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Three Management Approaches to Choosing a New ERP System

Posted by Scott A. Holter on Jun 27, 2017 3:35:29 PM

Three Management Approaches to Choosing a New ERP System-1.jpgOnce every 10-20 years, most manufacturers and distributors shop for a new ERP system. Some go through a quick, simple exercise to determine if their current system is adequate for the near-term while others go through an entire evaluation and selection process that culminates with a purchase and replacement.  Through our 20+ years of experience, Meaden & Moore has identified three approaches, each appropriate under their respective circumstances.

Top-Down Approach

First, there’s the high-level, top-down approach. This begins with a quick and short identification of critical, high-level vendor, strategic, technology, and business requirements. The search then focuses on carving the universe of vendors to a short, manageable list very quickly based on which ones fulfill these high-level requirements.

The benefits to this approach are speed and management buy-in.  In fact, executive management and the Information Technology Department may drive this process without extensive end-user involvement. Done well, this process is low-cost, expedient, and unencumbering and often results in an acceptable solution. The primary drawback to this approach is that it ignores the detail processing and day-to-day tactical decision-making of the key system users. As such, it runs the risk of an implementation that requires extensive software modifications.

Upfront Discovery and Requirements Gathering Approach

The second approach includes greater, upfront discovery and requirements gathering. In this approach, the company’s subject-matter-experts and essential duty ERP users are observed and interviewed to determine a much longer list of requirements.  Afterward, software vendors’ packages are compared and contrasted according to their fit to the company’s requirements.

This approach results in fewer risks, especially the risk of extensive, unplanned software modifications. By defining the requirements upfront and seeking software that fulfills the requirements, “out of the box” customizations can be avoided.  In addition, this approach results in a lower chance of buyer’s remorse. 

The primary drawbacks to this second approach are the additional time and cost required of the buying company. Frequently, consulting firms are engaged to assist with visioning of the future-state and detailed requirements building exercises, thus adding cost to the process. Subject matter experts and users are engaged to define detailed requirements, adding to the time and cost of the project from an internal cost perspective.

Process Mapping and Blueprinting Approach

The third approach includes process mapping and blueprinting exercises prior to the requirements building efforts. Using this approach, the buying company defines its current state business processes and then redesigns them into improved, optimized future-state processes.  The redesigned future-state processes serve as the basis for detailed ERP software requirements building. Thus, this approach requires even more preparatory work than the second approach.

This third approach is best, almost exclusively recommended for companies that currently perform activities and processes in non-standard and dissimilar manners. For example, a multi-site manufacturer with different approaches to engineering change and design control may need to utilize this approach if the company’s goal is to standardize this process according to a common model based on industry leading practices. The drawback to this approach is the potential for added cost over the second approach without added benefit.

Meaden & Moore recommends utilizing this approach selectively where the first or second approach is insufficient.

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Topics: ERP

Scott A. Holter

Scott A. Holter

Scott Holter is the Director of Meaden & Moore’s Business Solutions Group. He has spent 20 plus years in manufacturing and technology consulting.

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