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Posts Tagged ‘How to Buy ERP’

8 years ago we first published a series of posts entitled “Software That Matters.”  It was an ERP implementer’s point of view, culled from long experience, on why and how to purchase a business management software system.  Later, we turned Software That Matters into a popular white paper that has since been viewed hundreds of times.  

Now eight years later, we thought it was time for an update, to reflect lessons learned since then.  (We also did a 2015 update three years ago.)  Much of what we wrote then remains every bit as true today.  But we decided again to carefully retrace our steps, re-edit our paper, add some comments and present it as a series of blog posts that will carry us through November, 2018.  We think that’s timely, as many companies at this time of year tend to reconsider the software they use to run their business — and how they might do better.

In our series we will again try to convey what’s important, what to measure, how to buy, what works, what it costs… and the many other business considerations required of this strategic investment, in what is probably the most important (and expensive) software a company will ever buy.  In other words, the Software That Matters.

 

To a manufacturer, few things are more important than knowing your costs.  So our third success story involves a Midwestern manufacturer and distributor of paints, who proudly noted how after implementing their ERP system they were able to capture the true costs for every single transaction associated with a production item.  The result was a gross margin improvement within a little over a year of one to two percent – yielding a near-term bottom line improvement of over $200,000 each year over prior best performance.  Why?  Because for the first time they knew, tracked and could therefore manage and control their production costs, and thus regulate their selling prices more profitably.

The fact that this firm’s CFO could also get a snapshot within seconds of what the month’s overall performance looked like, at any time, was simply icing on the cake.

ERP is a tool, as much as anything else.  Smart managers use it to modulate and control production and performance.  ERP allows a company to know its costs and associated details, so that it can simply make better decisions, armed as it is now with better information.

After all, the point is not better data, or more data, or even better information (information being the byproduct of data).  The point is to convert that data and information into more informed decisionsAnd that’s what ERP is built to do.  That’s why companies use ERP as a key growth strategy.  They use ERP’s reporting capabilities to drive better decision-making, pure and simple.  Our paint manufacturer did just that, and it led to long-term gross margin improvement, thus returning their initial investment many times over.

One final example from our Case Studies merits mentioning.

This manufacturer of construction products to a variety of markets including manufactured housing, marine, roofing and housing has locations across the U.S.  The discipline driven by their use of ERP has given them the flexibility to expand markets both geographically and functionally.  In turn, their increased sales drove a demand for better warehousing and the ability to accurately, rapidly and easily ship more products to more customers in more places than previously possible.

Using handheld barcode scanners in the warehouse, staff was quickly and easily trained to pick orders accurately, the first time, every time.  This dramatically improved accuracy of fill-rates and sped up shipping.  Mistakes were caught before they happened.  This resulted in fewer customer returns and complaints, even as they improved ship rates by over 25% (the customer’s own numbers).  Without the software, this client noted, they could never have kept up with their increase in orders.  Even the auditors were impressed by their year-end inventory accuracy and improved turns, they told us.

These are just two more examples of the overriding principle: that a strategic investment in improving your automation results in dramatically improved bottom line results – in multiple areas, on a continuously improving basis.  Real world results, from real world clients, applying the principles and technology of ERP.

In our next post we’ll look at “who benefits,” and how.  Stay tuned…

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8 years ago we first published a series of posts entitled “Software That Matters.”  It was an ERP implementer’s point of view, culled from long experience, on why and how to purchase a business management software system.  Later, we turned Software That Matters into a popular white paper that has since been viewed hundreds of times.  

Now eight years later, we thought it was time for an update, to reflect lessons learned since then.  (We also did a 2015 update three years ago.)  Much of what we wrote then remains every bit as true today.  But we decided again to carefully retrace our steps, re-edit our paper, add some comments and present it as a series of blog posts that will carry us through November, 2018.  We think that’s timely, as many companies at this time of year tend to reconsider the software they use to run their business — and how they might do better.

In our series we will again try to convey what’s important, what to measure, how to buy, what works, what it costs… and the many other business considerations required of this strategic investment, in what is probably the most important (and expensive) software a company will ever buy.  In other words, the Software That Matters.

 

Success Stories

If an ERP system is a “strategic investment” in one’s long-term business improvement strategy, it is helpful first to look at a few examples of the benefits that investment yields.  Such success stories serve to validate the investment.  We’ll reveal some here though because of the public nature of a white paper and a blog, we won’t name names; however, our examples are all culled from our own actual Case Studies.

The examples are cited not to hoist our own flag but simply to relate real-world success stories that demonstrate how ERP pays for itself – usually, many times over.  It’s an effective way to convey actual results – and what better way than from firsthand experience?

These success stories serve to reinforce some of the principles we’ve outlined earlier: that as a strategic investment, ERP returns its costs many times over, by eliminating waste and redundancy, streamlining operations while providing more actionable information, and preparing the foundation for growth.

On the smaller business side of things, one client spoke of the number of new people she did not have to hire.  This Chicago-based manufacturer of small electronic components uses ERP to handle all purchasing, payables, receivables and invoicing, not to mention quoting, planning and generating work orders – all utilizing pretty much just one person.  She stays on top of bills of material and order flow, generating the reports she wants, when she wants them.  On the shop floor, automated bar-coding creates labels for parts and bins and makes work order tracking not only foolproof, but totally accurate and simple.  The right material gets issued to the right job, every time.  Paperless invoicing completes the cycle.  The firm has eliminated hundreds of thousands of dollars of labor cost, materials and waste, by its own reckoning.  And that’s a typical outcome.  Given this company’s relatively modest system costs, the ROI is probably at least ten to one, if not better.

Another example: A Midwestern manufacturer of rubber gaskets and seals shared some of their business results with us after implementing ERP software to greatly streamline distribution, warehousing, manufacturing and accounting.  The firm was able to consolidate all production formerly done in two (and sometimes three) shifts into one.  Sales, given greater sales capacity, increased by 35%.  They were able to reduce staff count by 40%.  These are their numbers.  Moreover, they say they can put out more quotes with fewer reps, in half the previous time… with a 75% improvement in accuracy.  They ship with 99.9% on-time fulfillment.  Again, all these are the customer’s own numbers and words.

The common denominator: a well planned, budgeted investment in improving processes to eliminate waste, streamline procedures, remove redundancy, consolidate functions, and improve shop floor workflow and final product delivery.  A plan which, the customer notes, was executed on-time and on-budget.

In other words: aligning business strategy with effective technology solutions.

Before moving off case studies entirely, in our next post we’ll look at two more, from the manufacturing sector of small business.  After that, we’ll look at a typical customer profile and “who benefits.”  Stay tuned…

 

 

S

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8 years ago we first published a series of posts entitled “Software That Matters.”  It was an ERP implementer’s point of view, culled from long experience, on why and how to purchase a business management software system.  Later, we turned Software That Matters into a popular white paper that has since been viewed hundreds of times.  

Now eight years later, we thought it was time for an update, to reflect lessons learned since then.  (We also did a 2015 update three years ago.)  Much of what we wrote then remains every bit as true today.  But we decided again to carefully retrace our steps, re-edit our paper, add some comments and present it as a series of blog posts that will carry us through November, 2018.  We think that’s timely, as many companies at this time of year tend to reconsider the software they use to run their business — and how they might do better.

In our series we will again try to convey what’s important, what to measure, how to buy, what works, what it costs… and the many other business considerations required of this strategic investment, in what is probably the most important (and expensive) software a company will ever buy.  In other words, the Software That Matters.

 

Motivators

Noting our earlier tenet that ERP is, above all, a strategic investment, let’s take a look at what typically motivates companies to look for a new ERP system.

First off, let’s face it: nearly everybody has some kind of automated system today.

It might be old.  It might be entry-level, or outdated.  It probably made it over the Y2K hump, and perhaps was purchased around that time.  It probably has grown some tentacles over the years.  A packaged solution perhaps for accounting or basic bookkeeping.  Maybe a service for payroll.  A home-made application for tracking jobs, work in process, or inventory.  Maybe another program for CAD, with a large repository of drawings often unrelated to and inaccessible by anything else.  And spreadsheets.  Lots and lots of spreadsheets.  Word documents, too.  And some nifty FileMaker applications that you probably couldn’t run the business without.

And none of it, all too often… talks to anything else.

So, Motivation Number One for a new ERP system for most companies is simple: information is scattered, hard to find, unrelated to its counterparts, highly unmanageable, not readily accessible to all, widely dispersed and captured at best in ‘older’ systems.  Some of it is in a computer, and maybe some of it is not.

Motivation Number Two is related to Number One.  With information so scattered across different systems, or only on paper, there is a natural inclination towards redundancy – sometimes massively so.  How often for instance must the same information be re-keyed in one form or another?  Do you re-key quotes once they become orders?  Do you create sales orders that are recreated for work orders that are recreated for travelers, and so on?

Maybe you’re afraid to know the answer.  If most business owners added up all the time spent re-keying, searching, storing, retrieving, assimilating, reporting, sequencing, organizing and otherwise following up on all this data, they would probably be stunned by the amount of waste.

And as we all know, wasted time is wasted money.

Motivator Number Three is rapid or even sometimes uncontrolled growth.  Ironically, it’s the byproduct of success, which breeds more success — provided your systems can keep up.  Most growing companies, rather than change systems, find it easier to work with what they have, stretch its limits, even overload people.  They’re too busy growing, and afraid to make changes now.  It’s like blowing more air into an already inflated balloon.  You can keep doing that – up to a point.  But eventually, your balloon bursts.

A related motivator: a desire to grow.  We’ve often observed that companies who plan to grow… who wish to grow… simply don’t have the software infrastructure to allow it.

Any or all of our three motivators – scattered information systems, redundancy and waste, and fast growth – are usually the key factors in any decision to “get serious” about upgrading to a modern-day ERP system.  The goal: dramatically improved operational efficiencies… reduced expenses that yield strong ROI… improved customer contact leading to an improved customer experience… less waste… the list goes on.

In our next post, we’ll look at a few small business ERP success stories — motivators in themselves you might say.  Stay tuned…

 

 

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8 years ago we first published a series of posts entitled “Software That Matters.”  It was an ERP implementer’s point of view, culled from long experience, on why and how to purchase a business management software system.  Later, we turned Software That Matters into a popular white paper that has since been viewed hundreds of times.  

Now eight years later, we thought it was time for an update, to reflect lessons learned since then.  (We also did a 2015 update three years ago.)  Much of what we wrote then remains every bit as true today.  But we decided again to carefully retrace our steps, re-edit our paper, add some comments and present it as a series of blog posts that will carry us through November, 2018.  We think that’s timely, as many companies at this time of year tend to reconsider the software they use to run their business — and how they might do better.

In our series we will again try to convey what’s important, what to measure, how to buy, what works, what it costs… and the many other business considerations required of this strategic investment, in what is probably the most important (and expensive) software a company will ever buy.  In other words, the Software That Matters.

  

Asking Why On The WAY To A Better Answer

Starting with the premise that ERP is, above all, a strategic investment, the point is to create long-term strategic business advantage by being able to deliver your company’s products or services better than your competitors.

That strategic advantage might be faster fulfillment, or orders shipped more completely, or services delivered less expensively, or perhaps a level of service or product customization competitors can’t match.  In virtually all cases, it is best accomplished by creating and managing business processes that are optimized to deliver the greatest possible value to a customer at the lowest cost.

How do you do this?

Well, for one, you find ways of doing things cheaper, faster, better.  That’s where the ERP edge begins.

Utilizing computers and software as a competitive edge usually starts with eliminating human redundancy, eliminating tasks that have to be done more often than necessary, making tasks easier or more foolproof, eliminating or reducing errors, and improving and streamlining your processes through automation.

In virtually every company we work with, we see redundancy and waste.  It’s not the plan, it’s just the way things developed over time.  This is where the power of WHY comes into play… and how it leads to ERP.

One of the lessons we’ve learned over the years – and can never apply enough – is to ask clients Why?  Why do you print that report every week?  Why do you keep so much safety stock?  Why does your staff spend so much time ‘following up’ on (or “expediting”) orders?  Why do you have thousands of redundant bills of material?  And so on…

The answers almost always lead to further Why’s as we drill down to the core, underlying issue(s) – issues that often are actually pretty far removed from the initial inquiry.  More often than not, things are done the way they are because, well, we’ve always done them this way.  It used to make sense.

So to close the circle: with today’s technology, with today’s newer ERP systems, with an intelligent look at your business’ processes and procedures, it is possible to identify and correct or eliminate the wasted steps, the redundant processes, the disorganized data and disconnected systems.  And today, it’s possible to streamline, tighten up and tie together much of an organization’s information under one umbrella — or at least, fewer umbrellas than ever before.

That umbrella of unified and consistent information, available to all who need it, becomes the foundation for your management team’s ability to make the right decisions about the right issues and products at the right time.

And that is the essence of ERP.

In our next post, we’ll look at the key motivators behind most ERP decisions.  Stay tuned…

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Eight years ago we first published a white paper – divided into about a dozen single-page, easy-to-read sections — on how to choose a business software system (often called ERP today).

The concept was simple: After 20 years of implementing systems, we would provide some concise strategies and tips, corroborated by others, that would help folks looking for clear-cut, objective advice on software selection.  We felt that will all our experiences and trials and errors, we could share what we’ve learned with others, without recommending any particular brand or type of software.  Our goal was simply to give folks food to think about, while distilling the best advice we’d learned over many years.

Since that original publication in 2010, we’ve had many reads and downloads.  Since that time, a lot has changed and yet, remarkably, so much of what we knew back then remains true today.  We updated our paper in 2015, incorporating key changes we’d seen, mostly of the software-delivery nature, while revisiting our tried and true principles.

Well, it’s now three years later.  A lot of folks start thinking about new business software at this time of year.  So we thought it was time once again to reload and release our thinking, fully eight years since we first wrote our pamphlet, titled “Software That Matters.”

So beginning this month of November, 2018, we’re using our blog again to share what we’ve learned, updated for the times.  The idea is to pass along one or two key ideas per post, so that by the time you reach the end, you’ll have a clearer picture of what really matters when you set out to replace your business management system with new software (hint: it usually isn’t the software).

We hope you find the dozen posts that follow useful in your own search.  While full disclosure requires us to admit that we do, after all, sell and install software, we’re confident you’ll find our posts factual, objective and largely unbiased – just the way we intended them.

And so, updated for 2018, we give you… Software That Matters.  Thank you in advance for reading.

Simply put, we do ERP.  And after 25 years of doing it, we believe buyers of ERP systems can learn from our experience.

 


 

ERP is Enterprise Resource Planning, a fancy moniker for the software that keeps businesses running.  Broadly speaking, we’re talking here about accounting, inventory control, MRP (Material Requirements Planning), manufacturing workflow, shop floor control, managing throughput in the warehouse or on the shop floor, as well as other critical business areas like customer relationship management and web store development.

We think of it as software that matters.

In previous blog articles, we’ve touched on some of these elements.  We’ve talked about CRM in a multi-part post here: http://wp.me/pBCDO-8X and extensively about WMS (there’s another one – Warehouse Management Systems), including a number of articles you’ll find here: https://pssiusa.wordpress.com/category/general-wms-warehouse-mgmt-articles/

But let’s step back first and look at the bigger picture: What is this stuff, and why is it so mission critical to any company that wants to grow, prosper or these days, even survive?  What good comes from it?  Who — and what — is involved?  What are the costs and what are the benefits to be gained as a result of that investment?

At its core, ERP software is, above all else, a strategic investment.  It’s an investment of your firm’s most precious resources — cash and people’s time — in what is best described as a long-term business improvement strategy aimed at substantially, even dramatically, improving your return on that investment (your ROI) in the years following a successful deployment.  ERP is front and center in business to improving your operational flow, reducing expenses, eliminating waste, removing redundancy (and the curse of all those spreadsheets), and continuously improving your processes.  It’s the on-the-ground implementation of “lean.”  And perhaps most importantly, it’s the platform for business growth.

In our next post then, we’ll take a look at where to start, and the one critical question you need to ask in order to get started.  Stay tuned…

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