What Now! Part 5
Be Realistic With The Budget
There is always a sticker shock that comes with the cost of purchase and implementation of an Erp system. In a mid-sized company the true cost of implementation for an ERP software package will start at 70% of the cost of the software and could be as much as 300%. This variation is a result of the variety and complexity of business models and serves to highlight the value in knowing your vendor’s capabilities and your internal capabilities.
You have done your due diligence, researched your vendor, analyzed your processes and set you goals. That should show you the value in an Erp system but sometimes that value is not always affordable, we all have a King’s dreams but we don’t all have a King’s budget. That is why we suggested you list the features as “wants and needs” so you can plan for a staged approach and implement what you need then, budget and phase in what you want.
You are attempting to make your business operate more efficiently and effectively and give yourself the capability to do more with less. Your bottom line will improve and the return on your investment will be realized if you have planned for it. In the end that is exactly what Erp is, an investment in your organization.
What Now! Part 4
The True Cost of ERP: Implementation
The cost of a complete, end to end ERP implementation project is very high It is critical for an organization to make the project a success and start deriving benefits out of it as fast as possible. But what is it that makes an ERP implementation project successful?
There are a series of common factors:
-A well-defined project organization structure that details the project planning, execution, and monitoring mechanism
-An attitude which stresses business transformation instead of process automation
-An approach to implementation that brings about the proper integration of people, process, and technology through effective management of the change process, specifically the expectation and the result.
What we are saying here is you must define and plan the process in coordination with both the vendor and your organization. You should have an internal team that works with the vendor’s team to layout a step by step plan with timelines and milestones clearly defined and monitored. The tasks associated with implementation and start-up should be distributed to those who can meet the timelines in the most effective and efficient manner. If you have chosen to customize right away those customizations need to be analyzed and simulated and scored according to the goals you established in your search.
If you organization has ever added a new product line or a production line, you know how disruptive that change can be. But those changes only affect the employees in direct contact with the new product or the production line. The implementation of any Erp system will cross all levels of you organization and affect most of your employees daily routines. This makes the implementation of an erp system the biggest change management project you organization will embark upon. Therefore your internal implementation team must treat it as such and be proactive in its promotion to your employees. The benefits and long term goals need to shared and reiterated often with your employees so that the long term ROI can be achieved. It is our advice that the internal implementation team consists of not only C- level managers but managers from all levels as well as non managerial staff, so that input and buy in from across your organization can be achieved.
What Now! Part 3
Get to know the vendor and your people
The industry analogy is: we are about to get married, shouldn’t we get to know each other better first? Choose the right vendor for the right reasons. Don’t buy based on demonstrations that stress the “bells and whistles”. Use the information you gathered from your analysis to measure the vendor’s capability to satisfy your business process needs. Demonstrations are a great opportunity to test the vendor by watching how they handle processes and issues that are standard in your industry. Let me caution you here, watch for the vendors who exhibit any of the following:
- Poor or non-existent analysis prior to issuing a quote.
- Insufficient knowledge and resources in required core competencies
- Cannot demonstrate industry specific knowledge
- Doesn’t demonstrate their product effectively. (This can mean he doesn’t know how to use it.)
Don’t hesitate to ask to speak with or visit existing customers in the same or similar industries and go prepared with questions not only on specific features but also on how they handled customization and special projects. This will give you a better understanding of the vendor’s capabilities and expertise which is crucial in determining the division of responsibilities during the implementation process.
Knowing the vendor is critical but not knowing the limitations and capabilities of your people is fatal. Many an ERP project has been derailed because the purchaser has failed to grasp the magnitude of the project and failed to realize the limitations of internal resources. This doesn’t mean that your personnel can’t do a large portion of the implementation themselves because they often can. It means that you must chart a proper plan for implementation, dividing up tasks based on knowledge and expertise. What can your people do efficiently and effectively and what will you need to rely on the vendor to do?
What Now! Part 2
What You Need vs What You Want
Identifying the pain – What is it that has brought you to the table in the first place? Do you need to streamline production, keep better track of job costs or improve the quality of quoting and estimating? Whatever the reason, now is the time to analyze your business pain points and find a solution for, if not all, as many as you can.
Pick and prioritize your features- You’ve identified the pain now choose the pill. Which features will eliminate the pain, accounting, job costing, order entry or maybe it’s scheduling. What ever it is, list the features in order of importance and be sure to highlight the ones you can’t live without as critical.
Analyze your existing business processes and determine which processes give you a competitive advantage and which are flexible. Identify the strengths and weaknesses and map out strategies to improve where you need to and document the results. This is crucial; we have seen hundreds of businesses pursue customizations to align the Erp system to their processes only to later discover that those processes were not as critical as they thought and there was a better way to do it out of the box.
What Now!
The first of 5 parts
You have decided that an ERP system is what you need to transform your business into the vibrant successful organization we all dream about, now what? Erp systems are a robust complicated beasts and buying one without a plan would be like giving your 16 year old the keys to a Porsche without teaching him to drive or at the very least teaching him to drive something else first. He is headed for a deadly accident and if you purchase an ERP system without first doing the basics you are too!
You need to prepare yourself for the task and plan for the results you seek; in short you need a plan. First, know what ERP systems are and how the benefit you. Second, know what you want, know what you need and know the difference between the two. Third, know the vendor and their capabilities but also know yourself and your people and be honest about their capabilities. Finally know the cost, the true cost and set a budget accordingly.
What are ERP Systems
Enterprise Resource Planning (ERP) software is a series of modular software applications where each application represents a particular business process within your organization. These applications communicate with each other and pass information between them. They share a common database where information is stored so it can be retrieved as needed. For example, in a typical manufacturing company an ERP system would contain modules where you can:
- Store basic information such as product structures, drawings, manufacturing instructions, and quality requirements
- Quote, price, and enter customer orders
- Plan and forecast customer demand and schedule product availability
- Manage your supply chain
- Cost products, break it down forensically, and measure performance
- Manage receivables and supplier payments
- Manage inventory locations and turns
- View and print a variety of reports that improve your decision making capabilities
- Quality analysis
If your company is distribution or service based then your needs will vary somewhat from this list. A good ERP system can adapt to most core business types. Special needs from particular business types have resulted in “industry-specific” modules that assist with special processes. But make no mistake, what you really need to invest in should be determined by where your problems lie.
The Real Benefits of ERP
The true benefits you will reap from investing in ERP lie in the ability of the software to provide business intelligence data that will improve process efficiency and reduce the overall cost of doing business.
These include:
- Automation of manual or clerical business process
- Improved product or service quality
- Improved customer relationships
- Forensic cost analysis capability
- Direct business to business communication
- Improved communication across all functional departments
Next: week what you need vs what you want.
