Competitive Manufacturing/ Manufacturing Technologies - Enterprise Resource Planning (ERP)
How to choose the right ERP system for your business and avoid being the next roadkill on the information superhighway
The software market is awash with business management software systems offered by vendors who tend to believe their solution is always the best. How can you ensure that your company does not become a statistic among the many ERP failures, and how can you take the luck factor out of finding software that best meets your company's needs?
The term "ERP" originates from "Enterprise Resource Planning" and is based upon the approach of utilising and integrating all 'enterprise-wide' resources. An ERP System could integrate the planning, financial management, manufacturing, sales and marketing components of your business, depending on the key objectives you want to achieve for your business.
In successful ERP implementations where the selection is linked to the latest strategic thinking within your business, the software can be leveraged to transform the firm's performance. The results can be outstanding.
But there are many examples of ERP implementations that have failed, and most of the failures have been due to poor implementation processes rather than a lack of software capability.
Here are some ideas for improving the chances of success for your ERP project:
- A good place to start is a review of your strategic plan, with an emphasis on the company's present position and likely scenarios for the future. It is useful if your strategic plan is able to express the core business objectives/issues in no more than three or four main points.
- The next step is to carefully evaluate your ERP requirements from the perspective of the business.
- Translate these needs into 'Technical Feature Requirements'.
- At this point it is valuable to examine each software feature and map how it will make possible the achievement of each of the three or four key strategic objectives extracted from your strategic plan. In this way, the software functionality can be ranked in priority order, based on the likely positive impact that the feature in question will have on the business.
- QMI uses a process known as Quality Function Deployment (QFD) for this purpose usually a group activity involving key personnel in the organisation. Each area of functionality is given a score based on how it will contribute to achievement of each particular strategy.
- Each score is then multiplied by the weighting for that strategic issue, and summed to provide an overall score for each area of functionality. The strength of this process lies in the fact that the analysis is tied back to corporate strategic objectives.
- The next step is to carry out an initial software selection by examining all available software offerings with your prioritised functionality in mind. As a first cut, it can be useful to choose software that is already used in industries similar to your own, because different types of manufacturing will require different software attributes or features.
- For example, most furniture and engineering businesses are "Make to Order" and require an ability to backward schedule, with inventory usually held as work in progress.
- On the other hand, process industries such as foods or chemicals would usually "Make to Stock" based on forecast requirement, with inventory held as either raw materials or finished goods.
- This step can be time consuming unless you have access to a proprietary selection system, such as QMI's PinPoint. Pinpoint is a database with detailed information on the major business software packages in Australia, and includes a system for selecting the software most appropriate for your business.
- Once you have a short-list it will be useful to narrow the number of packages under review. Successful selection can be aided by arranging site visits and discussions with other users of the short-listed packages.
- This is best achieved by having individuals in your own cross-functional team interact with their equivalents in the company being visited. Again it is valuable to choose companies with similar processes to your own.
- When you are comfortable with your short-listed selection based on prioritised functionality and manufacturing type, it is time to send out Requests for Quotations (RFQs) to the vendors, carefully stating all your requirements.
- Now is the time to explore more intricate issues such as whether you will have access to the software source code, or whether the software is available with floating licences. This is often the final step for weeding out unsuitable packages.
- Final software selection can then be achieved by reviewing all data collected so far.
- When it comes to software implementation, QMI research indicates that most companies underestimate the importance of training personnel at all levels in management system processes.
ERP systems demand great data accuracy, which in turn calls for a disciplined approach to all company activities involving data. A successful implementation will take account of the cultural maturity of the organisation with respect to systems generally, and provide the appropriate level of training.
QMI's ERP advice delivers a structured and proven process by which you can evaluate your own needs, and make an educated decision about applying the appropriate technology to suit your situation.
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