Wednesday, April 18, 2012

ERP Software Selection

It may sound a little off, but when selecting an Enterprise Resource Planning (ERP) system it is important to consider solutions that actually target your company’s challenges. 

Many organizations start out looking for ways to drive efficiency in their operations.  Perhaps by reducing paperwork, minimizing shipment errors, increasing accuracy of their inventory, or tracking inventory movement.  All this in order to increase customer satisfaction, reduce costs, and stabilize and increase profits.  

Makes sense.  

Then how do companies get off track?  There is no shortage of buzz words in the technology field.  Cloud, SaaS, ERP, CRM, EDI, etc.  Every industry and group develops their own language so they can communicate more efficiently within the group.  This is the same goal most organizations have with an ERP solution itself. 

The more complete and efficient the communications, the better for business.  Problem is that when these groups try to connect with outsiders (i.e. prospects or customers) they forget that no one else understands what they are saying.  This leads to people nodding their heads afraid to ask what was meant, because they do not want to look stupid.  Sometimes others will forge ahead and not take the time to find out if they even need any of the talked about features and benefits.  Order too much, or not the right solution. A real disconnect happens.  A real potential for disaster.  An over budget, failed installation.

Who wants to put up their hand in a board, planning or committee meeting and say “I do not understand?”  What does that mean?  How does that solve our challenges?

Any organization needs goals.  They first need to learn what they do not know.  Figure out that the operations they thought were so wonderful and the inefficiencies they thought were just the cost of doing business could be reduced.  You need to know where you are and where you are headed.  How else will you know if you are off course?   How else would you be able to determine if that module in the ERP system will really make sense now, tomorrow or never?

Use the communication and rapport with the solution provider as an indication and starting point of their general strengths and weaknesses.  Every company does some things better or worse than the others in their industry.   That is why there are so many solutions today.  You have to find the supplier that is of like mind.  The one that is responsive to your needs and the culture of the people who work for you as well as your customers. 

Remember happy customers?  That is what you want.  That is what we all want.

Here is a test.  Wait until you get down to two or three candidates, and make a hotline call to each of them.  First one that responds in a way you like and is similar to the way you respond to your customers should get high marks.

Plan for the future.  Buy what you need today and develop a roadmap for the future.  As you hit your benchmarks you can add new modules.  ERP software is modular and typically based on departmental or functional roles.  Get the basics today, learn and implement them, then add more.  The only times it makes sense to do otherwise is if you need to define a competitive edge over your competition or you are in need to catch up to the competition.  In either case you need to be able to allocate the resources needed for training and implementing the new modules.  I have seen plenty of failures, because there simply were insufficient resources to implement the “new stuff” (training being a big part). 

Avoid the finger pointing when that happens.  It just does not help. 

By the way, determine your budget now and allowances.  Nothing is perfect, comes in on time or on budget.  There is always a fudge factor.  Now a good supplier lets you know this up front and its magnitude is often small unless there is a dramatic change in the organization, like new leadership or a merger and acquisition.  Things happen.  Life happens.  Like investing in the markets or heading to a casino for fun.  You have to know when enough is enough. 

At what percentage over budget do you pull the plug and start over?

Few suppliers have an in-house solution for every business challenge.  This might seem to be a contradiction to the all-inclusive ERP integration.  In some respects it is, but then consider that services like Payroll and Human Resources are usually better done by a dedicated organization.  The same is true with other modules or applications.  You just need to find out how well is the integration done.  Who supports the integration?  Does the ERP provider have a solid relationship with the other provider and who do you call for support if there is a problem.  Are the interfaces well defined?

Do not get swayed by the upfront costs and annual license maintenance fees. 

We all know when something sounds too good to be true.  Some companies will come in with a low-ball price upfront, but then overcharge and nickel and dime you for everything else.  Take the time to do the best you can in determining the true Total Cost of Ownership (TCO).  This will help when you calculate the Return on Investment (ROI).  How much time is reasonable for a total return on investment?  Some say one year, others two.  Regardless, it is better to figure that out now and budget accordingly.

At this point you should have lots of questions.  Now is the time to get answers.  A consultant or trusted advisor can help in this area.  Dolvin Consulting works with Manufacturers, Distributors and Specialty Retailers to help them make better decisions. 

Not sure of what you know or do not know?  Afraid to look ignorant?  No need that is why we are here.  Contact us today.  In the worse case we make new friendships.  In the best, you find the best fit solution for your challenges and budget and make a new friendship.


  1. Hello Friends.........

    Great information.Thanks for sharing this useful information with all of us.Keep sharing more in the future.

    Have a nice time ahead.


    erp Modules

  2. Its fantastic to read something on ERP system. ERP system it is important to consider solutions that actually target your company’s challenges. ERP provider have a solid relationship with the other provider.that is very useful for me.
    Finance Module in ERP