How to prepare for an ERP Evaluation
Twenty years ago it was more common for companies to replace their ERP solution every seven to 10 years. That timeframe has been extended considerably. Many companies are using their ERP solution for 20 years or more. We have worked with several companies that originally deployed their current ERP solution in the early 90s. Imagine how much the world has changed and what capabilities exist today that didn’t exist back then!
Selecting a new ERP solution is a major decision for any organization, small to large. It is one of those decisions that can ruin the decision maker’s career if the project doesn’t deliver the expected results. Therefore, companies are extremely cautious as they evaluate solutions and compare the costs and expected benefits to ensure they are making the right decision.
The rest of this article will provide some guidance on what companies can do to prepare for an ERP solution evaluation. There is value to the organization regardless of whether or not a new ERP solution is deployed.
Get executive approval to start the process
This is an incredibly important step to ensure that your time spent on this process will be well spent. Meet with your executive team to identify the current system issues and costs to the business. Explain what the current system is costing the company and the limitations it is imposing on current business processes. The current system might actually be preventing the company from moving forward on key business initiatives like product line expansions, geographic expansions, and acquisitions if the issues are severe enough. Try to qualify and quantify the current issues and present the business case to the executives.
Form a cross-functional selection team
This is also a critical step. We have seen selection projects led by the IT department, finance, and operations, but the best projects were ones where all the players were represented on the selection team and had a voice in the process. Gaining that support from all of the various departments will be critical to the success of the project. Having them involved from the start will save time wasted looking at various solutions that only solve the business needs of one department.
We recommend a selection team similar to the following:
- Executive Sponsor
- Selection Committee Chair
- Subject Matter Experts (SMEs)
o Customer Service
- IT Department
The team members should have a broad understanding of the company, the current system challenges, and desired future state.
Identify the key business challenges
Too often we see organizations do very detailed requirements gathering at this stage and put together lengthy requirements documents (sometimes with over 3000 individual requirements). ERP solutions have gotten much better since the last time you evaluated them. They will all have the basic requirements or they shouldn’t even be considered. Don’t worry about documenting requirements like the ability to print checks or manage 20 digit inventory SKUs, the software vendors probably wouldn’t be in business if their systems couldn’t do that today.
The key at this stage is to identify your key business problems. Is your key issue that you are unable to determine the costs of your products, which leads to uncertainty in pricing? Are you having issues meeting your demand or knowing what products to produce? Are you missing project deadlines because you can’t effectively manage the project plan?
Too many companies get lost in the minutia of the details and lose site of the big problems they are trying to solve for the business. Stay focused on those items at this stage. Make sure you know what success would look like for the project; addressing the key business problems you have today.
Identify your key strategic differentiators
This is related to but slightly different than identifying your key business challenges above. The challenges might be related to costing because your system doesn’t do it well, but it may not be a strategic differentiator for your company. Strategic differentiators define what is unique about your company. It is your secret sauce. It’s what allows you to compete in your marketplace. The worst thing you can do with any ERP implementation is mess with your strategic differentiators.
For example, one of our clients developed a quoting tool that allowed them to very quickly take a digital drawing from their customers and quote a prototype in a few hours or days. They were also able to quickly produce a prototype once the quote was accepted. Their ability to quote and produce quickly was what allowed them to compete effectively in the marketplace and charge premium prices based on the speed of delivery. During their selection process they wanted to make sure that this strategic differentiator was not impacted. Toying with that process would have had dire consequences for the company.
Make sure that you identify your strategic differentiators so when you evaluate solutions you can ensure that they will accommodate them.
Preparing for an ERP evaluation summary
The first phase of any selection project is important to ensure that the time spent evaluating is well spent and that you have buy-in from leadership and the key departments impacted by ERP. Getting this wrong or short-cutting this first part of the process will impact its long-term success.