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Page 1: Pick Your Next ERP System in 6 Steps

Pick Your Next

ERP System in 6 Steps

…an e-book by

Page 2: Pick Your Next ERP System in 6 Steps

Foreword

Contrary to what you may have been told, ERP is not only for large organizations. As SMB operations become more complex, it is essential for the software solutions to evolve and also become more complex, making the adoption of a comprehensive ERP system a necessity. If your Small to Medium Sized Business (SMB) is drowning in paperwork and bad information from disparate systems, it might be ready to implement an ERP (enterprise resource planning) System. You may be overwhelmed by not only the software choices, but the best practices in choosing a new ERP system. There are many benefits to ERP - probably the most important is the ability to get real-time information across the company from one system. No more out-of-date spreadsheets from various departments that take hours to dissect. Another great benefit, especially for high-volume organizations, is the capability to improve on-time deliveries and greater inventory control and visibility. And improved efficiencies across the organization help your company become lean operations that can better compete in an ever-growing global marketplace. In this e-book, Pick Your Next ERP System in 6 Steps, we’ll outline the six steps you should take to ensure a successful selection and implementation. From assembling your cross-functional ERP team to finally selecting your ERP system, we’ll walk you through each step of the process.

The Encaptis Group

200-6400 Roberts Street

Burnaby, BC V5G 4C9

Phone: 1-866-277-2736

www.encaptis.com

Page 3: Pick Your Next ERP System in 6 Steps

H O W T O P I C K Y O U R N E X T E R P S Y S T E M I N 6 S T E P S

1

Assemble Your Cross-Functional Team of Experts

Many companies believe an ERP project should start with the IT team. While you certainly need IT’s input and support, especially as it relates to network and hardware issues, it’s really a cross-functional process. Key stakeholders from areas such as accounting, purchasing and inventory, operations, IT and all other instrumental areas of your business should be tapped, as well as a member of the Executive Management to keep the project focused, on task and on budget. The team will be responsible for a number of important tasks:

Researching, evaluating and selecting the ERP system

Setting specific goals and objectives

Communicating the need for ERP and its benefits throughout the company

Collaborating with the ERP vendor to create and execute the implementation plan

Keep the team to 5-8 members. Each team member should be responsible for getting feedback from others in their business units and providing it to the team. And remember, the team members don’t have to be the managers – but they should be well-respected, effective communicators with a good understanding of how the current processes feed into the overall company goals. Be sure not to discount less experienced or junior team members. Employees with limited or outside background can give valuable input into a process or system based on experience with the systems or processes they have recently learned, or with systems they have used at other organizations. Once you establish your team, you are ready to move on to the next step, Assessing Your ERP Readiness, which we will cover in the next chapter.

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Assessing Your Company’s ERP Readiness

So you’ve put together your ERP Selection Team and think your company is ready to implement ERP (enterprise resource planning), but are you sure? While an ERP implementation can be a key element of your company’s growth, if you’re not truly ready, it can be a costly and time consuming undertaking. To stay on time and in budget, it is critical to do your due diligence to ensure that your entire organization is prepared before making your decision. Upfront preparation, clearly defining expectations and goals, and doing your due diligence help to ensure that your ERP implementation is a success. In this chapter, we focus on assessing your company’s ERP readiness, and provide a list of questions that can be used to guide you through the decision process. There are many things to consider when reviewing and implementing ERP systems. Assessing your company’s readiness is just one step, but an important one. Having a good survey of the organization’s preparedness to undertake such a big project helps you to predict whether or not it will be successful. For instance, if your executives are not convinced of the need for ERP, then it is unlikely that they will be supportive if issues arise during the selections process or implementation. Similarly, if key user groups aren’t willing to make changes, then their use of the new system will be limited, deeming the implementation a failure. And if goals, expectations and anticipated ROI are not clearly defined, then it’s not possible to measure the success of the overall project. To help you assess your organization’s readiness for ERP implementation, we’ve compiled a list of questions you should be able to answer positively and thoroughly before embarking on your project.

1. What is your motivation for implementing ERP? Is there pressure across the organization? Without pressure throughout the company, there will be little motivation for change.

2. Are your business processes standardized across all departments and offices?

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3. Have key stakeholders documented specific needs and wishes? Are all business requirements documented in one place? Are they prioritized?

4. Has an ERP strategy and change management been fully identified and documented?

5. Has your company had significant turmoil in the past few years? Examples include management change, layoffs, other IT projects, etc. Are you still recovering from it?

6. Does the ERP implementation have executive sponsorship? 7. Have you assembled your selection and implementation team? Have you appointed a

Project Leader? 8. Have you identified early system adoption users (initial key users)? Early adoption is

critical to the success of your implementation. 9. Do you have documented the business case, assumptions and anticipated ROI? 10. Have you outlined your key performance indicators (measurements of success)? 11. Is the company culture open to the project or will key stakeholders have to be

convinced of its usefulness and ROI? 12. Is your ERP Implementation project fully funded - including miscellaneous and

unexpected expenses (plan for about 10% for additional programming and miscellaneous expenses)?

13. Is your data ERP-ready? The data going in is only as good as the data coming out.

Implementing ERP can be a great way to help your company compete on a national or global scale, if implemented properly – start to finish. Don’t underestimate the importance of assessing your company’s readiness, and if you’re not ready, start preparing for the future now!

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Defining the Business Requirements

Oftentimes, an executive will walk into the IT person’s office and say, “We need ERP.” The IT person goes about lining up several ERP providers, interviews them on their software functionality (not necessarily considering user requirements), and if it seems to fit and is reasonably priced, they select their vendor and schedule implementation. As we explained in Assessing Your Company’s ERP Readiness, this sets up the company up for failure by not fully exploring several areas and processes related to the ERP implementation. Considering the high failure rate of ERP implementations, you want to make sure you have carefully considered all aspects of the organization and the impact the ERP implementation will have. With proper foresight and planning, ERP does not have to be a failure and in fact, is key to many companies successfully expanding their business on a national or global scale. In chapter 3, we walk you through Defining the Business Requirements when selecting an ERP system. We will help you define the areas where you expect to receive benefits, as well as identify budgetary constraints. Correctly outlining these areas upfront will assist you when you are ready to review and qualify solutions. The most important question to ask yourself and others is, “What do you want to achieve with ERP?” Getting a clearly defined answer will help you have a good understanding of what your organization hopes to accomplish with an ERP implementation. Without this key answer, you won’t be able to accurately define its success later. Here are two questions you should ask your team:

What is the business objective for implementing ERP?

Have we defined the strategy?

If you cannot clearly and succinctly answer these questions, it is unlikely that you will achieve ERP success. The point of the strategy is to define the objectives of the ERP implementation and define the measurements of success.

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There can be a number of objectives, each with its own measurement of success:

Is your organization trying to standardize operations across the company (and perhaps many offices and geographic locations)?

Do you want to improve customer service by improved fill rates and service levels?

Does your company need improved visibility throughout the organization?

Are you already using ERP but need to upgrade to a more robust system?

Do you want to reduce overhead by streamlining operations?

How will the ERP implementation contribute to the individual objectives?

Without understanding how the ERP implementation contributes to the individual objectives, it will be difficult to measure success at some point in the future. Don’t forget that some objectives may not have a measurable contribution. Things like improved visibility or reduced business risk may not be quantifiable in dollars but they do contribute to the overall success of the company and the ERP implementation. Here are a few questions to consider:

Have you identified the objectives you are trying to achieve?

Can you put a value on the objective, if successful?

Is it possible to achieve the objective without ERP?

Is there a deadline that your organization is trying to meet with the ERP implementation?

Once you clearly document the answers to the questions above, you will be able to better identify if an ERP system is going to benefit your company. If you decide ERP is indeed right for your company, you will be able to move on to the next step, Review & Qualify Software Solutions, which we will discuss in the next chapter.

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Review and Qualify ERP Solutions

In this chapter, we will guide you through the steps to help you narrow down your choices. Before reviewing solutions, it’s important that you identify key areas about your company to help you determine which solutions are right for your business.

Define Your Success The most important step is to thoroughly understand your measurements of success, specifically, Critical Success Factors. Critical Success Factors are the necessary elements for an organization or project to achieve its goals. While you no doubt have an extensive list of needs and wants developed by your ERP Selection Team, not all of the items listed are critical to the success of your project. During your research, you should have identified key savings from your ERP implementation. The savings don’t necessarily have to translate into cash savings, but should impact the bottom line. Streamlining operations, visibility to inventory and data and increased customer satisfaction may not be immediately translatable to cash, but will affect operations at some point. Easily identifiable things like increased revenues have an immediate impact on the company’s cash flow. Develop a numbering system to prioritize your requirements. A “5” could be essential with “1” being non-essential. If you have mostly 5’s, you should take another look at your requirements. Not all requirements are must-haves. Identify Your Existing Business Processes If you aren’t sure of what it is exactly that you wish to accomplish with your ERP implementation, then you’re not ready to move on to evaluating systems. Be sure to clearly and fully understand what it is that the employees are doing on a daily basis, and what each business requirement is. Then, you will be able to recognize a good ERP fit when you see it, and be able to clearly communicate your need to the vendors.

Do you fully understand your existing business processes?

Have you talked with employees about their daily activities?

Can you identify areas where you need improvement?

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Identify Preferred Solution First, determine if you want an off-the-shelf product with many basic and advanced features already built in. This is a great way to save money, get a stable product and get great support. Be aware that you may be required to change some of your processes to fit the product (which may not necessarily be a bad thing). You may also consider a vertical solution, developed for and used solely by companies in your industry. The advantage of a vertical solution can include additional functionality specific to your industry and deeper level of knowledge of the specific best practices. Finally, you can also have a totally custom solution built for your company. The vendor will start with a base product and will build a solution that exactly fits your needs and wants. Beware that custom solutions will most likely be the most expensive and time consuming to implement (which may also not be a bad thing).

Develop a Vendor List There are many ways to identify potential vendors – starting with your computer! Do a thorough internet search to develop a list of vendors that seem to meet your needs. You can also learn of solutions through a number of more traditional methods – trade shows, trade journals, colleagues, and consultants/accountants. Be sure to find a reputable VAR for your identified solutions. Your VAR can make or break your implementation. Once you’ve narrowed down your top two or three vendors, be sure to do a thorough reference check. Create a checklist of questions so you ask each reference the same questions.

Issue a Request for Proposal Use your RFP to get a good picture of each vendor’s capabilities. Your questions should include those related to technology, user experience, implementation and cost. Grade each solution to identify the fit of the vendor solution to your requirements. Once you’ve identified the solutions that could be a fit, it’s time to schedule the demonstrations. Create an evaluation scale such as:

5-included in current release and cost estimate

4-available in current year

3-minor workaround

2-third party solution

1-major workaround/custom development

0-not available

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Schedule the Demonstrations Each person on your ERP Selection Team should clear their calendar to attend the solution demonstrations. They should each have a copy of the business requirements and grading criteria. Be sure the vendor demonstrates all critical features in a live version of the software. Do not settle for a Power Point slide show or demo version of the software. Each attendee should provide feedback and their score for the vendor solution. In the next chapter, Qualify ERP Vendors, we’ll cover how to dig deeper into the vendor offering to make sure you select the best ERP solution for you.

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Picking the Right ERP Implementation Partner

In this chapter, we’ll explain why it’s important to choose the right ERP partner and how to tell if a vendor is the right one for you.

Choose the Right Partner Choosing the right partner is as important as selecting the right ERP system. Establishing a long-term working relationship will help with internal adoption and increase the likelihood of a successful ERP implementation.

Narrow the Field Once you’ve narrowed your selections down to 1-2 providers, allow them to conduct interviews with ERP Selection Team. The ERP team should clearly communicate the business requirements outlined when they defined the business requirements. Once the vendors are brought up to speed on your needs, they will be able to build a meaningful presentation that sets your business in the context of their product offering. Their demonstration should illustrate how the gaps in your current processes will be filled, how existing processes can be improved or how new processes will impact your business (such as e-commerce).

Prove It It’s very easy for a vendor to walk you through how their system completes specific tasks. But what does it look like for your business? Preparing a script with a few business processes that the vendor will work through the system not only ensures they understand your requirements but helps you to see if the system will work for you (and possibly improve your processes). As mentioned previously, never allow a vendor to “demonstrate” the software via Power Point slides. It’s a huge red flag – run!

Know the Costs (all of them!) You’ve probably heard stories of how ERP implementation costs spiraled out of control, costing thousands more than the original estimate. Unfortunately, this happens, but it doesn’t have to happen to you. Ask the vendor to provide you with the Total Cost of Ownership (TCO) which should include:

license fees (including 3rd party)

implementation fees (training and consulting)

support & maintenance fees (including maintenance on custom development & 3rd party products)

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hardware

software

networks/communication

software customization

any other fees not included in the proposal

If you’re convinced you need an ERP system but are not sure you can afford it, ask the vendor for a phased-approach. You can break up the costs over a longer period of time, and it may be less stressful on your staff.

Avoid Customization if Possible

ERP gets a bad rap when it comes to costs, and a lot of that is due to software customization. During the demonstrations, be open to new processes that are standard in the software but may be different than how you currently do something. You might be surprised to see that there’s a better and easier way to do something, and it’s already included in the software. This also helps to avoid future maintenance and support costs.

Time is Money

Your ERP vendor should have experience in fast, streamlined implementation of ERP systems. The faster it’s running, the greater your user buy-in, the sooner you will start seeing a return on investment. Ask your vendor about their methodology for smooth implementation, and their long-term support to ensure the system works and your goals have been met.

Show Your Expertise

The ERP vendor you choose should have a broad view of the organization, one that goes beyond functionality in the software. Understanding the entire business cycle is critical to a successful ERP implementation. Ask your top vendors to demonstrate their knowledge of your industry or business and have them demonstrate how that will translate into results for your company.

Look for a vendor who has deep experience in the industry, with a stellar reputation for implementing solutions on time and in budget (be sure to check references). And one with extensive experience is more likely to be as committed to your success in the future, as they are during the initial sale.

You’ve Made It (almost) Choosing the right ERP vendor and system for your company doesn’t have to be a complicated process. Following these tips will direct you through the process and help you to choose the best ERP vendor for your project.

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Selecting Your ERP System

You’re almost there – you’re almost ready to choose your ERP system and start implementation. In the previous post, Picking the Right ERP Vendor, we explained how to choose the best partner for your business, which is as important as selecting the right product. In this final chapter, Selecting Your ERP System, we will give you tips for choosing the right solution for your company.

You already know that you need timely and accurate information to make smart business decisions and the software you’re currently using is no longer suitable for your growing business. You need an ERP system that will not only provide visibility to the information your managers need to make better decisions, you need an ERP system that will provide you with key competitive advantages.

With so many ERP systems to choose from, it can be overwhelming to pick the right one. But, if you’ve been following along in this series, you are armed and ready to make your decision – and it will be the right one if you’ve done your homework.

Consider All the Options There are many ERP choices in the market today so be sure to fully explore your choices and choose the best one for your business. Don’t pick solely on name or reputation. Consider what your organization’s needs are, and select the best one to give you that competitive advantage.

Review Your Business Requirements It may be many months since you first developed your ERP team and drafted your wish lists, so it’s a great time to go back through those lists and make sure that your RFP addressed the most important items, and most importantly, that your top ERP vendor choices can meet those needs. Also, review your current processes and what those processes will look like in a new ERP system. The potential vendors should have clearly demonstrated how your processes will look in their system.

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Evaluate Technical Fit It’s important to understand how the new ERP solution will dovetail with your current infrastructure. Implementing software built on a completely different platform can cause issues (and increase costs) later on.

Know the Total Cost of Ownership As mentioned in Picking the Right ERP Vendor, it’s critical that you fully understand the total cost of ownership (preferably before you become invested in a particular system). Despite the sales reps being completely committed to your success, they are still trying to sell software, so they may downplay some costs associated with their software. Be sure to ask about hidden costs that aren’t apparent in the quote. Things to consider:

license fees (including 3rd party) implementation fees (training and consulting) support & maintenance fees (including maintenance on custom development & 3rd

party products) hardware software networks/communication software customization any other fees not included in the proposal

Be Realistic with Your Implementation Plan Prior to making your final ERP system decision, ask for a comprehensive implementation plan that includes installing the software, ensuring it is functional, tested and accepted by key users (including those on the original ERP Selection Team). Having this plan up front will help you completely understand the costs and resources required to successfully kick off your new ERP implementation. In your plan, include things like business processes, workflow design, data migration, testing and any change management activities. Prior to installation, make sure your data is fully scrubbed and useable. The data out of your new system is only as good as the data you put into it.

Track the Success of the Project Going back to Defining Business Requirements, you should pull out your original list to track the success of your ERP implementation. Have you improved visibility, reduced costs, increased customer service levels, or any of the other items on your list? Go back over it to measure your success and make any necessary adjustments.

Selecting the right technology for your company will give you the edge over your competition. But you must go through all the steps for success. Once you know what you need, you will be able to make a smart choice to keep moving forward.

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Want to learn more about picking ERP systems? Ready to learn how SAP Business One or Microsoft Dynamics AX can transform your business?

Contact Derin Hildebrandt at 1.866.460.7765 ext. 100 to talk about your business goals for your move to ERP and to schedule your initial complimentary consultation. And be sure to visit our website to learn more about The Encaptis Group, our offerings and to view product information and videos.