5-step Consideration when choosing ERP system for your business.
1 - Why you need a new system: Figuring out your business drivers.
Your first step in figuring out what you want is determining what your challenges are and what your business needs to do better.
Consider these business challenges:
- Economic conditions
- Increased competition
- Ability to execute strategy
- Market volume
- Lack of brand equity/awareness
- Operating cost
Some other business drivers to consider:
- The speed at which you do business—Can your systems keep up with the pace of change in your industry? Are your business processes flexible enough to adapt as your business grows and changes?
- Decision making— Can you get the information you need, when you need it, to make timely decision?
- Access to data—Can you access all your data, no matter where it’s stored?
- Better flexibility—Can you easily upgrade or add to your software when you need to? Can your software scale to meet your company’s growing needs?
- More productivity—Is your software easy to use, or do your workers spend more time fighting with your systems than focusing on their key tasks?
- Complexity—Do you have to manage complex products, supply chains, and sales channels, while dealing with volatile customer demand? According to IDC Manufacturing Insights, complexity is set to increase in many business areas and success will come from managing these complexities better that the competition and with an eye for customer fulfillment.
Whatever your key concerns, the right ERP system can help by:
- Streamlining, accelerating, and standardizing business processes
- Providing better visibility and intelligence across the organization and along the value chain
- Providing better access to and unifying data
- Improving process flow
2 - What do you want to accomplish: Establishing your ERP strategy.
Once you’ve identified your key business drivers, you need to figure out what it is you want to accomplish. What will be your key initiatives and what do you need from your ERP system in order to deliver against your business goals?
Many companies make the mistake of trying to solve business problems with software. Software is not a part of this step. Develop a list of what you want your company to achieve, not features of the software. In other words, avoid creating a list working from the bottom up, with items such as the need to email a PO to a vendor, or the need for a report that tells who didn’t clock in today.
So, what is it that you want to achieve; what are your goals? Listing these has a more far reaching effect, and involves training employees and streamlining business processes that can transform your culture and increase profitability.
After you’ve listed your goals, list your initiatives. What are you going to do to meet your goals?
Ask yourself if the business leaders in your company—the people who will ultimately have sign-off on your decision—agree with your vision? If they do not agree, either convince them of your wisdom so that they do agree, or change the list. It is vital to get buy-in from these business leaders because choosing an ERP system is a business decision—not just an IT choice. Remember, that list contains your goals. You will judge all software packages on how well they will help you achieve these goals.
3 - What you need from your software: Determining your priorities.
Selecting and implementing an ERP system is a major, expensive project. While your business needs should drive your selection, you obviously must focus on the technology as well. It doesn’t matter how carefully you’ve strategized and mapped out your processes, if the software you select can’t deliver what you need. Get it wrong and this will only act as a further barrier to achieving your goals.
There are a few important selection criteria for manufacturers choosing an ERP system:
Functionality —
Old-school ERP systems were traditionally transactional in nature and focused around financial management—general ledger, accounts receivable, and the like. Today, however, manufacturers have a new set of requirements; they need ERP systems to be more operational and better equipped to serve the entire enterprise. Your ERP system needs to foster a decision making environment and be flexible enough to match your business processes—not force you to change your processes to meet the way the system operates. And, it needs to be able to adequately serve your entire enterprise—and scale as your
company grows and evolves.
- Customization is a large part of the functionality equation. Can the system do what you need it to do right out of the box, or will your vendor (or consultants) need to customize it to provide the functionality you need? If you have to modify the source code to meet your needs, you’re looking at a greater investment in money, time, and support. And, customization can impact your system’s ability to be easily upgraded down the line.
Ease of use — Your ERP system may have all the power in the world, but if your users can’t
figure out how to get their jobs done, it’s useless. Your ERP system needs to match the way you do business—putting information from all the systems that run your business at the fingertips of your users. Presented in a way that makes sense to them, and that doesn’t force them to toggle between disparate screens, log in to disparate systems over and over again, and waste time digging just to get what they need.
Business fit — Your ERP system needs to fit your business. Not the other way around. Discrete manufacturers have different needs and processes than process manufacturers. Your ERP system needs to support your way of manufacturing. If you’re an engineer-to-order manufacturer, you’ll want a system with strong project management functionality, so you can manage the bid process straight through to end product, with a keen focus on managing cost. Similarly, if you’ve implemented Lean manufacturing principles, you’ll want a system that provides real time alerts to further your JIT processes.
Industry fit —
A pharmaceutical manufacturer has little in common with an automotive
manufacturer. Their sales, production, supply, and accounting requirements couldn’t be more
different. Their ERP systems need to acknowledge, accommodate, and cater to those differences.
Integration —
Your ERP system needs to connect to other systems and to the specialized applications you need to support your differentiating business processes. Whether those critical business systems reside within the four walls of your plant, in a remote location, or in our primary supplier’s facility on another continent, you need them to seamlessly connect and communicate to keep data flowing smoothly.
Deployment options — Deploying an ERP system no longer has to mean running the software strictly on premises. Modern ERP systems give you more deployment options that ever. If you have a strong IT department that can manage upgrades and data security, you may want to go with a strictly on-premises model. If you’re looking to cut your start up costs and get up-and-running more quickly, you might want to consider an on-demand/software-as-aservice (SaaS) or cloud deployment model. In that model, you license the software from your vendor for a flat, per user rate. The vendor provides data center management, the hardware, upgrades, and all of the support.
If you pick a partner like
Infor, you’re guaranteed to have global support—whether your ERP system is running in your own data center or we’re supporting you through hosting or a subscription model. We can also tailor a hybrid solution that provides any combination you want.
4 - What it will really cost you: Calculating the total cost of ownership.
There are two types of costs to consider.
- The first is the initial purchase price. This includes all of the software, hardware, maintenance, training, and support services. The actual price for that will be based on the scope of your project, the size of your implementation, the geographic coverage, and other related factors.
- The second cost to consider is: What it is going to cost you over the lifetime of the software? What is the total cost of ownership (TCO)? According to a survey by IDC Manufacturing Insights, manufacturers keep their ERP system for 10-15 years on average, so you’re going to need it to grow with your business.
5 - Who do you turn to: Choosing the right vendor.
Your ERP system is a pricey piece of software that’s going to be in use for a long time. So, you’ll want to make sure the company you choose will be around to support it. Here, you’ll want to look for financial soundness, organizational stability, and a track record of providing exceptional customer service.
Beyond those somewhat obvious characteristics, consider:
- Vertical expertise — Can this company provide references from customers within your industry? Within your vertical? Do they offer industry-specific best practices and processes, built in to the system?
- Global/local presence — Does this vendor do business in the locations where you do business? Do they offer a local presence where you need it? In the languages your company uses and the time zones where you operate?
Vision — What is this vendor’s technology vision? Are they looking to innovate in ways that could benefit your business?
- R & D capabilities — What is the investment into the enhancement and roadmap for the product you are looking to invest in?
- Customer service — How is the vendor’s track record of customer service? Where do they
rank on surveys? How many customers are repeat customers?
- Credibility — What do existing customers have to say about the vendor? Beyond those references, what is the word on the street—from review sites, social media networks, etc. Does this vendor have a good reputation?
- Implementation ability —Your ERP system is only as good as its implementation. So, before you decide on a particular ERP system, carefully consider how a vendor will deliver and support your project.
Source: Infor
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