What is an ERP?

After reading through some of my posts on ERP and restaurant technology, you might be wondering, “what is an actual ERP-but actually?” Not only limited to restaurants, Enterprise Resource Planners are used across all industries to help companies operate more efficiently. Theoretically, an enterprise resource planner is a system (or set of systems) that integrates information from all departments within a company. This information is then used to execute more “complex” calculations as part of process within a company. However, systems are not always able to communicate with each other-this is especially true in restaurants.

Before we dive into the specifics of an ERP, a quick history lesson on how these systems came to be will be helpful for all the restaurateurs out there reading. In the 1970s as computers enabled companies to process data and information, a group of former IBM data scientists saw an opportunity to improve a particular part of company operations-purchasing. After automating the sourcing process, they decided to tackle invoice management, production and inventory management. Realizing that these separate functions needed to be integrated under one system, the group of scientists had formed the foundation for one of the largest database companies in the world-SAP. Another well-known company rooted in IBM’s early history is Oracle, which is the parent company that purchased Micros- every restaurateur’s favorite Point of Sale System.

Now that Micros was backed by one of the largest database companies in the world, the assumption is that the product was going to dramatically improve and become less nimble-WRONG. Why would they? Everyone was used to it and it was already bringing in a ton of revenue. Why spend money to fix something that aint broke? Everyone has a special place in their heart for Micros rants, so I’ll stop here and just get back to the main topic-the Enterprise Resource Planner.

The ERP is a system that connects all data points within a restaurant, mainly grouped as revenues and expenses. The three main ones we are all familiar with is Sales, Inventory, and Labor. Restauranteurs who win are the ones who build controls around keeping these three categories in line with their budgets. Throughout restaurant tech history, entrepreneurs have built companies around a small niche within one of these three main ones. Some have been wildly successful on their own, others have been acquired, and others were around for a couple of years and eventually shut down. While we laugh at people who spend time studying history, they laugh when they see how history tends to repeat itself. We are at the exact point in time that those early data scientists were in the 1980s; right before SAP, a giant was born.

With the rise of these “micro” innovations, restaurants have continued to sign up for the marginal increases to their bottom lines. However, as more and more systems and vendors get tagged onto “the big picture,” data and information gets more and more convoluted. Since each company has their own reporting configurations (which usually are crap) and maintain focus on the problem that this specific vendor is solving, there is no regard for the end user and the real core problem for restaurants (and really all businesses)-having end-to-end visibility into data and information.

As a systems engineer, I have been trained to understand the what, the how, and the why of the big picture. Over the years, I have been narrowing my focus on one of the big components of the hospitality canvas: restaurants. With an initial goal of wanting to own and operate 6 restaurants, my goal has iterated to creating access and democratizing tech literacy across the industry. Narrowing my focus and my goals has led me to where I am today.

Recently, I joined a company that I wholeheartedly believe will change the world. Not only will we be providing access to real-time data and information, but we will educate stakeholders-from server to CEO- on how each of these data points directly impact their day-to-day jobs. We aren’t solving problems that our guests have: making a reservation, ordering deliver so they can Netflix and chill, or comparing menus online. Rather, we are innovating to help our key stakeholders who spend endless hours on manual tasks because of disjointed systems and convoluted reporting solutions that they have signed up for over the years. Improving quality of life is one of our main drivers.

Just to give you an idea of what a typical restaurants tech stack (set of solutions used for operation) can be, see below:

Figure 1: Illustrative Restaurant Technology Stack

Like the companies that SAP and Oracle are serving, restaurants also have a ton of information that is segmented across different systems, as seen above. It doesn’t take any special training to realize that this is complicated and overwhelming. Imagine how much stress this can put on an entire organization! As an optimist, I am hopeful that we will take the lead in creating the first Enterprise Restaurant Planner-known as the rOS (Restaurant Operating System) and bring together all key functions of a restaurant, and eventually an industry, under one system.

Does your restaurant or restaurant group use an ERP? What are some of your favorite and least favorite things about them? Shoot me a note at e.r.mandowsky@gmail.com or please leave a comment below!