efficiency, ensuring you only pay for the functionalities that add value to your operations.

Seamless integration

Traditional ERP systems often lack compatibility with other tools and software that businesses rely on. This often leads to fragmented workflows, data silos, and inefficient processes. The result? Missed opportunities for automation and increased manual effort.

Composable ERP is designed to effortlessly connect with your existing systems, third-party apps, and industry-specific tools. APIs or pre-built connectors enable smooth data flow between different platforms.

Imagine you are running a retail store. A composable ERP can integrate your POS and accounting systems, so when a sale is made, your inventory updates automatically, and your financial records remain accurate. This integration eliminates manual entry, reduces errors, and keeps your data up-to-date across all systems.

Effortless scalability

As businesses grow, shrink, or evolve, their ERP systems must adapt accordingly. Composable ERP provides the flexibility to add or remove modules without causing disruption. If you start as a regional distributor using basic inventory management functionalities, you can later add logistics and multi-location tracking modules as you scale. 

Alternatively, if you consolidate, you can easily remove unnecessary functionalities. This modular approach ensures that your ERP scales with your business - efficiently and cost-effectively at every stage of your business journey.

Ultimate customisation

Every business has unique workflows, and composable ERP allows you to tailor each module to suit your specific needs. Whether it’s modifying functionalities, interfaces, or reporting tools, your system can be designed to work exactly as your business demands.

For instance, a restaurant can customise the ordering module to reflect its unique menu and pricing. If you later decide to launch a loyalty program, you can easily adapt their CRM module to track customer points and rewards.

Real-time data insights

Composable ERP delivers real-time data insights through integrated analytics and visualisation tools. It allows you to access to up-to-the-minute information across all operations from a unified dashboard.

For instance, retail companies can use real-time sales data to spot trends or spikes in demand, allowing for immediate adjustments to inventory and procurement processes. This level of visibility enables quick decision-making, improves responsiveness to market changes, and enhances overall business agility.

5 Steps to Implement a Composable ERP Strategy

The study from Gartner also shows that failure rates for ERP implementations can exceed 70%. To ensure success, businesses must adopt a structured approach to implementing composable ERP. Here are five essential steps to guide you through the process:

Step 1: Assess business needs and processes

This foundational stage is critical, as it sets the direction for the entire ERP implementation.

• Identify stakeholders: Engage key stakeholders from various departments - such as finance, operations, and sales - to gather diverse perspectives on current challenges and requirements.
• Conduct a current state analysis: Evaluate existing systems and workflows by process mapping (document current workflows to identify bottlenecks and inefficiencies), technology assessment (review tools for integration and functionality gaps), and data quality review (assess the accuracy and consistency of current data).
• Define business goals: Establish clear objectives for the new ERP system. For example, improving efficiency, enhancing customer experience, supporting growth, and enabling data-driven decisions.
• Prioritise requirements: Rank identified needs based on their impact on business goals, feasibility, and cost-benefit analysis to focus on the most critical components.

Step 2: Select your appropriate ERP software solutions

Choosing the right ERP software solutions is key to a successful composable ERP strategy. The technology solutions you select will significantly influence the system’s effectiveness, scalability, and overall alignment with your business objectives. There will be several critical factors for you to consider before making the final decision.

• Modules selection: Choose best-of-breed ERP modules that fit your business’s specific needs. You can pick modules from different vendors or opt for an ERP vendor with a modular approach. For instance, Odoo offers a wide range of modules - such as sales, inventory, project management, and CRM - that can be integrated as needed. This allows you to implement only what is necessary.
• Vendor support: Evaluate the level of customer support and available resources. A strong vendor community can offer valuable insights, while reliable support is crucial during implementation.
• Cost considerations: Look beyond initial licensing fees to assess the total cost of ownership to ensure long-term value.
• Security and compliance: Ensure the platform is compliant with relevant regulations, such as GDPR for data protection or HIPAA in the healthcare sector. This will help safeguard sensitive information and mitigate potential legal risks associated with data breaches.

Step 3: Ensure integration with existing systems

Integrating your composable ERP with existing systems, such as accounting, payroll, or HR software is crucial for maintaining data flow, reducing disruptions, and avoiding operational silos. Proper integration ensures that all departments can access the information they need, improving overall efficiency and collaboration.

Step 4: Implement in phases with agile methodologies

Using agile methods to implement a composable ERP strategy means making changes step by step. This approach helps reduce risks and makes transitions smoother. Before rolling out the entire system, conducting a proof of concept (POC) can help validate the solution’s effectiveness.

Breaking the implementation into different phases allows teams to spot and fix problems early. Regular meetings keep everyone on the same page and aligned with project goals. This approach makes it easier for users to adopt the new system and ensures that each module adds real value. It leads to a more effective ERP system overall.

Step 5: Continuous monitoring and optimisation

Once your composable ERP system is up and running, ongoing monitoring is vital to ensure it meets your business needs. Regularly check system performance, user satisfaction, and data accuracy. This helps you identify any issues early on and allows for quick fixes before they become bigger problems. Use analytics tools to gather insights on how different components are functioning and how they impact overall operations.

Optimisation is about making improvements based on what you learn from monitoring. This might involve tweaking existing modules, adding new features, or even replacing components that are not performing well. By continuously refining your system, you can ensure it stays aligned with your business goals and adapts to any changes in the market or your operations.

Key Takeaways

Composable ERP offers a flexible and customised approach to managing your business processes. To ensure a successful implementation, consider partnering with an experienced team that understands the nuances of composable systems. Start your journey toward a more agile and tailored ERP experience today!

Reference:

• Gartner (2024). Enterprise Resource Planning to Optimize Operations