The Business Guide to ERP Systems

Enterprise resource planning (ERP) refers to a management system that is used integrate the various departments and functions of business into a unified system. The single system is composed of various software modules and components that handle all the different processes of each department, from manufacturing operations to finance and human resources. An ERP system will generally require both hardware and software components.

The original ERP systems were integrated monolithic packages, but newer ERP systems are more flexible and can be installed as separate components. While ERP is introduced into an organization as a software solution, it is really a work methodology that requires a great deal of business process analysis and system re-engineering beyond the software.

In choosing to implement ERP you are also committing to a complete change of business processes. Enterprise resource planning (ERP) systems are typically used to replace a disparate set of individual systems strung together in a complex and clumsy manner. ERP packages offer a solution to this while bringing specific and tangible business benefits.* ERP systems make it much easier to integrate systems across multiple locations.* Most ERP systems run on a single database, which means there is only one data warehouse to manage and maintain.

This single database system also means there are fewer points of failure in your system as a whole.* The processes that go into fulfilling a customer order are automated and enhanced by a successful ERP system. It creates a software flow chart for each step in the process to give direction to the whole.* Every employee in the chain sees the bigger picture and becomes more accountable for their role in order fulfillment.* ERP systems can speed up the manufacturing process through automation in areas such as procurement and production planning. This can help reduce the costs of carrying inventory and increase inventory turnover.* Simplified supply chain operations mean you gain more responsiveness in terms of both quality control and timeliness.* ERP systems enable you to remain competitive by taking advantage of the latest technologies in your market segment.

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Your 7 Step Guide to ERP Failure

So you want an ERP failure and you want it to be of epic proportions? Okay, here are your top ways to assure you go down in flames in the most spectacular way.

Key things to ensure ERP Failure

1. Select the Software at face value based on the Vendor’s Promises. In fact, the best thing you can do is to buy the software right there at the trade show.

2. Don’t even consider the business processes. Fully adopt the software the way it works out of the box. Process ERP Failure.

3. Only include the users at the last minute and then for minimal training. Use Mushroom Management to keep the users at bay. People ERP Failure.

4. Pick an ERP Software on an operating platform to which IT has no knowledge. For example select an ERP running on Unix and put it into a Windows environment. Technical ERP Failure.

5. Keep executive level management out of the process and out of the project. Use upward mushroom management** with executives about the status of the project. Avoid their support at all costs.

6. Avoid data cleanup. In fact, push the data over to the new system with no review. Forget any field type changes or consideration of system differences.

7. Only use the standard reports. Those are good enough for your users.

**Mushroom management: noun, a method of “keeping them in the dark and feeding them lots of Sh!&”

Congratulations you are now on a path to ERP Hell! Enjoy the ride.

Avoiding ERP Failure

In all seriousness, here are some resources to help you in you avoid ERP Failure:

Why New Systems Fail: An Insider’s Guide to Successful IT Projects

ERP Software Selection Tools

ERP Project Management Articles

Project Manager Templates

ERP Implementation Articles

ERP Failure

Video: ERP Channel Partners – Can they Survive the Cloud?

ERP Channel Partners – Can they Survive the Cloud?

Don Fornes, CEO of our partner Software Advice, interviewed Microsoft’s Director of ERP Marketing, Guy Weismantel, about the latest updates to the Microsoft Dynamics ERP product line. The topic of discussion turned to ERP Channel Partners and how the cloud computing era will affect them.

Mr. Weismantel talks about how Microsoft ERP Channel Partners can adjust to the new marketplace where there is now hardware or software to install or maintain. Cloud computing brings a new way of doing business. Traditional resellers and implementors make money on both the licenses of the software, the hardware provided, and the service to install and configure the systems. But additionally, they should be making money from the value added services such as crafting the best solution for the client and providing an upsell opportunity. This is the area that will need to expand for these ERP Channel Partners to survive.

This is the third in a series of 7 videos that we will be posting.

How Can ERP Channel Partners Survive in the Cloud Era?

Getting More Microsoft Dynamics Information

If you are interested in exploring Microsoft AX 2012 for your company, please select one of the two links below:

For information on other ERP software products, please see our ERP Software Directory for many more vendors.

ERP Channel Partners

For information on the Microsoft ERP Channel Partner Program, please see http://partner.microsoft.com
ERP Channel Partners

ERP investments to slow in 2011

According to analyst group Forrester, ERP investments will continue to slow in 2011, despite growth in IT spending. Almost three quarters of those surveyed said that they would not be investing in ERP this year. That is troublesome for the industry and even ERP giants such as Oracle are being conservative this year.

You can read the full article here.

We would like to see what your plans are, please comment on this article and let us know if you are seeing any ERP investments in your company.

How not to implement and use ERP software

ERP Software done correctly can be a great tool for improving a business. Done badly, it can demoralize employees and drive down business results.

Case-in-point:

How not to implement and use ERP software — ERP Software should enable business processes, not torture the employees.

“My experience with SAP was of an all-purpose integrated business solution. At the beginning of the day, I clocked in using an SAP applet. Next, I would go through a set of SAP generated planned-production orders, direct work orders, or reported directly to my supervisor. After looking through the routing information (generated through SAP), I would complete the specified task. When the task was complete, I would “clock-off” on the job, which entailed bringing the PPO to a computer, scanning it into an SAP applet, and entering my badge number (employee ID). Another thing I found interesting was the request to clock off on all activities. Even if I had only swept or scraped tape off the floors (it was a slow summer), I was asked to clock off on something called “lean labor.” I found this curious, though I suppose from an efficiency standpoint it was very important. To refer back to these “value-chains,” it is important to know exactly what every employee, piece of inventory, and work order are doing at any given time. Whether it is benig worked on, working on something, or finished, this real-time updating system allows everyone company-wide to see which projects are in progress, which are complete, and which have not been touched. Also from a managerial standpoint, it is important to see how much work each individual employee is doing and how well they are performing, not to mention that employee’s ID will always be attached to that job if future concerns arise.

Now from a business standpoint this is all well and good. But what about the employee? A lot of days, clocking and clocking out I felt as though it did not matter whether or not I was even there. There were simply no jobs to be done for entire weeks at a time, but that did not change that I had to “clock out” for certain jobs. Of course, a business wants to make sure that all of its employees are being as productive as possible, but clocking out on cleaning out the same area 3 times during a week seemed redundant and absurd. Not to mention clocking out on an activity such as “material handling” or “lean labor” is fairly arbitrary. This of course necessitated a manager to scold me when my productivity levels fell (ie playing Frisbee with a cardboard box in the back). It is important to note that I was simply summer-hired as well. Working full time at a job as a number would eventually get fairly tedious. As one of my co-workers noted to me, they had simply clocked in and clocked out for a couple of weeks and clocked off on none of the jobs they were doing. No one said anything to him. So who’s checking these jobs?” – Andrew Mellino

Implementing technology to collect data is one thing, but ERP should not be just about the numbers. ERP ideally should be “process improvement enabled by technology.” It should not be a tool to harass the employees. This is a key concept to understand when implementing and going through the design phase. Which processes are broken and which processes are working fine. Once you have defined that, then see where the ERP software can enable best business practices. It is essential that the employees have a buy in and provide feedback to this step.

If you get the employees to buy into the implementation and how it will change their jobs, you will gain the benefits of higher utilization of the system and overall better adoption. If you fail this step, you will have a failed ERP implementation. There is a saying that you should “drive data collection to the source.” This means that you should have the person who is directly responsible for the source of that data be the one who is entering it. When the ERP system is not implemented with the employees in mind, the employees will be unmotivated to use the system, ensure that the data is accurate, or even bother to put in correct information.

With the help of your line employees, design in best practices and work with them to build a system that they will use and will benefit not only them by making their jobs easier, but also benefit the whole company by driving positive results.

How to determine your ERP Evaluation Criteria

Defining your ERP Evaluation Criteria is essential for paring down the vendors and getting to the final choice. There are two focus areas for determining your selection criteria:

Determining your ERP Evaluation Criteria

1. ERP Evaluation Criteria – Process

The Process analysis for determining your ERP Evaluation Criteria is the method you would use to determine the flow of data through the system and how it would follow along your established or to-be business processes. For example, following a process flow of quoting an order, receiving the order, manufacturing or purchasing the product, shipping, and finally invoicing the order is known as the order-to-cash process flow.

There are other anther ERP Evaluation Criteria processes such as procure-to-pay, which maps the inventory requirement through the accounts payable billings. Another example could be the HR process of recruiting though retirement.

Using Process Flow documentation to determine your ERP Evaluation Criteria

By mapping out these processes in a tool such as Microsoft Visio Standard 2010 and developing a detailed flow diagram, you will have a good understanding of how your business operates. With this knowledge, your evaluation of various business management software will be a lot easier. Further, you can see how closely the software’s process flow mirrors your company’s or how disjointed the software is when it comes to your business.

2. ERP Evaluation Criteria – Functional

ERP Evaluation Criteria for the system is the detailed list of all of the things you need the system to do, from processing purchase orders, processing a sales order, to invoicing a client and producing financial reports. These are the nitty gritty things that your system should do. A good place to start is to evaluate your current system. What are the functions that the current system does well? Include these in your list. What are the things that your system does poorly, include the desired functionality in your list.

Your list should not be 10,000 lines, but rather it should look at those items that make your business unique. For example, most every business has to cut A/P checks. So most systems can do that. So do not list as a requirement that the software should be able to cut A/P checks, rather make your requirement specific to your company, such as “System should be able to cut 3 copy laser checks, with reprint capability.” That very specific requirement will help you distinguish the vendors from one another.

A good place to start is with an ERP Evaluation Criteria Template. ERPandMore has many different templates to assist you in evaluating various ERP software venders and have best practices built in. In using these as a starting point, you will save yourself countless hours in both preparing these criteria templates as well as in differentiating the vendors your are looking at. We hope this has helped to answer How to determine your ERP Evaluation Criteria

Social Networking and ERP?

Social Networking and ERP

Social Networking has become the mainstay of the internet now. Facebook, Twitter, and the like are all drawing people in and essentially training the next generation of computer users. These social media sites are like magnets that people have to go to each and every day to keep up with their friends and share their updates. People are accessing these media sources from all types of devices. It is all absorbing.

One of the biggest problems in most business applications is user adoption. Getting the users to use the Social Networking and ERP together is a key challenge in many applications. So how does the business applications market combine the social media attraction to a financial or manufacturing system? Combining a social media approach to a business management system would seem to be a logical conclusion. But there are obstacles. You have two different elements playing here. The cold hard facts of transactional data and the emotional connectedness of the social media. How can these gel together?

Salesforce.com has begun a trend in combining social media with a business application through their Chatter application. Essentially, Chatter is a Twitter for Salesforce.com. It is an embedded part of Salesforce.com. Users can post status updates and see all of the updates from their chosen connections (friends). But the power of this application is that you can follow business objects within Salesforce.com such as Accounts, Opportunities, Contracts, etc. So anytime an update occurs on these objects, you get a status update, not from a friend, but rather from an application.

Social Networking and ERP in Action

So how would this likely work in an ERP solution? First you could enhance any alerts to post to a status page. Next you could potentially use it to notify you on any changes to any master record, such as customer, supplier, inventory, or BOMs. The next thing you might consider is to have criteria based alerts be in the form of status updates. Post an update when a customer exceeds their credit limit, or post an alert when a critical inventory part is below its optimal stocking level. Together Social Networking and ERP can have an amazing integration of functionality.

The next logical extension of this would be to extend the ERP to the social web. Imagine getting private posts on Facebook when your major customer falls past due or when your shipment that absolutely must go out notifies you that it shipped on time. When Social Networking and ERP converge, you will have seamless integration between your networks, including Twitter, Facebook, and Linkedin.

Social Networking and ERP in the future

The problem with this whole concept is the ability for traditional client server based ERP solutions to move in this direction. Some of the new systems (or recently re-written) solutions may be able to implement this type of functionality quickly, but some of the older technology solutions may have difficulty bringing a social media function quickly to bear. Social Networking and ERP may only be a thing of dreams, but it can very well be reality faster than you might expect. This integration is clearly something that anyone looking for software should watch for and something we should add to our post on What to look out for when selecting software.

As this is a topic with no clear solution yet, what do you our readers think? Where is this going? When will we see it? Please post your comments and thoughts.
Social Networking and ERP

When to use ERP Software Consultants

Many times companies try to select and implement ERP software on their own. Sometimes this works and sometimes it doesn’t. So the question is, when should a company use an ERP Software Consultant to guide them in their ERP Selection or ERP Implementation?

The answer is not so simple. If a company is mature and has the resources that can look independently at the business processes, then it may make sense to embark on a selection on their own. Most of the time in mid-market sized or even smaller clients, then it is difficult for them to 1. Spare the resources and 2. Look at the business processes objectively.

Any good ERP Selection begins with a company evaluating their business processes. Borrowing from the Toyota Production system (aka Lean Manufacturing), a company should first eliminate waste and then consider automating. Automating bad processes will only make things worse faster. However, automating good processes will help grow the business and promote better communication.

: Image via Wikipedia

ERP Software Consultants – Best Practices

The real question becomes how much is the company willing to flex their processes to adapt to “best practices” that are usually built into a commercial software system. If the company is flexible (and this takes a lot of leadership to make happen), they can select a system and model their business around that system. The larger commercial systems, such as those from Microsoft, Infor, SAP, Oracle, and others have all grown up from thousands of implementations from all sorts of companies. They have developed efficiencies that many companies who adopt the software’s methodology can benefit from.

The real key is understanding the fit of a software package to the business. If the company does some niche processing, then a mainstream commercial package may not fit. However it the company is a distributor or a manufacturer of discrete products as an example, then a standard mid-market product would likely work for them.

So how do you choose the software, it is back to the business processes and the key requirements. “Key Requirements,” not just all requirements. The things that the old system does not do well and those things that it does very well are good places to start. Additionally, discover those requirements or processes that set your company apart from others in your industry. Usually processes around your competitive advantage are part of the key requirements.

Going back to the original question, should you use independent ERP Software Consultants? If you have a clear and objective understanding, you can afford the time to really research the vendors and you have a strong will with salespeople, then going it on your own might be reasonable.

If you do not have the time, the understanding of the ERP Software market, or the will power to manage at an arm’s length the software vendor’s salespeople, then an ERP Software Consultant would be a wise choice.

ERP Software Consultants