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ERP Strategies - Successful & Not So

What are your primary enterprise resource planning objectives you use when selecting an ERP system? Why do companies purchase an ERP system, and then fail to implement it to its fullest?

An ERP system is robust in its functionality. It can take internal and external information for a company to help it better perform its business functions. A robust ERP can be used to track information for HR, accounting, marketing, sales, planning, inventory and materials management.

One of the biggest reasons companies move to an ERP is to have all its information in one central database, instead of in multiple databases. When information is centrally located it makes the company more efficient when pulling together financial information as it relates to sales, inventory, etc.

Too often companies that use separate databases/software are considered to be a company of silos. Departments have an “Us against them” mantra.

When it’s time for month end the accounting department is trying to obtain information from HR, so that payroll can be posted through a journal entry, changes in inventory have to be confirmed by checking another software, then entered to the financial reporting software, hopefully free of errors.

An ERP that is done correctly will help ensure timely financial information as of a particular date. However, too often a company will purchase an ERP system and not utilize it the way it was designed to be used. Why is that? Why spend tens of thousands or hundreds of thousands when you will not use it the way it is supposed to be used? What are your thoughts? What are your primary objectives when deciding on an ERP system to use? How does an ERP that is supposed to make business better actually accomplishing that objective?

Answers

Mike Haile
Title: Founder
Company: Haile Consulting Solutions
(Founder, Haile Consulting Solutions) |

This is a very big question and there is a lot of information on the web as to what companies should do when selecting ERP's and why they typically do not get full value from it. As far as I’m concerned preparation is the key:

What’s the business case?
Do you really need a new ERP? How will a new ERP meet the business’s strategy? What are the alternatives? Etc. You need to really take time to put together a proper business case for a system change. Put some governance in place. Eg Executive Sponsor, Steering committee. Key stakeholders. These people will give the project substance in your organization and make the decisions

What are your requirements?
Look at the current system. Note all its strengths and weaknesses (do both) as you want to keep the good things about the current ERP
Agree what you want to be in the ERP. Many ERP’s have lots of modules that may or may not be useful. Make sure you know what you want otherwise the ERP vendors will tell you (and it will be what they have)
Get all the processes down and speak to a good cross section of users. This is not just the finance team but may be, HR, sales & marketing etc end users
Once you have the requirements go through them and separate the “must haves” from the “nice to haves” – ERP’s need to meet all the must haves and then you can look at the nice to haves. You must do this because otherwise you will lose focus on what’s important to your business. I have a feeling that one of the reasons that organizations are frustrated at the end of an ERP implementation is that they did not do this properly so were “wowed” by an ERP presentation which showed a lot of great functionality but was not for the business

What’s your budget?
Implementing a new system is expensive and typically underestimated. The obvious reason for this is that the scope changes and or requirements “mature” both of which mean additional costs. However well you plan an ERP implementation there will inevitably be some of these. Depending on the size of the business you should also think about hiring some change consultants, people to back fill key people etc.
Budget as much as you can and then add a healthy percentage of contingency 25% - 30%. I appreciate that this may be hard to do but it’s a lot easier to budget a number and beat it than it is to go back and asking for more, or worse not getting the best from the system.
Good luck!

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