ERP Evaluation, 8 Lessons Learned
Choosing to move forward with a new ERP solution is a significant undertaking for any company, even more so when the company happens to be a small to medium size manufacturer that generally has more functional areas to consider and likely has more budgetary constraints. The hope is that for the money and effort invested, the implemented ERP system will provide the backbone of the business, connecting all the functional areas within the company to improve decision making, efficiency and the customer experience while also reducing expenses and redundant manual processes.
A well implemented and correctly utilized ERP solution should be able to return multiples of the initial investment over the course of a few years and should continue to provide benefits as the business grows and the system is continually refined to meet changing needs.
Considering the cost and potential benefit involved, companies should do their due diligence in evaluating their potential choices when it comes to finding the right ERP solution.
Because the marketplace for ERP products continues to change, there are a host of factors to be considered that can make the evaluation more cumbersome. Among these factors are increased vendor options, evolving systems functionality, changing deployment methods and improved implementation tools, all while information (and disinformation) is more readily available from more and more sources.
Having been involved in over forty ERP evaluations in recent years, the frustration and confusion that these factors can cause for the evaluating company is evident. Based on personal experience, here are some suggestions to mitigate the frustration and confusion of ERP evaluation that will likely make the experience and resulting decision more satisfactory:
1. Know the problems you are trying to solve: There must be reasons that you are taking this major step and they should be significant enough to warrant the expenditure of effort and money. Be specific about the problems, quantify them when possible and have a vision of how removing, or at least mitigating, the problems will positively impact your business. Make sure this can all be communicated clearly both internally and with whomever you decide to engage.
2. Have a team that is on board and has authority to make decisions: An ERP evaluation project takes time and effort that without executive backing and a team to support it, will be a complete waste. Ideally, senior members from each functional area within your company should be part of the decision committee and your project team leader should have the executive sponsorship necessary to drive the project forward. All team members should be aligned on the business issues to be resolved and support the necessary changes that will need to take place.
3. Ensure that consideration is given to resource and budget allocation: Be aware that some of your critical employees will need to be involved in this process and must be given time to do so. Many evaluation projects fail because they are not given priority over other critical business functions, so it is important to plan ahead and make sure the project stays a priority for the entire team.
Based on the positive impact assumptions from step one above, it is also necessary to establish a realistic budget to narrow down the field of options. The least expensive options may not solve the problems, and the options that do may be out of the initial budgetary range. Balancing all the various financial considerations, try to establish a budget number in line with the problems that need to be solved and the resulting benefits.
4. Establish what can be changed and what must remain the same: It is highly unlikely that any ERP system is going to align with every business process and procedure that is specific to your business. A good ERP system will have the flexibility to be modified to meet your business requirements but that generally carries an additional cost. During implementation you may also find that one of your business processes which works well in one area may be the root cause of one of the problems you are trying to solve in another area. In short, it is very likely that at least some level of compromise will need to be reached.
Now is a good time to establish how open the team is to making changes and what critical aspects of your business must remain unchanged. No doubt this initial assessment will be modified as you get deeper in the evaluation process, but it makes sense to have a starting point.
5. Determine preferable method of deployment: While this is not necessarily a critical decision point in the beginning stages of an evaluation, some companies either have regulatory or business concerns that would influence how they might deploy. Additionally, some products offer different functionality depending on deployment that could affect your requirements.
In some cases, the software provider does not offer deployment options, so that could be a consideration as well. If you are interested in reading more about deployment methods and some of the general pros and cons, please review our article on ERP Deployment Options.
6. Narrow down the field of choices: Narrowing down the field should take into account not just the software product, but also the services involved in implementing it. Depending on the requirements you established in the preceding steps there are likely a number of ERP solutions that will fit your company nicely, but if those products aren’t implemented correctly the results will likely not resolve the issues that you purchased the product for in the first place.
From a product perspective, having completed steps one, three, four and five should help you narrow the field considerably. Budget considerations aside, a good ERP system will have the broad and deep functionality to handle most of the requirements across your organization while also providing the flexibility to be modified in those instances where you may need it. Additionally, depending on the complexity of your business, it may make sense to look at an industry specific ERP solution that is specifically designed to solve some of the challenges you may be facing. To narrow down the field even further, there are many sources available that provide product comparisons but be aware that those sources may not always be as knowledgeable or independent as they claim. It is generally a good idea to cover most of your requirements with the fewest number of products to avoid potentially costly integrations.
Implementation has become somewhat of a hot topic within the ERP software industry over the last few years. As training and implementation tools continue to improve, software providers are packaging these tools into programs that claim to yield faster and less expensive implementations, providing your requirements fit within predetermined system functionality. You may want to consider these programs if your company has the resources and highly experienced staff necessary to take on the full burden of an implementation, but most companies, especially those in the SMB manufacturing space, tend to be resource constrained.
For those that will require standard implementation services ensure that the providers implementation methodology will work for your needs. Unfortunately, that conversation often happens too late in the evaluation process when the field has been narrowed down to two or three providers.
7. Allocate enough time for thorough evaluation: Looking at this from a vendor perspective, many ERP evaluations appear to be somewhat chaotic, with intense short periods of activity followed by long periods of silence. When those intense periods occur, the expectation tends to be consuming a day’s worth of information in a two hour time window. Vendors need appropriate time to address requirements and the evaluation team members need time to assimilate information and ask questions.
Establishing a reasonable and mutually agreed upon schedule of events in the beginning, and then making sure that time-line is adhered too, can eliminate much confusion throughout the process. One critical, but often overlooked event that should be on this schedule is a discovery meeting in which the provider and evaluation team can ensure that all major requirements will be addressed in the subsequent demonstration.
8. Stick with your schedule. This was mentioned earlier, but it bears repeating from a different perspective. Depending on how critical your uncovered business issues are, there is likely an opportunity cost to your company based on delay in moving forward. A standard ERP implementation with relatively low complexity can take 6 to 9 months depending on your resource constraints. ERP evaluations are trending towards taking longer and longer. The point to be made here is that once the evaluation is completed and a decision has been made, the system still needs to be implemented, so any delays in evaluation can significantly impact your time to full utilization of your new system.
On a final note, a properly executed ERP evaluation requires time, effort and attention to detail. Anything less and the resulting decision could create issues for many years to come. Considering that the internal team members are often already resource constrained, some companies will rely on outside sources to help them through the evaluation process. If you do choose to move in this direction it is important that you find a partner that has specific experience in this area within your industry and that they are not tied to a specific software provider.