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Posts Tagged ‘Enterprise Resource Planning software’

convince erpERP Consultants Panorama Consulting recently posted 5 signs that a business needs a new software management system, posing them under the guise of “ways to convince your boss…”  Despite any assumed ruse here, the business points are well taken anyways, and we reprise them below as they reinforce the business case regardless.

  1. Focus on costs, benefits and ROI. First and foremost, executives want to hear things in terms of tangible dollars and cents.  Focus on the potential for reducing “hard” dollars in areas like software or hardware maintenance, reduced labor and elimination of redundancy (and spreadsheets!)
  2. Leverage your business and operational peers to build a strong case. If you can get a high-level evangelist on your team from the C-level suite, it will help build your cause and spread the word among their peers, by “selling” it without having to go it alone.
  3. Consider the status quo and alternatives to a new ERP system as viable options. “As a broad generalization, executives like to see a variety of options.  You may feel as though a new ERP system is the only viable option – and it very well may be – but you want to demonstrate to your superiors that you have carefully thought through and analyzed different possibilities,” notes Panorama.
  4. Focus on the “how” in addition to the “what” and “why.” “Getting to the right decision on which path to pursue is relatively easy when compared to how to get there.  In other words, a complete and well thought out analysis and recommendation will consider how the proposed solution will get done.”  Outline the implementation and how it will look based upon what you know at least so far.
  5. Don’t wait until it’s too late. “Good decisions are rarely made when under the gun with limited time.  With this in mind, it is important to make and build support for your recommendations well before you are in a time crunch to make the changes.”  In other words, don’t wait until your current system has become fully unsupported or discontinued, or support is no longer available, to start your new system initiative.  Done right, the process takes months – and commitment.  Time yours accordingly.

For Panorama’s full article, you can go here.

 

 

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A recent report by industry analysts Aberdeen Research serves to bring home in clear focus the degree of benefit achieved by companies using ERP to improve their operations.

In a report released last year (and available here) Aberdeen demonstrates that, particularly in the manufacturing environment, even the least efficient ERP implementation provides more operational benefits than doing nothing.

As Aberdeen contributor and analyst Kevin Prouty [pictured] notes, “ERP touches almost every aspect of planning for a manufacturing company, from budgets and reporting, to detailed inventory and production scheduling.  It becomes the foundation for growth in both operational efficiency as well as growth into new, distributed markets.”

Profitable company growth over the past couple years caused IT budgets on average to double from 2% to 4% of revenue from 2010 to 2011 according to Aberdeen’s research.  Meanwhile, revenues and profits during that time grew in the 7 to 8% range.

The top four business drivers for manufacturers’ growing investments in ERP were noted as follows (each cited by between 27 and 43% of surveyed firms):

1. Must reduce costs

2. Must be easier to do business with

3. Need to manage growth expectations

4. Must improve customer response times

So… did these manufacturers’ investments in ERP yield benefits directly related to their stated goals?  Here’s what they said:

The Best-in-Class firms (the top 20% as judged by a range of success criteria) showed an average 22% reduction in inventory levels… 97% inventory accuracy… took only half-a-week to close the month… had 96% manufacturing schedule compliance… and 98% on-time shipments.

For cutting costs and improving customer service, the answer to whether their ERP investments were worth it – was a resounding YES!

In our second (of two) posts in this series (on 7/19) we’ll take a quick look at the top strategic actions related to ERP.  Stay tuned…

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I ran into some good advice recently in a white paper entitled “The 2011 Focus Experts’ Guide To Enterprise Resource Planning”  that fits quite well with the advice we give to our own clients.  I’ll reprise some of their comments below, many of them verbatim (you can get the full report and many others about ERP here).

They suggest (and we concur) that in the end, “your best solution will be one that…

– Delivers substantial process improvements

– Meets the capital and operating requirements of the company

– Solves your firm’s most pressing business challenges

– Fits well with your technical environment

– Provides the specific functionality needed to deliver world-class business results”

For the mid-size company they note that there is an implementation and maintenance burden that comes with an ERP solution that can strain the often over-taxed IT department.  As well, implementation costs can be considerable.  They note that while SaaS (software as a service, or monthly-rental, pay-as-you-go style solutions) solutions are sometimes appropriate for midsize companies, “buyers in the midrange should consider full, integrated software suites.”

Focus goes on to say… “Look for an ERP solution that has all the core functionality your firm requires (for example, Financials, Manufacturing, CRM, etc.).  Trying to integrate several [separate and distinct] best of breed solutions into a cohesive solution can add significantly to the initial implementation cost.”  [That’s putting it mildly.]

“Custom integration also adds risk and delay while creating downstream uncertainties when trying to deploy future product upgrades.  When shopping for a full-featured, large product suite, keep an open mind about business transformation, because the process designs and workflows implicit in these solutions may not exactly match your firm’s current workflow.  If you can live with these tradeoffs (and the authors of this Guide recommend that you seriously consider doing so), large product suites may be the best approach.”

In other words, find a strong, well-rounded, well-respected suite of applications from within a single family, learn about its workflow and philosophies, and consider investing in the modules within that suite that apply to your business.  This, as opposed to buying your financial solution from one source, your manufacturing from another and, say, your CRM from a third.  Integrated makes for a more stable path — and often, a better bet on the future of your company.

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In our prior post we looked at the results of a survey conducted by CIO Magazine (and CIO.com) of over 400 business IT leaders, from companies large and small.  We noted the singular importance of companies selecting an ERP system that is at least generally verticalized for their industry (i.e., manufacturing, or real estate, or distribution) in order to be happy and productive with the result.

That same survey asked IT chiefs how they felt about their own current solutions (this was a 2008 survey).  They asked about innovation, flexibility, integration, TCO (total cost of ownership), and usability.  Herein, briefly, a synopsis of their findings.  See how they match up with your own thoughts about your particular system.

On those first three – innovation, flexibility and integration – responses were split fairly evenly: half were satisfied, but fully half were not.  (Ouch – that’s a lot of unhappy campers.)

About 60% were quite happy with usability but, no surprise, just over half were dissatisfied about their total cost of ownership.  This should come as no surprise, really, as ERP systems are expensive and, all too often, sold by salespeople who tend to over-promise and under-deliver.  Depending on who you believe, somewhere between 40% and 70% of systems fail to be implemented.  It’s a discipline where simply making the right promises, and then keeping them, will truly carry the day.

Despite the economy and the expense, however, companies were committed to their products, and in the survey over half planned a minor or major upgrade in the next year.  Despite maintenance, modification and related ongoing costs, companies know their survival depends on these systems, and so they keep them up. 

But about one-third of respondents found themselves stymied by complicated systems integration, a lack of customization around the business processes, a high cost of ownership, difficulty in extracting information, and systems that were difficult to use or not intuitive.  Once again, a lot of unhappy campers.  People may use their systems, but it doesn’t always mean they like them.

Still, well over 90% of companies will stay their course.  When asked about “alternative ERP models” (like Software as a Service), only 9% reported using an alternative.  As an article at CIO.com points out: “Historically speaking, CIOs have been reluctant to take many chances with their ERP systems. (Can you imagine this conversation: “Should we try something completely untested with our company’s most critical data?”)”

Now (two years later) we’re seeing a little more interest in the SaaS model, but with many of the same caveats as back then – there’s still too much insecurity about the model, too many horror stories.  That will change, eventually.

For now, the takeaway is this: PLAN carefully.  We always say “we cannot quote what we do not know.”  Take this to heart.  You cannot plan an ERP upgrade or a new project – even if it’s with better software that’s more wired to your vertical or business or industry – without a solid, specific scope of project.  Be wary of the salesperson’s “Sure, we can do that” knee-jerk response.  Take your time.  Plan the work.  Work the plan.  One small, discrete phase at a time.  Have a project plan, and stick to it when it works, revise it when it won’t.  Recognize up front that it costs – but in the end, it also pays.

 

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Today’s ERP (Enterprise Resource Planning) systems embrace much more than the manufacturing projects that traditional MRP tracked.  The borders are becoming blurred.  Where does, say, CRM pick up and ERP leave off?  Is CRM a “module”?  Do I have to buy it?

Truth is, it depends on the system you buy.  At this point at least, we see most vendors’ CRM offerings in the SMB space where we operate as being available, optional add-ons.  Over time, we expect the integration to run much deeper – it’s already doing that – and ultimately, to become a core component of a base ERP system.  In fact, there are ERP systems that (optionally) contain CRM functionality.  And there are CRM systems that include some ERP functionality.

Normally, CRM systems are not included in ERP systems.  ERP is focused on integrating disparate but related elements like production, engineering, customer service, planning, materials, financials, manufacturing and so on.  CRM focuses more on customer relations, marketing and sales.  But the interconnect between CRM and ERP is both obvious and logical.

You can think of CRM as “pre-sales to order type systems, with capabilities to help land the sale/contract that then is processed and fulfilled in the ERP system,” points out Focus.com contributor Len Green.  And he adds, “CRM can also help with after sales service management improved company-wide view of customer activity.”

Ultimately, you choose your ERP modules based on your needs.  The solution you choose needs to allow you to bundle (or unbundle) only the necessary modules, but give you the ability to add and grow over time.  Here again, think Quote-To-Cash.  How do we map our workflow in software to complement our processes while eliminating all the redundant work, the re-keying, the process waste, which usually afflicts most companies that have realized their own need for ERP?

Companies should ask questions of themselves, such as…

How tightly are design and engineering integrated into our Quote-To-Cash process?

Do we have multiple locations, and if so, how will they be integrated… who needs what access… and how will we collaborate across those locations?

What are the Key Performance Indicators (KPIs) we will use to benchmark our progress?  Will they be built into the applications in ‘dashboard’ fashion?

There are many more questions, depending on individual circumstances, to be asked.  In the end, ERP selection requires asking many questions, asking the right questions, and doing a comprehensive assessment of the business’ defined needs – as well as a definition of the benchmarks that will be used to measure progress against them.

In our own process, we ask the key questions, like: Why do you need an ERP system?  What do you use now?  What do you like, and not like, about your current system?  If you could wave a magic wand over it all, what would you change?  Then, it’s important to drill down on the specific needs, weaknesses, opportunities and any other conversations you need to have to determine where your holes are, how big they are, and exactly how you expect an ERP system to fill them.

In the end, it’s all about defining the needs and managing the expectations.  The relationship you develop with the team you select to deploy your solution will then ultimately determine your outcomes.

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In a “Focus Brief” released earlier this year by Michael Dortch, I.T. industry analyst and Director of Research at Focus.com, points up some observations about the evolving state of Enterprise Resource Planning worth noting.

As Dortch points out, the Gartner research group coined the term “ERP” in 1990, when it applied predominantly to manufacturing and specifically the management of resources required in order to produce manufactured goods. 

In effect, ERP was the logical extension or continuation of the 60’s-70’s concept of MRP (Material Requirements Planning).  In essence, ERP was the extension of the MRP philosophy from largely the shop floor and inventory planning out into the rest of the braches of an organization.  Evolving thought and faster evolving tech tools made this possible.  The power of the PC and the growing functionality of ERP software were destined to evolve over time into a larger corporate umbrella – first in large-firm corporate America, but over time down into smaller companies across the globe.

The key word in ERP – “enterprise” – meant software that could address most if not all of the critical processes and functional areas in a company, notes Paul Sita, a Focus contributor and I.T. consultant.  This is true whether your stock-in-trade is manufacturing or distribution or services or health care or… whatever.  ERP addresses, as Sita notes, “the breadth of the organization.”  As he also notes, most companies don’t implement all parts of an ERP system at once – rather, they “grow into it, and the integrated nature of ERP systems, by definition, brings value to whatever sub-set of applications you do implement.”

Sita’s opinions reflect our own experiences in implementing systems for our clients:  You have to start small, build gradually, celebrate the early victories, and build on a foundation of those small, successful, discrete steps.  Pick one or two company strategic objective targets, and focus on implementing the necessary technology to analyze, flowchart, remedy, enhance, streamline, cut waste, eliminate redundancy and generally improve the throughput and profitability of that one area (or two areas perhaps, where there is strategic or operational synergy in doing so). 

Financials are often (though not always) a good place to start.  Inventory control and/or order processing may yield even more returned value.  Ultimately, the job of the ERP implementer is to help you analyze and affect the entire “Quote to Cash” process.  Where you start is a matter for discussion.

We’ll extend this post into the next one with some comments about how and where CRM fits in to today’s view of what ERP means.

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Part 11 in a series…

We started this series of eleven posts here.  You may want to review our logic along the way. 

Our purpose was to set down in writing the fundamentals for how you know when you need an ERP system (or a new system)… its strategic importance… the key motivators in companies that highlight the need for ERPa few success stories on ERP’s benefits culled from our own clients’ experiences (and often in their own words)… what it costs in software and services, to  get started… how to get started… key performance indicators… the importance of turning information into actionand what your business management system should provide.

In other words, we’ve covered a lot of ground.  While covering the broad spectrum of ERP in the small to mid-size business requires dealing in some generalities, we’ve tried to be specific as possible about why to do it and what a typical project might cost — of course, there is no ‘typical’ project, but our guidelines will certainly give you a manageable budget from which to work.

A few key takeaways:

  • ERP is a strategic investment in your company’s long term health, even survival.  Thus, it is a long-term business improvement strategy.  It is essential to sound growth.
  • You’ll know you need ERP if… you have information scattered across many independent ‘silos’… you frequently key and re-key data… you rely on spreadsheets to run your business… different parts or your business do not have equal, common access to others… information is hard to find, organize or retrieve… you don’t know what it costs to complete a project or build a product… you have no common database or history of projects, products, customers.  In short, if you don’t have all your information under the fewest possible umbrellas (systems), then you need an ERP system.  How else will you be able to discover, report, and turn information into actions that lead to significant business improvement?
  • Done right, ERP pays for itself – many times over.  It will make you money.
  • Start small.  Segregate one or two key functional areas for early-stage implementation.  Work from a project plan.  Review and assess regularly.  Build, a step at a time.  Remember, like continuous improvement (which ERP really is), it’s a process not an event.
  • Recognize the costs.  Each project is unique, but a business in the $10 to $30 million dollar (revenues) range can get all the software you need and a good foundation in services for around $100,000, and often less.  Again, user counts and complexity affect the final figure.  But it’s a good starting point for a strong foundation that you can build upon for years to come.  You can get started for less than that, but have realistic expectations. 
  • Your mother was right – if it sounds too good to be true, it is.  Do your homework.  As W. Edwards Deming said: “It is management’s job to know.”  That’s how companies get to ROI.

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