Executives in manufacturing firms have valid concerns about creating disruptions in their organization by replacing or updating a functioning enterprise technology product such as an ERP solution. If that solution is poorly implemented, the business may suffer further from budget overruns, project delays or business disruptions. The worst case scenario is a break in business continuity, resulting in lost revenue and perhaps lost customers.
C-level executives are familiar with the cautionary tales provided by well-publicized failures in ERP implementations: The State of Washington’s community colleges have reportedly been trying to get a new ERP system functioning properly since it was supposed to go live in 2012. A series of internal and vendor issues have caused a cascading list of setbacks which have characterized the effort since its launch.
Target Canada is another well-known failure. When its ERP system launched in 2013, the company’s supply chain collapsed. Thousands of data entries were manually entered into the system by poorly trained employees working with unrealistic deadlines. A post-launch investigation revealed that only 30% of the data entered was correct.
However, failures like these are the exception, not the rule. When a company approaches a project with a properly designed strategy and execution, success is nearly a certainty.
Project Management is Key
Project management is an integrative endeavor where an action, or failure to take action in one area will usually affect other areas. One critical element of successful project management includes creating project teams with clear mandates:
Steering team - This group is comprised of the project manager, company executives and project sponsor. It oversees the entire project to assure that cross functional improvements work well for the enterprise and fit into the strategic planning framework. The steering committee also provides a project mandate and executive support to the project management team and core team members. This group remediates conflicting priorities, removes roadblocks, approves decisions, and serves as a point of escalation for significant changes (timeline, quality, scope, budget, resourcing).
Core team members – Your core team should be respected and knowledgeable individuals that understand the cross-functional perspectives of the business. Collectively, these individuals are able to represent the respective end-to-end functions of the business and know which SMEs to contact for more detailed discovery, discussions, and decisions.
Project management team – This group includes all parties above: project manager, steering team and core team. The project management team ultimately has a professional responsibility to the stakeholders of the project, including customers, company organization and public, for the overall outcome of the project.
For a project to be successful, your project management team must do the following:
- Identify appropriate processes that are required to meet project objectives.
- Use a defined approach to adapt the product specifications and plans to meet project and product requirements.
- Comply with project requirements to meet stakeholder needs and expectations.
- Balance the competing demands of scope, time, cost, quality, resources and risk to produce a high quality product.
Whatever the type of enterprise software or project, we have found that a strong project management plan is the most influential factor in separating the successful projects from the unsuccessful.
Choosing the Correct ERP Vendor and Third-Party Consultant
A successful ERP implementation can hinge on choosing the ERP vendor that best suits your company’s specific needs. Companies should keep the focus on making a good fit to their business process requirements and to team with a vendor that will be a good partner for the future.
Consider these six major recommendations to select the ERP vendor that will provide the best solution:
Select by industry segment
Manufacturers should team up with an ERP vendor that has proven success in the company’s specific industry. The vendor needs to demonstrate a presence in the industry with recent references and a product direction statement that explains how they plan to maintain their position as the leader in that industry. It makes no business sense to force-fit an ERP solution to a specific industry.
Look for a flexible solution that fits with existing systems. Talk to suppliers, customers and ERP professionals that specialize in a specific industry. Get opinions and feedback on ERP software and how it works with businesses of similar sizes and requirements.
Assess Total Cost of Ownership
Establish the budget for the project in terms of initial implementation and total cost of ownership (TCO). A solution quote usually includes software, first-year support and implementation consulting costs. TCO takes into consideration per user license costs, training, maintenance, customizations, upgrades, internal costs and other fees.
If the system is cloud or software as a service, take a hard look at the service level agreement for any hidden costs such as system enhancements and upgrades.
Consider Technology Strategy
The internal IT department should make any requirements known to the project steering team at the outset. This is not to be confused with the requirements your organization will need to define prior to the selection of new technology; that will need to involve all departments and should not rest exclusively with IT. As an example, are there sufficient IT resources to maintain and upgrade the system? Can existing staff handle the new technology platform? Does IT have the necessary infrastructure to facilitate an on-premise system, including servers, database management, and security and safety protocols? What is the overall IT strategy of the enterprise? Do the ERP vendors in the evaluation phase offer the technology model that is aligned with the enterprise IT infrastructure and strategy?
Evaluate the Vendor
ERP software needs to be selected to enhance competitive advantages that will increase profitability through decreased costs and fine-tuned processes. Consider that the smaller niche vendors offer solutions tuned to vertical solutions, and often come with a lower price.
Research customer references
ERP vendors typically offer a small selection of carefully identified customer references. We recommend another approach. Ask for a list of specific, relevant customers that have been using the system for a year or more, in the same industry and facing similar requirements.
Request an on-site reference visit and bring a team of appropriate managers and departments for the most accurate assessment.
Create a use case demonstration script rather than relying on an RFP
To best evaluate how a system will handle your organization’s future needs, it is important to create a use case demonstration script. RFPs can be subjective and result in a demonstration of the product that will give you their “showroom version” and how it will operate in an ideal situation. It may also demonstrate functionality that is on the cutting edge but has not been vetted in the field, resulting with a gap between reality and expectations. It is important to understand the value targets and decision drivers when creating the script to appropriately build out scenarios that reflect the priorities of the business. This is where consultants with broad-based and independent experience in the industry and multiple implementations under their belt can be invaluable. It is why many companies hire objective third parties to ensure they get the right solution selected.
A recent survey of more than 300 manufacturers by analyst firm Mint Jutras revealed a greater level of satisfaction from ERP projects than previously reported. The survey focused on the degree of success with their ERP implementations in terms of schedule, cost and return on investment (ROI). The study found that 67% of manufacturers and distributors rate their implementations as successful or very successful.
A careful ERP selection and implementation process will build a foundation of information, education and documentation that will increase the likelihood of a project’s success and maximize the ROI. Many midmarket organizations do not have this kind of experience on staff, so they look to third-party consultants to fill their need. If they go this route, it is essential to define which criteria are the most important to you. We see independence, industry experience, proven methodology, best practice knowledge, consultant’s skillset and whether or not they have a technology research group to be on the top of the list. Having this type of experience involved for a new technology project can create:
- Dramatic improvements to existing business processes structured upon industry best practices and differentiating business models.
- An accelerated process for selecting and successfully implementing the best enterprise and related solutions that align to the needs and future goals of the company.
- Negotiated software purchase agreements and implementation services that deliver the best total cost of ownership for enterprise and associated technologies.
- Successful realization of ROI goals through business analytics, process excellence, lean, Six Sigma, and other proven methodologies.
Driving these four strategic activities facilitates risk management and drives positive change throughout the client’s enterprise. Q