ERP Myths and Facts

This post is dedicated to those who know that there are no simple answers in the ERP space, and want to learn more about it. Here are a few Myths and Facts from the world of ERP.

 

MYTH: “Our project is not progressing as planned because it lacks management commitment”

FACT: Progress is often not achieved because of management burn-out. People involved can be disillusioned by promises made and expectations that were built-up by overzealous vendor reps, consultants who collect exorbitant fees as the project lingers and IT personnel who were looking for big budgets and the opportunity to rub shoulders with the “big boys.” When management is made aware of the process, and understands that there are no silver bullets in ERP or quick fixes, then expectations don’t run amok and progress can be measured in a real and meaningful fashion. A successful ERP implementation can provide a qualifiable ROI.

 

MYTH: “Our system went live in just a few months”

FACT: It is more likely that the financial part of the ERP went live in a few months rather than the whole system. Corporate financials are fairly straight forward to implement. Also, in most organizations the financials are already “under control.” An ERP system’s biggest added value is not in the financial area, but rather in other parts of the operation and perhaps in tying those other parts into the financials. Modeling and effectively managing operations in an integrated ERP system may take years to implement. In fact, it is an ongoing process. Ultimately, the system must be flexible enough to accommodate operational changes indefinitely.

MYTH: “Once we finished getting our ERP system up and running, our expenses went down drastically.”

FACT: Outside consulting fees may have been reduced and the initial costs for setting up the system are paid off, but companies often fail to take ongoing internal implementation investment into consideration. In the words of one CIO, “we planned for $600,000 and a 6 months project; we reached both and then stopped counting.” An ERP implementation extends over long periods of time, and any worth its salt will take years, not months.

 

MYTH: “Consultants are professionals who can guide the selection process and manage the project while maintaining an objective stance.”

FACT: We believe that anyone reading this already knows the facts.

 

MYTH: “Comparing ERP functionality lists is a good practice for initial screening of vendors for your project.”

FACT: Functionality lists are of marginal value in the selection of potential ERP systems. A single line in a list may represent a world of functionality in one software packages and very little in another. Even if the desired functionality is fully supported in the software, actually making it work for your specific needs may make implementation complex and cost prohibitive. Referrals in your industry are a much better yardstick. As the implementation team is just as important as the software in terms of successful projects, referrals from industry representatives regarding the implementation team are the second most valuable indicator.

 

By Galit Raviv

 

The Art of Choosing an ERP Solution

If you are looking for a blog post that will detail the benefits, functionality or implementation processes of a particular ERP solution you can stop reading now. This post will step back a level and try to see the overall picture of deciding to move forward with an ERP solution, the forest, and not just the trees. Our journey begins with a short description of why ERP software can be an outstanding tool for an organization, and goes on to take a look at why so many implementations fail leaving a bitter taste in the mouths of all involved. The road ends with solid recommended practices, foundations as it were, for a secure and effective ERP implementation.

 

Why ERP?

Even with the economy in trouble and companies looking to cut costs in order to stay afloat, many are still making the decision to move forward with new ERP systems, or continue to invest and develop the ERP systems they have in place, often to the tune of hundreds of thousands of dollars. Why? Because ERP systems, when properly chosen and implemented, make sense. In the long run, they ensure better business practices, have the potential to reduce time spent on tasks that can be automated, freeing people up to concentrate on other tasks and improve productivity, and can ultimately result in tangible monetary benefits in the long run. 

ERP systems are not simple. They are, or should be, an enterprise level investment of most of all, time and energy. An ERP system should not be purchased to address the needs of the finance team, or the sales people, or even the people on the floor of a manufacturing plant. An ERP system must be able to address the needs of a company as a whole, and when it does, that company will reap the true benefits of the system. 

Where in the past a company may have one software package for their accountants, another for sales and yet another for their warehouse, using ERP can not only give all of these different entities information across the company, but also give management a bird’s eye view of what is really going on, without the need for complicated reports generated from different systems. How much more efficient is a system if a sales clerk can see if a particular item of merchandise is available in a different store, or in the warehouse, or if not there if it is on order and when it is supposed to arrive – all at his or her fingertips. And that is just one example. Consolidation, integration and the sharing of information. How would it benefit your company?

 

What are some of the other advantages of ERP?

Proper implementation of an ERP system forces companies to get organized. You have to take a good look at the current business practices, make sure they are actually the “best” they could be and are achieving the expected results, and then think about how to make them better. Once this is all documented, it’s time to set rules and constraints in the software to control events. All this translates into establishing best business practices and processes. This is time consuming at first, but once everything is in place, and you know that management will be receiving an email if something out of stock was ordered and didn’t arrive within 24 hours of its expected delivery date (for example), it’s time that is worth investing. And with the rapid turnover of personnel in some companies, the “knowledge” of how a particular task is done is documented to ensure that it doesn’t get lost if a particular employee is no longer with the company.

 

Flexibility 

This is key to a successful ERP implementation, from both sides of the table. The ERP system chosen must be flexible enough to meet the growing needs of an organization, and to be able to change, modify and adjust processes as business needs change within the company. From the other end, the management must be aware that as business needs change, they may have to reinvest time and resources into making sure the software is keeping up with their needs.

 

Conclusion

Deciding on an ERP system is deciding who you want your business to partner with in the long term. It’s a partnership that needs to be re-evaluated periodically to ensure that the software is keeping up with advances in technology and changes in business needs. The ERP customer must be ready to commit to this long term partnership, and acknowledge that implementation is an ongoing process. Ultimately, the rewards will become apparent.

Future posts will address some of the pitfalls of ERP decision making processes and implementation, and how to avoid them.

 

By Rebecca Haviv