Simple Strategy: A Playbook for Choosing Your New ERP

Here are the key reasons why your business may need to invest in an ERP.

1. Reduce costs through increased productivity
An ERP system can automate manual tasks, such as order processing, invoicing, and reporting. Modern ERP systems will also integrate with other key tools like your sales team’s Customer Relationship Management (CRM) tool to reduce data entry.

2. Increase revenue through customer data and services
ERP systems integrated with CRM tools can collect and report on Business Development activities like quotes, sales orders, or pricing arrangements in a centralized location. This end-to-end tracking helps you better understand your individual customer’s needs and become their preferred supplier.

3. Mitigate risk with reliable systems and greater visibility
ERP systems provide a centralized database of real-time information that can generate actionable reports and customized dashboards to match your business processes. This allows decision makers to easily digest valuable company data and make informed, timely decisions. In addition, older legacy ERP systems may have become unsupported by their ERP vendors, presenting serious risk of disruption to essential systems should their ERP fail. A modern and fully supported ERP system will mitigate this risk.

BUSINESS NEEDS DISCOVERY
Once your business decides to invest in an ERP system, a successful ERP implementation involves the collaboration of three key roles:

1. ERP vendors develop and build the actual software – they are often focused exclusively on the product and may work through a network of implementation partners who sell and configure the software for a customer’s specific needs. SAP Business One, for example, is exclusively sold through implementation partners. A few ERP vendors also handle sales and implementation internally, for example Epicor’s P21 product is typically sold and implemented by Epicor directly. Most work through a combination of implementation partners for smaller customers and direct sales for larger ones.
2. Implementation partners, as mentioned above, are the ones who complete the actual configuration of the software and help guide you through the implementation process. You often have multiple choices of implementation partners for a given software so we’ll also discuss vetting this role later on.
3. Your business’ internal project team – your internal resources often have the most critical responsibility, including vendor management, change management, and user acceptance testing. Many organizations don’t have this IT expertise in-house and will leverage a system-agnostic firm for support in this role.

Selecting an ERP that is best for your business requires serious consideration and input from those who have critical knowledge of your business operations. The first step in ERP selection is understanding how a selection project will be resourced, which involves backfilling key personnel to free them up to be “Subject Matter Experts” (SMEs) during the discovery phase of selecting an ERP. This discovery includes:

1. Discover critical business processes
Certain processes are most critical to your business’ success. These are often those processes that distinguish you from your competitors or create the most value for your customers. Identifying these processes and how they interact within your ERP system is the first step in ERP discovery. For example, the most critical process for one of our clients was their ability to introduce new products to the market quickly and seamlessly. Their ERP system needed to be able to easily create products and sync to an online portal where external sales agents could quickly order them. Excessive manual effort or risk in this process was unacceptable and it became a guiding requirement throughout the ERP selection process.

2. Consider current tech systems and interconnection with the ERP system
An ERP system is at the core of your technology strategy and ecosystem so it should integrate well with other systems in your business. Many ERP systems will offer features like Warehouse Management, Manufacturing, Point-of-Sale, or CRM built directly into the ERP. These built-in modules will provide basic features but may not meet more sophisticated requirements. If additional systems are required, then understanding if and how they will connect with the ERP is critical.

3. Develop scenarios unique to your business
Your business may think more in terms of processes that often stay within one department, but an ERP functions across processes and departments. Developing unique scenarios that contain linked processes is a useful way to think through what the ERP system needs to do.

A common scenario for distribution companies is the purchasing of “project” related inventory, or inventory designated for specific client opportunities, like an HVAC distributor providing equipment for a large residential construction project. This scenario will effectively highlight key business complexities like purchasing with project-specific costs, allocation of stock, staged and scheduled deliveries, and project specific pricing and reporting. Creating unique process scenarios is a smart approach to view different modules within an ERP.

SYSTEM AND VENDOR SELECTION
The following next steps in the process are guides for getting you into the weeds, but also for weeding out the products and providers that aren’t a good fit for your distribution business.

1. Build your shortlist
Company size and industry play a large role in ERP vendor shortlisting. If your needs are very specific and require industry-specific integrations, this may limit the potential ERPs you consider. Conversely, if your needs are broader, you may be looking at more ERP options. Both impact the time required to make the best ERP selection for your business.

When creating a shortlist, it is critical to understand your business’ position within the supply chain, such as operations, manufacturing, or distribution. Your company size also determines which of the three broad tiers of ERP systems to consider:

TIER 1: highly configurable for large enterprises in multiple regions with multiple entities– highly complex, multi-national, multi-currency, multi-continent

TIER 2: space to grow with intrinsic processing elements designed to scale with the business– most common, covering medium to large size companies

TIER 3: lightweight or very specific ERP specialized for your industry– basic accounting, covering rudimentary functionality or niche solutions – e.g., for specific type of manufacturing

2. System demos
ERP vendors are experts in demonstrating the best in their system – and in hiding the clunky parts. The unique scenarios identified during business discovery will provide a guide for the ERP vendors and keep them focused on your needs and not on what is flashiest in their software.

One pitfall during demos is becoming too focused on the steps of your current process or current system. It’s important to remember that your processes will likely need to change with a new ERP.

Duplicating your old system in the new ERP is rarely recommended and will hinder the potential value of a new ERP. A way to avoid this is to be clear about the ultimate problem to be solved, such as, “we need to deliver this product at this time to this customer,” not “we need to be able to track purchases and deliveries.”

3. Evaluate ERP vendor and implementation partner
Choosing the appropriate partner to implement and support your ERP can be more important than the ERP system. The system selection process is also your time to evaluate the fit for a long-term business relationship, ensuring a successful implementation and productive ongoing relationship for the future. Some key things to consider during this process and after include:

• Timeliness of communication
• Communication style
• Professionalism
• Experience level of industry
• Vendor resources and capacity
• Customer service and on-going support

A new ERP sets the stage for how your business leverages technology to drive revenue, reduce costs, and mitigate risk. Effective ERP selection begins with thorough business needs discovery and ends with a tailored system selection process that prioritizes unique scenarios. Equally crucial is evaluating and choosing a compatible implementation partner for long-term success. ERP implementation is not just a technological investment but a strategic imperative to thrive in today’s competitive business landscape.