An ERP Selection Process That Guarantees Results

Written by Andy Pratico

There are over 1,000 manufacturing systems in North America and yet The Wall Street Journal has stated that “73.8%  of all manufacturers are dissatisfied with their current ERP systems.” Why? There are a number of theories why implementations have problems:
- Poor planning or no planning at all
- Top management not involved or
- Lack of commitment to the project
- Unreliable data
- Lack of training or implementation assistance
- Poor selection process
- Lost project momentum
- Business processes are not corrected

Budget Approval Dance

The first step in any selection process is expenditure approval. Middle managers spend days defining their selection process plan. The more detailed the budget approval request is, the more detailed the selection plan is, the more due diligence is assumed and therefore upper management’s perceived risk is lessened. The legacy selection plan usually contains:

The middle manager can get so obsessed with budget approval; and the upper manager can get so consumed in confirming the selection process is sound, that the most important objective in selecting a new system is often overlooked. The most important goal should be to ensure your company is successful with the new system! All other consideration should be secondary.

Legacy Selection Approach

The more you evaluate systems, the more you realize none lack functionality. The reason they fail is not because they are missing features, it is the exact opposite. They are so feature rich they are cumbersome and too difficult to learn. 
Then why do we devote our entire search to evaluating which system has the best and/or most functionality? Is it because new systems are purchased only every ten years, therefore, no one individual has the experience to learn from their mistakes?

Legacy Approach

Step 1

Issue a detailed multi-page novel called the “system requirements list” to all software vendors to roll out (honestly) thereby confirming which match. However software companies want to remain in consideration, and are motivated to answer each question with a carefully worded “yes we do that!”

Step 2

The selection team then shoulders the arduous task of reviewing “sales demos” in an attempt to decipher the differences. All sales demos are designed to look good. If the sales demo did not look good, the software company would go out of business. Software companies hire professional presenters who know how to navigate around the weaknesses of their system and precisely which keystrokes will present their software in the best light.

Step 3

You now call references to confirm that companies are happy with their systems. Where did you get the references from? Did the software vendor carefully select their very best customers that swear the software turns water into wine?

Step 4

And voila … you have selected the very best system for your company. Or have you?

Common Sense Approach

Step 1

Justify the ERP purchase with a business case. Will a new system provide you with a measurable return on investment? Or would streamlining your processes get the results you desire? Converting to a new system is difficult enough. Make sure that the effort is warranted - or else don’t do it. Remember, if you do not streamline your processes, a new ERP will only place pretty screens in front of your current problems.

Step 2

Document critical requirements that are unique to your company. Then match these must haves to the ERPs. Please note: Critical requirements only. We can all assume that most systems will have an “Aged Trial Balance.” This list should not be longer than two pages.

Step 3

Learn from un-biased experiences by visiting other companies using these ERPs. However, not the three the ERP vendor gives you. Ask them to be local, a similar size, in a similar industry (or with similar “must have” requirements) and have been using this version for more than 12 months (past the learning curve).

Step 4

Software price is a certainty. Implementation and training costs are directly relate to how much you contribute versus the vendor. All ERPs require the same steps to implement. You decide who does what and therefore how much it will cost.

How to Get Value with Sales Demo?

Consider it can take years to become fluent with any new ERP. Yet ERP sales demos usually last only a few hours. What can you possibly comprehend from watching a 3 hr sales demo?

However, if you plan to review sales demos, demand that the vendors bring in the trainer you will work with post sale, to show the software. You will never see pre-sales presenters after you purchase. Trainers have to live with their promises after the sale, and should be quite forward about what the system can, or cannot do.  Trainers are not offered to companies only looking because existing customers are paying them to implement their projects. This proof of concept pilot may cost a few thousand dollars, but will be far less expensive than the time-consuming legacy method.
Have the trainer set up the software around your requirements and enter a sub-set of your data. The intention is to present the system as if it were live at your facility. Again, you may have to pay for this service. Trainers are not offered to companies only looking because existing customers are paying them to implement their projects.
The ultimate goal when selecting a system is to make sure the system will provide the results you expect and you are happy with it. By following this simple process, emphasizing your critical requirements, you will not only get the right fit system for your company, you will be successful.

If you fail to implement

why do you care what software does?

For more than 40 years, Andy Pratico has worked with hundreds of manufacturers. During this time he has seen many implementation success stories, but sadly even more failures. To help companies increase their probability of success, Andy presents common sense workshops.

If time is money, then condensing tasks like evaluating software is profit to your bottom line. The step-by-step, due diligence process historically used costs $10,000s of internal resource time. How can we speed up the ERP selection process, and at the same time ensure our result will be successful?

The most important factor in selecting a new system is to make sure your company is successful with the new system. If 73% of manufacturers are not satisfied with their current ERP system and used the same selection process as you, why will yours be different? Maybe a different process should be investigated.

This 5-Step Plan is not only common sense but even better, it will take far less time to conclude and your results will be guaranteed!

Reference: This article was written by Andy Pratico for the first time for National Tool & Machine Association (NTMA).

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