An enterprise resource planning (ERP) system is the key to integrating diverse yet critical business functions throughout an organization. However, over the decades since its inception, ERP’s role has expanded. ERPs have evolved from focusing on specific business areas such as manufacturing, procurement, or human resources, to broader uses throughout the company, like customer relationship management, accounting, and business intelligence and analytics.
Because the role of ERP impacts all parts of your business, our experts advise that implementations requires involvement from more than just the IT department. In fact, case studies of successful ERP implementations demonstrate that involvement from stakeholders at all levels, from executives to end users, is necessary.
For many companies, the transition from existing traditional systems to a new ERP system can consume significant corporate resources, not only financially, but also time and risk to business operations. However, with knowledge, planning, and an expert ERP service partner, this will be time and money well spent.
ERP Implementation Best Practices
ERP implementation takes a considerable amount of time. It also requires financial resources, energy, and support. To ensure that these valuable resources are not wasted, early planning should be thorough and extensive.
1. Create an Implementation Team
A large-scale project like an ERP implementation requires a skilled, committed team. This team should include key members selected from across your organization, as well as from all levels of seniority, including executives, project managers, experts from varying parts of your organization, end users impacted by the implementation, and IT department staffers involved in helping with implementing or customizing the system.
This depth of people will provide insights into user patterns and business processes, as well as practical support for the project overall. Each member of the team will have a different role and set of responsibilities for the implementation. These should be based on their areas of expertise and the amount of time they can devote to the project. It’s important for responsibilities to be clearly defined so everyone knows the expectations, leaving no gaps in responsibilities.
The Role of the Executive Sponsor
There are various roles that need to be filled. An executive sponsor is the first of such roles. This role is pivotal because an ERP implementation can affect any and every aspect of the organization, and therefore, someone at or near the top of the organization needs to advocate for and drive the implementation strategy. The executive sponsor’s role is also to assist in assessing risks and developing action plans. This person needs constant updates from the project manager.
Typically, it’s the executive sponsor who makes final decisions about the project. These decisions may include whether to increase the project budget, which business processes to automate, and whether to add or remove personnel.
Because involving upper management is necessary, the executive sponsor is made aware of issues. Upper management does not need to know every detail of implementation, but they do need to have a bird’s eye view of the process and understand what aspects could cause delays.
Assign a Project Manager
Another essential member of an ERP implementation team is the project manager, who acts as a point person ensuring timelines are met and the project stays within its planned scope.
This person’s goal is to keep the project running smoothly while keeping communication flowing between the executive sponsor and team members about progress and challenges during the implementation. This person is highly involved in selecting the ERP vendor, scheduling demos, and organizing the final evaluation. In general, they coordinate the steps of ERP implementation.
Your ERP service partner, like Godlan, will have a dedicated project manager to help you during every step of implementation. But assigning a point person to coordinate with your vendor will streamline implementation. It’s important to have a strong advocate of the ERP system within your own enterprise and not be reliant on an outside vendor to carry this role.
Team Member Involvement
The project manager can’t accomplish their tasks without the end users. This element of the implementation team is tasked with making sure departments’ needs and concerns are met and addressed. End users require strong leadership skills to champion and explain the project within their departments. For both of these tasks, strong communication and technical skills are necessary.
In addition to end users, the team will need technical experts from different areas of the business, including manufacturing, IT, sales, and finance. These cross-functional team members are responsible for directing software design and configuration to support business processes, as well as identifying ways to improve processes.
Don’t Skip the Report Writer
In addition, an ERP implementation team usually contains a report writer who customizes the software’s reports to meet specific business needs. The report writer is tasked with analyzing the business’s existing reporting procedures and identifying ways to improve them by utilizing the new solution. This may be an ongoing task even after the system goes live.
Lastly, companies may also utilize an implementation partner like Godlan to handle the technical work involved in deploying the system and to assist with some of the responsibilities of the ERP implementation team.
With an ERP implementation team in place, it’s now time to reflect on an organization’s current standings.
2. Evaluate Current Processes and Procedures
What is it that your enterprise needs for long-term success? To strengthen any current weak points and achieve long-term goals, it’s important to have a good understanding of how your business’s processes and procedures are currently serving the organization.
Before even considering what specific vendors have to offer, the organization should be considered department by department. Businesses should begin by having a clear scope of the project. ERP systems can be tailored to fit your business’s specific needs and system requirements. By having a clear focus of your business’s unique needs upfront, your vendor will be able to help you craft your system with detail and precision. Knowing your current system’s strengths and weaknesses enterprise wide will help you develop goals and consider the trajectory of expected growth and anticipated change to the business.
Speak with representatives from each department to learn what they consider to be the strengths and weaknesses with the current operating system. With these things in mind, it’s less likely that the ERP implementation team will be distracted by buzz words, price tags, or flashy systems. Finding a good fit for your enterprise begins with this careful planning step.
ERP systems improve many areas of a business: financial management, human resources, capital management, purchasing, inventory and supply chain management, customer relationship management, and business intelligence and reporting. Your business may not require all of these features. Ask end users which features they feel would be the most beneficial in the big picture. After all, they will be the ones working with the ERP system every day, and a system can only benefit its users if they fully embrace it.
3. Determine Budget and Timeline
Once system requirements have been determined, the next step is to determine a budget and timeline for ERP vendor evaluations, demonstrations, implementation, and training. Cloud-based ERP systems typically cost less than on-premises systems, especially considering the upfront outlay. They also typically take less time to set up. Ensure the ultimate cost, both in time and money, of an ERP system will be offset by the new levels of efficiency and in cost savings. Once an ERP vendor is selected, putting the system to use can take anywhere from 30 days to more than a year. This is dependent on the complexity of ERP implementation and the number of changes after the fact, as well as the deployment model.
4. Carefully Evaluate ERP Vendors
Determining which vendor to choose for ERP implementation requires knowing what elements of technology your organization needs and knowing that the vendor chosen is one that will be a true partner for the long term.
What does your business need?
You should ask yourself questions about whether or not a vendor’s system provides solutions to challenges your company currently faces, and if the system can be integrated with your current operating system. Will customizations be required, and, if so, will the system be able to adapt enough to your needs? It’s also important to ascertain how user-friendly the system is.
<h4?What experience does the vendor bring to the table?
Another thing to consider is how long the vendor has been in business. Especially if the software you are considering is not as widely adopted, niche ERP software, it’s necessary to do heavy research. ERP tools have served businesses for decades; the big-name companies have been around for all that time working on perfecting the software. Not only have they taken the time to find out what businesses need, they have the money to support their product. To bring an ERP system to market, it takes hundreds of millions of dollars, and it requires even more money to develop and enhance the systems enough to meet the majority of businesses’ needs out of the box. There are only a small number of companies who can deliver best-of-breed ERP technology.
What’s their reputation like?
Once you have compiled a short list of vendors based upon system compatibility, it’s necessary to research the reputation of possible vendors. Read through reviews online and on social media. Ask the vendor not only for customer references, but for a list of their customers, past and present, so that you can reach out to businesses that are similar to yours, as well as get a variety of feedback as opposed to the customers the vendor selected. Speaking to a vendor’s customers will allow you to get a good idea of what an ERP system can do for you. In addition, you can get a sense of how accommodating the vendor will be during ERP implementation and after.
Narrow your choices down to two companies that offer what your company needs and who understand and support your business’s vision. ERP implementation is a long process, but more importantly, you will need support beyond the implementation process. It’s necessary to determine what solutions are offered when the ERP system has issues. What does the vendor’s support system look like and how fast will they respond to questions? Consider if the vendor offers support outside normal business operating hours. Find out how long the warranty period is, as well as how long the implementation will take.
Budget and timeline expectations
You’ll also want to verify that the vendor can complete your ERP implementation within your company’s budget and timeline expectations. Ask the vendor to explain beforehand what roadblocks may occur in the ERP implementation process and how they can be avoided to keep the budget and timeline on track.
5. Compare Advantages — Not Cost
While it may be tempting to make a decision about vendors based on the overall cost of an ERP system, the system’s long-term value should far exceed its cost.
Return on investment (ROI) should be considered when it comes to the price of your ERP software and implementation. This can be measured in a few ways.
For instance, are there specific areas of the business where cost savings can be achieved through new technology? This could be demonstrated through better inventory management, faster financial close, or via automating manual or time-consuming tasks. Perhaps technology costs will be diminished through the ERP system. Cost savings can result from a reduction in hardware or support, new software licensing agreements, or a reduced software footprint.
Undeniably, the initial software and implementation cost will be a financial investment for your organization. Consider what the ROI needs to be after year one, year five, and beyond in order to make the new technology worth this cost. Ideally, the faster ship times, better customer service, streamlined business processes, operational efficiency, modern e-commerce, warehouse and inventory management, and real-time business reporting benefits will pay for themselves.
For this to occur, don’t accept customizations your organization doesn’t need. Flashy upgrades are only worth the cost if they actually benefit your business. Conversely, choosing an ERP system because of its low price may also prove to be an ERP system with low functionality.
Overall cost is dependent upon the scope of your project; therefore, the solution can cost anywhere from a few hundred dollars to hundreds of thousands of dollars.
However, ERP implementation costs often go over budget. Vendors should advise businesses to hope for the best but plan for the worst in order to keep things moving forward without strain or stress. To prevent going over-budget, when you arrive at a cost you’re comfortable with, it’s wise to plan a little bit higher. This ensures that the myriad of hidden or unforeseen costs, such as maintenance issues or overtime pay for employees, will not hinder your ERP implementation.
This reiterates the significance of finding a vendor who you trust to guide you through this process keeping your goals in mind. The value of a vendor is what differentiates it from its competition. This may be demonstrated in the system’s features or in the services the vendor provides.
ERP Implementation Best Practices: Timeline
Determining a budget correlates with building a timeline. An ERP implementation shouldn’t be rushed because the ERP system touches every function of your business. Therefore, take the time to plan and process the changes that will be taking place.
Typically, an ERP implementation takes between 4 to 8 months, but this can be shorter or longer depending on the complexity of your project. If you have opted to implement the system in segments, the timeline will be shorter.
For smaller businesses, a shorter implementation window of a few months could exist if the business is using an out-of-the-box system. By comparison, a more complex implementation for a global organization with customizations, multiple locations, currencies, and languages would take much longer. In truth, ERP implementations can potentially take years to successfully roll out company-wide depending on the size of an enterprise.
Moving Forward With Your Selected Vendor and Implementation Team
Set your business up for success by taking the time to thoroughly reflect on your needs and consider your options. In a business world that is always moving fast, it is understandable to think that you need to act quickly. However, finding success requires time and precision. Companies that invest in comprehensive planning have the potential to experience shorter implementation times, as well as adhere to an initial budget compared to their peers.
Much like building a house, ERP implementation requires time and careful planning. These are just the first steps to finding success with your ERP implementation. With a like-minded vendor, a strong implementation team, and an ERP system selected for your business’s exact needs, a plan for implementation and change management can begin.
Contact Godlan to access demos and learn more about what ERP features will benefit your business.