How to Prevent 5 ERP Selection Mistakes

Selecting a new Enterprise Resource Planning (ERP) software solution is a monumental milestone for a manufacturer or job shop, and one with far-ranging business consequences. Imagine being responsible for hiring the right executive to integrate all your business functions, boost collaboration between departments, centralize enterprise data, ensure data accuracy and visibility for smarter decision making, and innovate your business processes for maximum productivity and efficiency.

This would likely be the most important hire your company has ever made and is precisely what is at stake here. Selecting the right ERP will enable every key employee in your company to work smarter, more efficiently, and more productively. It empowers informed data-driven decision making with high success probabilities—exactly what is needed for smaller and medium-sized manufacturers to compete in today’s marketplace. It maximizes your business potential in every area from purchasing and sourcing to manufacturing and inventory processes, to sales, marketing, distribution, and customer relationship management.

When you complete your due diligence in the selection process, you set your business up for a dramatic short term upswing and long-term success. For these reasons, it is not something to undertake hastily or without the consideration of all your key decision makers. We advise our clients to plan and document the ERP selection process in advance in order to avoid the following five mistakes that often lead to deep regret:

1. Failing to identify business objectives and align them with ERP benefits
2. Improperly assessing business requirements
3. Conducting inadequate hands-on system evaluations
4. Not setting realistic budgets
5. Neglecting to consider training and support options provided by the vendor

This report covers each of these mistakes in detail. The goal is to help you select an ERP solution that will provide the most benefit to your company and ongoing support not only through current industry and global economic swings but far into the future.

Aligning your ERP selection with industry best practices and specific business objectives is critical, according to Aberdeen research. Among manufacturing leaders, 48% have industry-specific best practices contained within their ERP solution compared to just 43% for those not in a leading position in the industry. Even more telling, 41% of industry leaders’ say their ERP solution is aligned with their business objectives, compared with just 28% of other industry members.

Business objectives vary. At this first stage in the process, it’s important to focus on broader goals by assembling your team and discussing your specific needs:

1. Productivity: In order to compete effectively through market swings, you may need to squeeze more production from a leaner staff. This is one of the primary benefits today’s manufacturing-specific ERP solutions deliver. When the next manufacturing recession hits, enhanced productivity will be essential to the survival of many smaller and medium-sized businesses.
2. Efficiency: If you are upgrading from a legacy system or cobbled-together software, the right ERP solution offers dramatic potential for enhancing efficiency. Consider the redundant tasks that take place across business functions. Encourage individual employees to talk to their peers in other organizations with newer ERP systems to find out how they are being held back by your current system.
3. Speed to market: How quickly are you able to bring your products to market relative to your competitors? If you are lagging, improving in this regard should be one of your top objectives as you evaluate new ERP offerings.
4. Growth: Do you want to increase the number of clientele and the market niches you serve? Would you like to expand your business within a short time frame? ERP investments provide the tools to make smart investments and decisions that can dramatically accelerate your growth.

Once you have your objectives, you need to thoroughly assess your basic and unique business needs. The right ERP for your organization must address the needs that are specific to your business in addition to the routine requirements of manufacturing.

Features and functionalities:
As an organization considering a new ERP solution, you must research the positive effects of using a best-of breed ERP solution in each of your business functions. A new solution is an opportunity to innovate and even automate many of your processes.

You also want to be able to identify functionalities specific to your industry and niche. What are your business requirements to improve upon your current operations, processes, and practices? What software functionalities do you need in order to maintain current high-functioning business processes? Which functionalities do you need to improve inefficient processes? For instance, you may need stronger tools for scheduling your employees’ time on the shop floor, or for tracking inventory and deliveries, or you may need a tool for performing recalls.

If possible, research your competitors and the ERP solutions they use to determine the industry standard functions you need in order to compete. Talk with vendors about features and functionalities that can provide you with a competitive advantage.

Finally, put a list together of features and functionalities and qualify each as a must-have, nice-to-have, or not important.

Adaptability and customizations:
Some ERP vendors offer a variety of modules and add-on features in order to meet your business requirements while others customize their ERP solutions to meet the unique needs of individual businesses. In either case, it’s difficult to make assessments on your exact system needs without collaborating with vendor personnel to determine the best way forward. Vendor expertise is key to assessing how well the solution you choose will adapt to your requirements. Once you are comparing several vendors, for each business function, compile a list of the various tasks the system will need to handle and talk with your vendors about how the system will work for each task.

Scalability and flexibility:
The future is now. Don’t be driven exclusively by your current list of functionality and feature needs. Your requirements will change as you grow, and you need a system with the technology and structure to scale with you. “Future proof” your business with a system that is designed to incorporate new technologies.

Mobility and IoT:
Do you need a system that can support remote workers, traveling executives, late night access, or activities performed on tablets and smartphones? How about a system with long-term technological versatility that can support the investments you will likely be making in Internet of Things (IoT) devices? Few ERP solutions are compatible with each of these needs.

Cloud-based vs. on-premises solutions:
Cloud-based solutions offer a variety of important benefits for smaller organizations that enable them to compete in a marketplace with aggressive larger players. The cloud offers economies of scale in cybersecurity, software updates, and system maintenance so that you don’t have to invest in additional internal IT personnel and resources. It also ensures that you won’t purchase software that will become obsolete, as the software will be periodically or continually updated by the vendor, without any work on your staff’s part.

After identifying your business objectives and system requirements, you know what to look for—on paper. In reality, however, businesses that conduct a thorough selection process often find that the systems they expected to perform best for their needs did not. A primary reason for this is lack of user friendliness.

Consider the cult following of Apple® products; they are typically not the most technically sophisticated but are designed to be user-friendly. People naturally understand how to use their products, and that leads to accomplishing more with them. Just as with an iPhone® mobile digital device, a clean, intuitive user interface and dashboards in an ERP system enable more workers to quickly reach peak productivity. The last thing you want is employees struggling to learn and use certain features. User friendliness also reduces costly errors and productivity disruptions. As you grow, user-friendly add-ons that work in predictable ways enable you to scale the software without skipping a beat.

So how can you determine real-world usability during the selection phase of your ERP transition? Request evaluation kits for each of your key decision makers and demonstrations from your vendors. Get your hands on the systems (through free trials, if available), explore how they work, and involve managers who will be using the various components in the process. Also, don’t forget to involve those who will perform the daily tasks—they must use the software and play a large role in it being successfully deployed throughout your company.

Conducting the previously described reviews will make your team more knowledgeable ERP buyers and show you where you should focus your investment and where you shouldn’t. The most expensive systems are often not the best solutions for SMBs. Many cloud-based systems offer flexibility in features and pricing, so you will likely have a lower upfront investment. Refer to your list of must-have, nice-to-have, and not important features to be sure you invest in features you need.

Build money into your budget for a successful implementation and for the smaller costs that may come up along the way like new employee onboarding, supplemental staff training, and data conversion. Ask your vendor for guidelines and helpful resources.

• Right before Halloween in 1999, Hershey’s® couldn’t deliver on $100 million worth of chocolate because the company’s ERP implementation failed. The stock dropped by eight percent due to the operational disaster.
• In 2000, after a bad ERP implementation, Nike® lost $100 million in sales due to a failed supply chain project. The company was hit with a series of lawsuits and also saw a 20-percent dip in its stock. Manufacturing Business Technology.

Implementing a new ERP solution will be disruptive to your business, but strong vendors can minimize the disruption and the growing pains. The right vendor should have a successful implementation track record and be able to adapt the implementation to any company regardless of size and requirements. You should have an assigned implementation project manager to guide you through the process and a variety of training resources, which may include online tutorials and demonstrations, as well as online group classes or in-person training sessions. User documentation should be provided in the training sessions so that users have reference materials they can check while they are working. Vendors should also provide guidance to help you manage the change within your company, to communicate the process to employees, and to enable your employees to become comfortable with the system before you go live.

Once the system is live, you will need a vendor support team including expert consultants with experience in your specific field, who understand your business as well as your ERP system. You may want online user group resources that your employees can tap into, and phone support representatives that they can call when necessary.

The journey of selecting and implementing an ERP solution for your manufacturing business is a significant undertaking that requires careful planning, thorough research, and strategic decision-making. The process is not merely about choosing a software solution, but about transforming your business operations, enhancing efficiency, and driving growth.

The right ERP solution can revolutionize your business, integrating all functions, promoting collaboration, centralizing data, and fostering smarter decision-making. It can streamline your processes, boost productivity, and empower your team to work more efficiently. However, the selection process should not be rushed or taken lightly. It requires the involvement of key decision-makers and a clear understanding of your business objectives and requirements.

Avoid common pitfalls such as failing to align business objectives with ERP benefits, neglecting to properly assess business requirements, conducting insufficient system evaluations, setting unrealistic budgets, and overlooking the importance of vendor-provided training and support. Each of these elements is crucial to ensure a successful ERP implementation.

Remember, the goal is not just to select an ERP solution, but to choose a solution that will provide maximum benefit to your company, offering support through current industry and economic changes and well into the future. The right ERP solution is a long-term investment in your business's success.

The process may be complex, but with careful planning, clear communication, and the right support, your business can successfully navigate the ERP selection and implementation journey. The result will be a more efficient, productive, and competitive business, well-equipped to thrive in today's fast-paced and ever-evolving marketplace.