By: Dr. Edward F. Knab
Most organizations are ill equipped to select the most appropriate ERP solution, the task is daunting and if not given the appropriate attention can expose the organization to a significant risk. There is an almost infinite number of horror stories associated with the selection and implementation of ERP software; most organizations only go through this process once every 15 years and therefore have little or no experience in maximizing the effectiveness the process.
There are two major reasons why organizations find the process of selecting the proper ERP solution such a difficult challenge. The first has to do with the knowledge base within the organization. Unfortunately, organizations (and people) only “know what they know”; meaning that we are limited by our own experience and we are only able to evaluate ERP software within the context of our own collective experience which may be too limited maximize the benefits of this important decision. The second is that organizations have a difficult time choosing and implementing the best ERP solution is that everyone in the organization already has a 40 to 60 hour a week job. Companies are operating so lean in this environment; they have an insufficient number of resources to dedicate to the project. Additionally, the best people within the organization have the least available time and can only dedicate a limited number of hours to the project on a weekly basis.
Companies can either hire additional outside resources, which is difficult because requires a long lead time to learn the operational nuances of t5he company or identify an appropriate consultant that has experience implementing ERP solutions as well as knowledge of the requirements of the clients market.
In choosing an ERP software package and planning for the overall project, executives need to make decisions based on objective and unbiased information rather than gut feel. In particular, organizations should consider the following:
Why ERP?
This question is perhaps the toughest to ask once the company is already on the ERP bandwagon. Often, ERP will not solve organic business problems. If your business strategies or key business processes are ineffective or inefficient, even the most advanced ERP system is not going to help. Prior to making a decision as large as implementing a system that will cost millions and affect your entire company, it’s important to have a clear understanding of what you want to accomplish by taking on this challenge. There may be more cost-effective and lower-risk options such as improving processes, redesigning your organizational structure, consolidating your global supply chain, or implementing a performance management system. In these cases, maybe choosing not to implement ERP is the best solution. On the other hand, ERP may be the business tool that enables these improvements.
What are the Business Requirements?
If you have decided that ERP is the route you need to take, it is important to begin by looking at your desired operational model and using that as a starting point in determining what software to implement. The Executive Steering Committee should define and document key business requirements for any package they may select. This includes not only nice-to-haves, but also requirements that are “deal-breakers” if the software is unable to accommodate. In addition, and most importantly, executives should use ERP business requirements definition as an opportunity to improve current operations, efficiency, and effectiveness. The last thing a company should do is implement software to automate the same flawed business processes. Instead, it should be focused on achieving measurable business value for your organization, and you should choose the software the best enables you to do this. Generally, this requires a detailed process review with the company’s senior executives and managers to evaluate their level of comfort with the existing processes a well as a look to the future in terms of forecasted growth and market changes.
What ROI is required by your business case?
This is where many companies fall flat. Even if you complete the first two items discussed above, it is important to understand and document what your total costs will be for each ERP vendor under consideration, as well as your anticipated business benefits. This is important in gaining approval from other executives or your Board of Directors, and it is also helps ensure that you realize the potential benefits of implementing ERP. All costs, including hidden project costs such as internal project resources, data conversion, and lost productivity immediately following go-live, should be included in the business case and ROI calculation for each ERP vendor you evaluate. In addition, benefits should be reasonable and not overly aggressive. Ultimately, your business case should be a tool to manage business costs, benefits, and ROI going forward, not just as a sales tool to justify a decision that’s already been made. And if the resulting ROI for a particular ERP vendor does not make sense or meet minimum investment criteria for your company, then it’s probably not a good idea to undertake the project.
How will you manage the selection and implementation process?
Has the organization thoroughly assessed all of the options in evaluating potential external implementation teams? Software companies often are not always the best at implementing their software, and some are much more expensive than others. You can often find third-party vendors and consultants that can implement ERP more successfully or at a lower cost. It is also important to look at consulting firms that are capable of helping you manage the non-technical aspects of the project, such as organizational change management, training, and ERP benefits realization. Productivity Constructs, Inc. is an example of such a firm, which is technology neutral and specializes in providing project planning and business consulting for all types of ERP implementations.
If your organization is considering an ERP upgrade, Supply Chain Experts can help you design a program that delivers both immediate and long term benefits to your organization. The program will be designed to shift your organizations thinking, improve innovation, and implement a program that will optimize operational performance and satisfy the requirements of your customers.
Dr. Edward F. Knab
Productivity Constructs, Inc.
800 660 8718 office
949 413 7333 mobile
ed@edwardknab.com
www.productivityconstructs.com
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Dr. Knab is an academic practitioner and seasoned supply chain expert whose company, Productivity Constructs, Inc., is focused improving global leadership and thereby creating more effective organizations and higher levels of job satisfaction. Dr. Knab can be contacted for speaking engagements, coaching, or consultation at efk@productivityconstructs.com, ed@ewardknab.com or www.edwardknab.com.
