The decision-making process is fundamental in any company. We could say that 90% of the time we spend in a company is spent making decisions, to a greater or lesser extent. In addition to the time we spend in this process, its importance lies in the fact that a good or bad decision can mark the future of the company in a positive or negative way, as well as its position with respect to the competition.

However, making a good decision is not easy, so it is necessary to have an efficient information system. For this, it is important to have quality data, from which we can elaborate valuable information that allows people to improve their knowledge about something in order to apply it for the benefit of the company.

There are leaders who make decisions based solely on their intuition, their ideas, etc..., and although sometimes this may have given good results in the stable environment in which we have lived for some decades, in the current turbulent and changing environment they are no longer effective.

The best thing to do is to adopt a system for agile, data-driven, fact-oriented decision making, what has come to be called an analytical orientation to data. This is becoming a critical requirement for developing truly competitive and successful strategies.

Of course, a good ERP system together with BI (business intelligence) applications brings a lot of value to decision making, as it contains valuable data on all the internal management processes of the company. Let's see what their role is.

The decision-making process and its phases

1.- Defining the situation

As always when we have to respond to a problem, the first thing to do is to define the situation in detail, and to do this it is necessary to determine what kind of problem we have and exactly how it affects the company, and to establish where we want to get to, what the objectives are. Therefore, the first step for the company's managers is to detect the fundamental differences between the current situation of their organization and the one they want to achieve.

2. Establish starting criteria, based on an objective system.

Once this first phase has been completed, it is time to decide which criteria are to be followed. In most organizations, people in management positions do not agree point by point on how they see things. Although the diversity of opinions is positive, it would not be feasible to make a decision if no one agrees.

Therefore, the first thing to do is to define a system that objectifies the process in order to easily find the necessary consensus. It is a matter of establishing which methods will be implemented and which points will be prioritized. ERP software will help you at this stage of the process, but let us come back to this a little later.

3.- Analysis of alternatives and selection.

You already have the problem and the criteria you want to apply to solve it. Now it is time for you to put on the table the analysis of the different alternatives that are presented to you. Rarely is there only one possible solution, so it is advisable that several people discuss the issue so that the ideas come out. When you have enough options, it is time to decide which one to choose.

It is very important that you do not see it as infallible. Even if you make what you think is the best decision, there will always be a possibility of error. However, it is true that relying on an efficient information system such as the one offered by an ERP management program helps to reduce the margin of error.

4.- Implementation and control of results

The next step is to implement the decision and wait for its effects. Finally, never forget to evaluate the results. This aspect will help you to see to what extent it has been appropriate to select that alternative and, in any case, you will be able to see where you can improve for the future.

How ERP helps the decision-making process

We have already said that an ERP program favors better decision making, and this is because it allows you to apply a much more efficient information system that reaches all areas of the company. We can say that it is a repository of great value to articulate a reporting that favors better decision making.

Let's see what is the value that this type of software brings to decision making.

A.- Single record philosophy

The fact that all data is stored in a single place is an advantage for data quality, since it guarantees data consistency.

ERP is a collaborative tool. That is, all employees can share relevant information through this system, and everyone can access the same information, so that communication between departments is optimized. In addition, ERP also has the functional characteristic of integration, making all systems talk to each other.

Thus, it is much easier to make an appropriate decision if it is based on consistent data, since the information and criteria to be followed are unified throughout the company.

B.- Indicators and reliable data

An ERP software provides you with reliable indicators about your company, since it is the most effective source of information about the internal data referred to the management processes of a company. In this sense, an ERP management program gives you a global vision of your business in an updated way. In this way, it will be easier for you to set the criteria to be used and to measure the objectives you are pursuing.

In addition, the ability to access all data in a structured way allows for the rapid production of management support reports tailored to the specific needs of each situation, which facilitates and greatly reduces the time spent on decision making.

An ERP system can help improve access to data through:
  • Integration: By making all systems talk to each other (and to all staff), data can be easily shared and communicated.
  • Automation: The automation capabilities of an ERP allow data to be collected and collated automatically, eliminating human error.
These two functional features of ERP help turn messy data into useful information that can be leveraged to improve and transform the business:
  • A large volume of data can be overwhelming, but when you have a way to organize it into hierarchical information, you can use it effectively.
  • An ERP system not only makes data easy to access, it also makes it meaningful, which helps you gain new insights about your company, inventory, or customers.
  • The software integrates all systems and automates the recording processes.
C.- An easy and intuitive system

To achieve the agility that a decision making system requires, an easy and intuitive system that allows employees to use it efficiently is needed.

ERP systems have many advantages, but they will not be effective if they are too complicated to manage. Today, there are ERP systems that are highly customizable even at the user level, making them simple, intuitive and easy to use. For this, it is important to choose an ERP application that has just what is required, without further complication, and take the time to explain the details of its use to your employees.

D.- Data Visualization - BI Integration

In the end, the ability of people to understand data is what allows us to improve our knowledge about something. In this learning process, it is very important how we perceive the information calculated from the data, since our understanding of the facts is multiplied when we perceive it in a visually effective way.

The ERP offers reporting tools, customized data visualization and predictive analytics solutions. You have the option of including a module that allows you to generate statistics, tables, graphs, etc.

If, in addition, the ERP is integrated with any BI tool, the power of analysis is multiplied through very powerful visualization systems that allow navigation through dimensions and their customization to the problem that requires our attention.

E.- Risk management inherent in any decision.

Finally, these types of solutions help to manage uncertainty and minimize risks through their suite of functions that facilitate their control. Some examples are shown below:
  • Using demand-driven MRP to avoid human error in the supply chain: When it comes to the supply chain, bad decisions can put the company's entire operational capability at risk. To better decide in this environment, demand-based material requirements planning (MRP) can track the company's material needs and suggest adjustments in real time.
  • Use SRM for better supplier relationship monitoring and full traceability of operations: SRM (Supplier Relationship Management) is a component that:
  1. Provides a better overview of potential disruptions in the supply chain so that the manager can decide accordingly.
  2. Minimizes the risk of shortages by providing a seamless way to interact and negotiate with suppliers.
Provides in-depth analysis of supplier performance.

Use of predictive analytics to drive risk management decision making: With all data brought together in one place, the organization can leverage predictive analytics and business intelligence applications to improve forecasting and risk management. Also use BI (Business Intelligence) tools to perform predictive analytics that will feed into decision making, supporting or not supporting planned courses of action.

Conclusion: a key element in decision making

In a business environment in which most companies compete, developing agile decision-making processes can be the basis for a significant competitive difference.

Decisions made by a company's decision makers can never be based on emotion or intuition. Instead, the available data must be analyzed to get an overview of the organization's situation. This is where ERP systems come into play, helping to turn data into useful and effective information to improve and transform the business.

Each ERP system provides its own functions and analytical solutions to help you make decisions. In addition, each management area has specific applications designed to provide an overview of the status of operations, records or a user-selected combination of analysis dimensions.