Part I: Selecting and Implementing an ERP System
Hassan Khan, Anthony D’Agostino, Danielle Marchese
Developing a comprehensive systems strategy is critical to every company’s long-term success. But the effectiveness of the strategy is only as good as the selection and implementation processes that precede it. This is especially true when choosing and rolling out an enterprise resource planning (ERP) system.
An ERP system is software that automates, integrates and streamlines business processes across an organization, making accounting, data analysis and other operations more efficient. The benefits of ERP have a direct impact on the customer experience, which makes it one of the most important technology decisions you will ever make for your manufacturing or distribution company.
Before you embark on an ERP project, ask yourself why you are implementing the system in the first place, and communicate your answer to all stakeholders – upper management, project team, ERP vendor and, eventually, all employees. This will provide a solid foundation for consensus-building, change management, adoption, long-term usage and maximum return on your investment.
It is also important to understand key ERP selection and implementation best practices from Day 1 – before you even start to evaluate or install a new system.
Get ERP Selection Right
The variety of ERP software available in today’s marketplace makes the selection process challenging. Choosing an ERP system requires a thorough, structured and unbiased decision-making process that includes the following steps:
Define Clear Requirements. The best place to start is to define your goals and link them directly to the ERP features that will achieve them. If the goal is to save time and lower costs, automation features will most likely be a requirement. If your objective is to improve customer communication or analysis across the business, certain data management tools may be must-haves.
Assess Current Environment. Analyzing existing systems, workflows, and critical business processes is another best practice that can uncover deficiencies that the ERP system should address. Typically, a management team will assess all of the shortcomings of a company’s performance and prioritize those items based on visibility to the customer and impact on the customer’s experience.
Narrow down your options. Shortlist and evaluate at least four different ERP systems to find the best match to the identified requirements and needs. Looking at systems that are customized to the M&D industry, or your sub-sector, is a helpful way to hone in on your best options.
Evaluate the impact on your workforce. When making your decision, don’t forget to consider the impact on your workforce. ERP upgrades often require a client to hire more staff to maintain a more robust system than what was used previously. You should also consider the abilities of the existing team to work with the new ERP. Conversely, depending on the level of automation and process improvement provided by the system you select, the change may lead to necessary layoffs or increased training expenses. All of these factors should be considered as part of your overall decision-making process.
Communicate with your workforce. Before the selection of a software infrastructure is even made, you want to communicate the reasoning for this change, manage expectations about the project and proactively address any negativity and concern.
The Do’s & Don’ts of ERP Implementation
ERP implementation can be equally complicated and often requires extensive planning, training, and support to achieve the intended results. The implementation team needs to understand all of the needs and workflows defined in the selection process to realize the full potential of the ERP solution. Follow these best practices to achieve maximum results:
Don’t treat your ERP implementation as an IT project. The most effective implementation will be a “people” project. ERP projects are done by you, not to you.
Do define clear project scope and goals. While the objectives of the ERP will be clearly laid out in the selection phase, this is the time to take it a level deeper. Which specific modules are you implementing? Which areas of your business will be affected? Which systems will require integrations to your new ERP? Are you doing this all at once or in sequence? Without answering these questions up-front, your budget can spin out of control and your ERP suppliers will not have a clear understanding of clear goals and key performance indicators (KPIs).
Do obtain executive buy-in. Successful ERP implementation requires cross-functional collaboration and the reallocation of budget and resources throughout the implementation process. Getting executive buy-in ensures senior stakeholders understand the long-term benefits and how this will impact top-level business goals such as revenue and profitability. Successful buy-in ensures executives are fully committed to seeing the project through – from planning to long-term support, and every decision in between. A member of senior management should be assigned as a “project sponsor” to help make decisions on priorities and trade-offs of resources and help facilitate ongoing executive support.
Do assign a core project team. Your ERP project team is the most critical factor in your implementation. They will establish goals, requirements, and key performance indicators (KPIs), as well as carry out daily project management tasks. These people need ample time, support, and skills to perform the implementation effectively and avoid delays, growing costs and configuration missteps. In addition to the project sponsor, the core project team should consist of a project lead supported by a core team of functional/departmental leads or members who are knowledgeable about the company’s processes and/or have completed an ERP project before.
Don’t customize – configure. A key ERP implementation best practice is to conform to the standard business processes of your new ERP system as closely as possible. Doing so will make the implementation quicker, the maintenance costs cheaper, and future upgrades easier. In rare instances, customizing a business process makes sense, but if you find yourself customizing processes frequently, there is a good chance you chose the wrong ERP system in the first place.
Do clean data before migration. It is important to make sure the formatting of the data in a new ERP system is correct before importing data from your existing system. The process of cleaning legacy data before migration includes ensuring existing tables and databases are correctly formatted before they are imported and removing redundant data that provides little value.
Data can be transferred to the new ERP system manually or via automation. Automation is faster and less tedious but still needs plenty of oversight to avoid issues. Your ERP partner, IT staff and implementation team will all need to be involved for a successful data migration.
Do test system before deployment. Testing your ERP system before deployment is important in ensuring that it is fit for purpose and able to replace your legacy systems. This will include unit testing for each part of the system, integration testing to determine if these parts work together, and system testing to ensure that the entire system operates as expected. Alongside technical testing, it is also important to develop a full UAT (user acceptance testing) plan that allows actual end-users to test the ERP system before it is fully implemented.
A successful ERP implementation can bring invaluable improvements to customer satisfaction, productivity, cost containment and more – but not without a lot of planning and sacrificing first. Your budget, people and processes will all be impacted initially, but by continually communicating the benefits, securing buy-in from the top, defining goals and managing change, you can avoid the obstacles that hamper the efforts of even the most qualified project team.
To learn more about these strategies for selecting and implementing an effective ERP system, as well as post-implementation success, listen in as Grassi’s Technology and M&D advisors present a live video session on Getting ERP Right: Best Practices for Manufacturers & Distributors on March 28, 2023.
