The importance of selecting the right ERP solution

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1 The importance of selecting the right ERP solution The benefits of selecting and successfully implementing the right ERP solution for your business are widespread. The right ERP solution, tailored to suit the needs of your business, can be both a trigger for, and an enabler of, process improvement across your entire organisation. 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. As with any solution that delivers significant long-term benefits to a business, choosing the right ERP solution has its challenges. When a company gets it wrong, the consequences are devastating just ask Nike. The leisurewear company endured an awful year in 2000, with the company s woes being linked to investing in the wrong ERP solution. After spending $400 million on a software package that was designed to oversee the process of fulfilling warehouse orders, the company was hit with $100 million in lost sales revenue, several class action lawsuits and a 20 per cent dip in stock market prices. Why? Because their expensive ERP solution encountered a software update glitch, which resulted in unequal distribution of the company s Air Jordan and Air Garnett trainers. This meant the company was unable to fulfil demand for the products and went against the company s core reason for investing in ERP. That s what happens when companies don t choose the right ERP solution, but for those that do the benefits are clear for everyone to see. When businesses choose the right 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. The ability to track everything throughout an entire business from one piece of centralised software is something that is more than worth the initial investment. This White Paper informs executives what to consider when investing in a new ERP solution. What is the primary purpose of a new ERP solution? How should it best be implemented? What infrastructure is required and how will it fit in with any existing business applications? And ultimately, how can I ensure I get the best out of my initial investment? Page 01 April 2014

2 The business issues to consider There are four 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 and 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. When you start really experiencing 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. According to Panorama, only 27% of companies that implemented ERP globally failed to recoup the initial costs associated with the purchase. 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. It might seem obvious, but many businesses enter into the task of adopting ERP without identifying key process facts that could ultimately drive the entire project off-track. ERP is an important investment; it s going to help you work smarter, better manage your resources, and ultimately save in administration time and costs. 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? Map all your overall business processes and identify how ERP will fit into the way you work. Perhaps it will change the way you work? If this is the case, why is your current way of working ineffective and what changes need to be put in place? Above all else, write down what you expect to achieve from your ERP investment. What are the long-term business goals you want to achieve? Note these down and keep referring to them throughout the entire ERP experience; during implementation, go-live, testing and even after years of using a solution. Share your notes and objectives with more than one ERP solutions provider so they are aware of your vision and can tailor a solution to suit your needs. If you refer back to this document after having ERP installed and using the solution for a number of years, and you have strayed away from your objectives, then it is likely you will need to adapt your solution in order to get the best from it. Page 02 April 2014

3 Achieving organisational buy-in The planning stage is not a process that only one person within a business should handle. Without buy-in from key stakeholders, your ERP implementation is not going to be plain sailing. 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. According to Panorama, 25 per cent of companies are unsure of their ERP payback period and the primary reason for this is because they did not have a clear set of goals and business objectives when starting a project. Consider costs ERP is a long-term business solution, and once implemented, will become a critical foundation for all your operations and processes. Like any investment though, it is important that ERP delivers clear and transparent returns on your initial investment. A low total cost of ownership is imperative when selecting the right ERP solution for your business. ERP is an expensive investment initially, but in the long term your business will reap the rewards in increased efficiencies. 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 longterm 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 cloudbased 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. Page 03 April 2014

4 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. 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. 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 How customisable does my ERP solution need to be? Remember what we said earlier: with ERP there is no one-size-fits all solution. 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 and how your ERP solution will connect with, any send information between these systems. You may already operate HR software, production management systems or quality control systems. Make sure the solution you choose to invest in seamlessly integrates with these systems and ensure you plan ahead of implementation to make sure integration does not hold up your planned go-live date. 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 outof-the-box solution or a product that better supports customisation and personalisation. While your ERP vendor should be offering you a bespoke ERP solution, tailored to accommodate the needs of your individual business, you may want a customisable solution; one that you can alter and develop yourself to further enhance efficiency. Page 04 April 2014

5 Typically the idea of a customised solution will frighten even the most technical of people but this is an important thing to consider in the long-term. During implementation it is likely you will experience one or more things that the software doesn t do quite right, so you may request to make just one minor change to the way your software is designed. While Panorama has found that only 11 per cent of companies will want a customised ERP solution, those that do can better protect 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. Make sure you speak to multiple vendors before investing in one ERP solution and discuss how customisable their solutions are. 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. Traditionally ERP solutions do not incorporate document management software but that does not mean that you can t operate ERP in parallel with a rudimentary document management system and a labour intensive manual filing system. Speak to prospective ERP providers about potential Workflow models that will allow you to design, manufacture, and supply products through one simple system. ERP is developed to be flexible in nature so the most engaged providers will be able to adapt your solution to accommodate other applications. Page 05 April 2014

6 Eat the elephant of implementation ERP implementations can be elephants just ask Waste Management. The US firm famously sued its ERP provider over an excessively delayed ERP implementation, for failing to timely and accurately define its business requirements, and failing to provide sufficient, knowledgeable, decision-empowered users and managers to work on the project. The company was promised an 18-month implementation period but it dragged on, costing the company business and money and turning into one of the messiest ERP legal battles in recent times. Waste Management is not alone. 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 three implementation Ps - planning, preparation and project management. Planning Plan your implementation. Talk with your supplier and include them in your process mapping. Ask them to work with your project managers throughout implementation and ensure that everyone has clearly defined roles and responsibilities in order to make your go-live date an achievable aim. Some providers will even switch you from your old system to the new system out of hours to ensure that you encounter minimum disruption. That s not to say though, that you should plan for zero levels of disruption. Make sure you put procedures in place that will keep your business operational in the event of any disruption and then at least this way you will be prepared for any eventuality. Preparation Do as much pre-training with your team as possible. If you have properly outlined your aims and objectives prior to seeking out an ERP provider, you will at least know how you expect your solution to change your business processes. Let your staff know what to expect upon go-live so when your ERP solution is ready to use, they can operate the system intuitively. Project management Surround yourself with the right team. Include the people in your business and make sure you ask staff if they have experienced an ERP implementation before. They may have information that can help you better prepare for a successful implementation. If you are new to ERP then you may need to hire an external consultant to help guide you through the implementation process. This does incur additional costs but often it is a lower amount than that which can be incurred due to delayed 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 everyday in your business anyway. Page 06 April 2014

7 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 60% indicate their ERP projects were a success. Nearly seven out of 10 respondents, 69%, also indicate at least some level of satisfaction with their chosen ERP vendors. Furthermore, 73% of respondents stated that they did recoup the costs of their ERP investment after implementation. The time it takes to recoup these costs depends on the efficiencies that you planned your solution to deliver and just how much preparation you did beforehand. It depends on the buy-in from the rest of your team, who should share your vision for ERP, and much of it depends on choosing both the right solution and the right software vendor. 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. Page 07 April 2014

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