The benefits of ERP are widespread. When a business successfully selects and implements the correct solution they can boost productivity, improve customer tracking, operate a better inventory, automate sales, manufacturing, CRM and accounting, and benefit from one single, integrated piece of software. It can help senior management gain insights into business performance, provide a robust platform for growth, and simplify a supply chain from end-to-end. However, as with any solution that delivers significant long-term benefits to a business, choosing the right ERP solution has its challenges.
The Business Issues to Consider
There are six critical issues to consider when planning to invest in ERP:
How does the solution fit into your business?
Commercially, how much will ERP cost, and how can you ensure you always maintain a good total cost of ownership?
How functional does your solution need to be, and how do you avoid making it overly complicated?
What infrastructure is required?
What sort of training will be needed?
What processes will the solution have to operate from day to day?
In brief, how can you ‘eat the elephant’ of ERP implementation and ensure a successful, on-time, on-budget go-live date?
It seems a lot to think about, but by taking the time to consider why you are investing in ERP, and mapping your aims and objectives down from the outset, you can ensure that you tailor a solution to meet your business needs and avoid any unexpected operational errors. According to Panorama, only 27% of companies that implemented ERP globally failed to recoup the initial costs associated with the purchase. However, when you start to experience the cost benefits is likely to be months after the implementation, and may even take up to five years of using the software, or more, for cost benefits to be fully realised. Much of this depends on whether or not you have selected the right solution for your individual business and the more planning and preparation you do at the purchasing stage, the quicker you are likely to start experiencing the benefits of ERP.
Where Does ERP Fit Into My Business?
Knowing why you require an ERP solution, whether it’s a new model, an upgrade or a legacy replacement model, is the key to making the most of your overall ERP investment.
Think about what processes you are trying to control in your business.
Is your company growing at a rapid pace and you need a scalable, centralised solution to support this growth?
Do you want a more transparent view of your business processes so you can learn to automate functions for optimum business efficiency?
Do you want a single solution that can handle all these tasks at the same time?
The scope, size, complexity and change required for successful ERP implementations requires involvement and buy-in from everyone within a business. Reducing the planning process to an informal task can lead to an improper commitment of time and resources. Without major decision makers involved from the beginning, leadership and stakeholder support, critical steps and activities can be easily overlooked.
One of the most effective ways of budgeting for ERP is by selecting the right user licence. As a growing manufacturer and distributor of goods, you have a real need for a single integrated business solution to manage your high volume orders. You need enough user licenses and the right combination of modules within your solution to deliver value throughout the supply chain, but you don’t want to be limited financially to the amount of licenses and modules that you can afford to invest in. No business should be forced to limit its number of users or operate ERP with limited functionality, so how do you jump this hurdle?
The solution is to invest in an ERP solution that offers a range of transparent licensing options and modules that suit each individual customer so you only pay for the modules you use, rather than a complete package. Make sure your licensing options are flexible and can be changed at any time so you are not ‘fixed-in’ to a long-term licensing fee. This not only keeps associated costs at a minimum but it also allows you to benefit from a customisable solution that can support future changes in your business.
Choosing the right deployment model
Another cost-related issue to consider is the right deployment model for your business. The three primary options are on-premise ERP, hosted/managed service ERP and cloud ERP solutions. Gartner has already openly predicted that 47% of organisations utilising cloud ERP will move their systems to the cloud over the next five years, and while it is certainly a buzz word for organisations, this doesn’t mean that cloud ERP is necessarily the right model for your business.
There is still a place for on-premise deployment of ERP, and typically hosted ERP solutions provide greater flexibility to tailor service packages to help meet the individual needs of your organisation. However, for cost conscious businesses that don’t want the worry and hassle of managing their own solution, cloud ERP is the most beneficial deployment model.
A cloud based solution reduces dependence on internal ERP departments because data and hosting is all looked after externally, by your ERP provider. It keeps initial investment to a minimum, allows you to make changes to your solution on demand and allows you to benefit from seamless upgrades.
How functional does my ERP solution need to be?
The functionality of your solution depends on your planning processes; what you want to achieve and how ERP will fit into your business processes. You will need to consider any other business-critical systems that you currently operate (HR software, production management systems or quality control systems etc.) and how your ERP solution will connect with, and send information between these systems.
How customisable does my ERP solution need to be?
If we take the typical business model of a growing manufacturer, which also has its own distribution facility, some of the aims and objectives in the planning stage would likely include the following:
Automate shop floor data collection
Create dashboards and metrics for reporting
Provide an EDI interface for customers and suppliers
Reduce administration time
Automate load planning to expedite deliveries. For example, if your business uses pick lists to verify quantities of inventory, ERP can enter these details into a load planning interface to generate actual dispatch notes which can be accessed and viewed from your ERP solution
Manage design departments and manage multiple documents
The biggest challenge to fulfilling these needs through ERP is deciding on whether or not to invest in an out of- the-box solution or a product that better supports customisation and personalisation. While Panorama has found that only 11 per cent of companies will want a customised ERP solution, those that do can better protect a competitive advantages.
In order for a company to have a true and sustainable competitive advantage in certain areas, it has to be something that can’t be replicated on a large scale with generic ERP systems and something which has been personalised to the business user. On the downside, upgrades can become more costly and risky when you have added your own code to your solution and often customisation can mask new business processes and software functionality that you should instead be adopting, hiding a problem rather than solving it. You may be in the 89% of companies that don’t want to customise their solution but knowing you have the capability to do so can ensure you always get the most out of your ERP investment.
Do you manage engineering or prototype production projects? Do you install or service the products you manufacture? If so, then your ERP solution will likely need to control prototype and production levels throughout your entire business and fully integrate with your production management system. Perhaps your existing production management system does not offer high functionality and you need this module to be incorporated into your ERP solution? Interlinking your new product introductions at the commercial planning stages will help you shape the functionality of your solution.
For end-to-end manufacturers a reliable and successful ERP solution will incorporate document generation, design and issue control. This can be a key enabler to reducing administration time and automating manual, labour-intensive tasks. If your business is a designer, manufacturer and distributor of products then you will likely need some sort of document management incorporated into your ERP solution.
‘Eat the elephant’ of implementation
According to Panorama, 53% of ERP implementations incur cost overruns and 61% run over a longer period of time than originally promised. As with anything, the bad cases are always more widely publicised than the good but often the elephant of implementation only rears its ugly head when a company has gone into the implementation process without the four implementation ‘Ps’ – plan, promote, (be) practical and post implementation.
Once implemented your team will need to be able to easily operate your solution and make sure that they can master it quickly. Speak to your vendor about the training they provide and make sure the solution you invest in is intuitive. ERP solutions are built on a wide number of frameworks but those styled upon Microsoft solutions can be more intuitive and easier to operate than others, because they are built upon solutions that you probably use every day in your business anyway.
Making the right choice
There’s no doubt that ERP is a big investment and as with any other large scale investment, it brings a number of risks. However, with proper planning and a rigorous procurement approach, together with appropriate strategic input, it is possible to plan a project to budget which does deliver high value outcomes and exceed client and executive expectations.
That’s why Panorama’s 2013 ERP Report found that 86% of respondents were satisfied with the ERP system they chose to implement and 73% of respondents stated that they did recoup the costs of their ERP investment after implementation.
Often selecting the right ERP solution is a matter of psychology rather than software functionality. Making sure you have planned your ERP journey, have realised a specific need for the solution and are prepared to get the most out of it following go-live will all aid your chances of success. And with the right ERP provider onside, listening to your business needs and tailoring solutions for you, the typical risks associated with ERP investment are kept to a minimum throughout the entire process.