This is Part 1 of a two-part series that gives you a better perspective on Best Practice for ERP System Selections.
As Steven Covey said, to begin you start with the end in mind. It’s very true when you start to plan for and design what the new ERP (Enterprise Resource Planning) system will look like for your company. At a high level, here’s some best practice tips on how to start a project like this:
Start with Overall Business Objectives
What are your plans for organic growth, expansion – both domestic and international, new products, innovation, ownership, manufacturing processes, distribution channels, competitive advantages, and overall profitability? Where are you going as a company?
Tie ERP Strategy to Your Key Business Objectives.
It depends on the type of company you are – if you are a low cost/low price provider, you will want a different type of software than say a high technology leader in the industry. Look to establish links between your core capabilities and your key business objectives in order to leverage your strengths to achieve both your short-term and longer-term goals. Ask yourself, “Why are we doing this and what do we hope to achieve?”
Look at Vendor Characteristics and Longevity
Do they offer a niche boutique software solution, or a general purpose package? Do they specialize in your industry with a large installed base? Are the large players a good choice or not for you? How stable are they financially? How long have they been in business? What kind of support do they offer and is it a good fit with your organization? In the end who do you want to align with for long-term stability and support?
Do a Detailed Analysis
Once you have your overall strategy in place, you need to do a careful discovery and evaluation of your specific needs to document exactly what the system needs to do to support your particular processes. Each company is unique in some ways and those things that make you unique need to be identified and addressed in terms of core functionality and priority as part of your decision criteria. Some of these differentiators may become “deal breakers” as you go deeper into the evaluation and selection process.
Only Engage Vendors that have a Good Fit
Don’t waste time talking to vendors or seeing demos that do not address your core needs and concerns. Your documented requirements should act as a “shopping list” of key features/functions you are seeking. Quickly filter out the potential vendors that do not meet your criteria.
Create a Cost/Benefit Model
Every ERP system is a significant investment in money, time, resources and effort. Look at where you will receive tangible benefit from a system, before venturing into this process. Many ERP projects have been put on hold because a clear Return on Investment (ROI) was not identified or justified. A bad decision can in some cases cripple a company financially and can cause significant issues in cash flow.
Don’t Underestimate the Change Management Part
ERP projects in general are all about change. Change is a very good thing, but at times can be a scary thing to your people. Anticipating and planning for how to respond to change is a critical success factor for buy-in, participation, and overall adoption of new business practices and processes. Minimizing the impact to people’s daily activities, or not including them in the process can be very detrimental to having a successful launch and deployment of a new application system.
Get Executive Buy-in
Executive leadership is essential to a successful search, selection and implementation process. The President/CEO, CFO, COO and others all need to be on board with supporting the process. Often times it falls to the IT person to lead the ERP project without much executive support. They typically have limited visibility into the whole organization’s needs, as well.
In part 2 of this series, we will provide helpful hints that will reduce the risk of picking the wrong system, ultimately leading to a smoother implementation, and valuable daily working application.