Your company has done a great job of surviving the initial start-up stage, it has achieved a presence in the market and it is able to attract top talent. What should it focus on next? I'll bet you didn't say invest in the appropriate ERP system. Your company has a unique opportunity to do something that is difficult for its largest competitors: achieve full integration with all of its core systems.
Enterprise Resource Planning (ERP) brings all of your core applications together in one platform. Accounting, Purchasing, Inventory, Warehouse Management, Customer Relationship Management (CRM), Payroll, and Human Capital Management (HCM) exist in one platform and, more importantly, can share data.
Your company can achieve real time analytics on costs and profitability if it seizes this opportunity to come up with an effective implementation plan. At the heart of everything your company does is a financial transaction. Being able to harvest critical pieces of information from financial transactions will give your company a distinct competitive advantage. Here are 10 things you should do when selecting a new ERP.
1. Achieve buy-in from your executive team
Choosing an ERP has to be a collaborative effort. It will touch most if not all major functions of the company. Every senior executive that heads a major function that will be affected by the ERP should be represented. Consensus needs to be formed on the selection of an ERP and then the executive team needs to become the champions of the project. Every ERP implementation runs into adversity. Without the buy-in from the executive team, there is a high risk the implementation will fail.
2. Use a Top-Down, Bottom-up approach to developing the Project Scope
The executive team needs to provide the strategic vision. The team must answer the following question: What do we, as an organization, consider as our key metrics of success? Middle management and staff must then take the strategic vision and answer the following question: How do we turn the company's strategic vision into an operational plan? In answering that question, middle management and staff must figure out the data that is needed to fulfill the strategic vision and the process to capture it. It's critical to do this step prior to forming a list of potential ERPs. It's also important to involve the people that do the actual day-to-day work during this phase.
3. Create a list of potential ERP vendors
Now that you have decided on a specific vision, you need to explore potential ERPs to see which ones can most closely meet your needs. Send out RFIs (Request for Information) and RFPs (Requests for Proposals) to determine which vendors you would like to invite to demo their product. Both functional and technical representatives from your company should be represented at the demo. A healthy amount of skepticism should be used in viewing a vendor demo.
4. Perform a gap analysis
Undoubtedly, no matter which vendor you use, there will be a gap between what the application does and what you want. (Many companies have not documented what they want prior to selecting an ERP and don't figure out the gaps until they are already in the middle of implementation. It's too late then!) Lists the gaps for each potential ERP and the workarounds for each gap noted.
5. Ease of data extraction and integration
How easy is it to get data in and out of the ERP? This is another critical facet that is often overlooked before making the system selection. How difficult will it be to migrate data from legacy systems into the new system? What data formats does the ERP support for extraction? Who has access to import and extract data?
6. Select the ERP
Make your selection based off of the company's strategic vision, the gaps and workarounds and the ease of data extraction and integration.
7. Decide to use the ERP vendor's implementation services or other third-parties.
Using the vendor's implementation services will almost always be your most expensive option. Depending on the vendor, not all of the implementation consultants may have the appropriate level of experience. Furthermore, the advantage of using a third-party is that you have implementation resources that have experience across multiple industries and applications. If you choose an implementation consultant that does not derive any revenue from reselling an application or does not specialize in only one application, you can get an unbiased opinion of the pros and cons of your selection.
8. Acquire the budget dollars and resources
You cannot establish a budget until you've decided what you want to do and which ERP you want to implement. Any attempt at budgeting before this and it will be merely an exercise in what you wish to spend, not what you are going to spend. Inadequate funding leads to important aspects of the implementation being pushed to later phases and compressed time for data validation and user acceptance and training. Translation: your implementation quickly turns into a hot mess.
Resourcing the project is also important for success. Be realistic about the demands for the time of your staff. Expecting some overtime during the implementation is reasonable. Expecting people to work 50 hours or more every week is not. What temporary resources will be needed to ease the staff burden? How much time will be needed to train new resources?
As you can probably imagine, an ERP implementation can be costly. An ERP implementation improperly done is extremely expensive. First figure out what is the likely dollar amount you will need and then build in a sufficient contingency. How you will fund the project should be kept separate from the decision on how much you will need.
9. Create a realistic project plan
Companies that do not have a mature project management organization will often attempt projects of this nature without a project plan. The chances of success in this scenario are very low. There are too many moving pieces that need to be coordinated.
One of the hardest things to do is to estimate the time it will take to complete tasks that the organization has never done before. Leaning on the vendor or third-party consultant for baseline estimates will be key. It is important to remember, however, your company is unique and task completion times may vary significantly but it's at least a starting point.
Once the plan is drafted, don't hide it. Get feedback from the project team. The project plan is a living breathing document. It will be updated multiple times during the implementation. This is fine and normal. If the project scope changes frequently, that's a problem.
How and when user training is conducting has a big impact on the success of the project. Ideally, you want to train shortly before user acceptance testing begins. This allows newly trained users to immediately put their new found skills to use. Having a big gap of time between end user training and user acceptance is problematic. Many key concepts will likely have be re-trained.
On-going training is equally important to make sure you are fully utilizing the ERP. If you think of training as a one-and-done kind of thing, you are leaving money on the table. Plan to develop staff and have them to become as proficient as possible. If you only hire employees who have experience in the ERP you have selected, you are likely missing out on otherwise great candidates. Plan to invest in training so that employees keep up with latest enhancements rolled out by the vendor.