By: Jeff Carr
The New Year is when we assess our current personal situation and look to create goals to exercise more, eat less and lose weight or learn a foreign language.
The same is true for manufacturers and distributors; it is the ideal time for a company to work on improving its current situation and seek ways to operate more efficiently, increase profitability and work smarter.
Turning over a new leaf as a business often coincides with introducing a new or updated enterprise software solution and enhanced business processes.
Many companies, while in the introspective, self-analysis phase, determine if they are well served by their current ERP system or if it’s time to evaluate and choose a new, more capable solution.
Perhaps your company’s ERP system hasn’t kept up with technology innovations. It may be out of the upgrade and improvement loop. It might not accommodate mobile transactions, it may be hobbled with an antiquated on-premise data center that lacks security patches, and may be generations removed from the current version. Maybe worst of all, your company has added point solutions as needed and what you have now is a klugey, clumsy and inefficient, bolted-together solution that works – but not at an optimum level.
If that scenario rings true for your company, it’s time to move to a new ERP system better designed to meet the challenges of manufacturing in the 21st century.
Looking at Value
When assessing the current value of a legacy ERP system, the primary focus should be whether the legacy features and functions adequately support the business – not just the current state of business but the anticipated future state too.
Another area to consider is the solution’s integration with external systems, applications, customers and suppliers to help manage the extended enterprise. Are there a multiple point solutions like CRM, SCM, PLM and customer and supplier portals that were an afterthought and aren’t fully integrated into the ERP solution?
In terms of the end user experience, does the current ERP system offer an intuitive look and feel? Can users easily adapt screens? It’s common for small to mid-sized manufacturing and distribution companies to be using AS-400 based ERP systems with antiquated “green screens” from another era. We see users still struggling with legacy, user-unfriendly ERP solutions that demand programming expertise.
When considering current value of the ERP system, how robust are business intelligence capabilities? Does the system provide real-time visibility info areas like shop floor activity, capacity, inventory levels to fulfill orders and equipment effectiveness? Do users access easy to understand, “at a glance” dashboards and scorecards?
What about reporting? How easy is it to generate up to the minute reports that are accessible throughout the enterprise? Is there a need to improve the visibility and transparency of information?
Five Steps to Evaluate ERP
After carefully looking at whether installed systems can handle both the “current state” and “future state” of business processes, it’s then critical to evaluate the vendors that may provide the functionality your company requires. The selection team should gather information that will help eliminate the less worthy candidates and ultimately decide on the best fit.
- Vendor Companies: Which vendor companies know my industry the best? How large are the vendor companies under consideration? Will they keep abreast of technology changes or are they static when it comes to innovation?
- Technology: What is the technology strategy favored by the vendor? Does its technology platform and architecture support my company’s IT strategy?
- Function Fit: Many vendors will claim to have a good functional fit for your company’s unique needs; the key is identifying the vendor solutions that most closely align with best practices in my industry.
- ERP Support: Due diligence should include an assessment of vendor support systems. This includes education and training programs, implementation methodology, maintenance and phone support, user groups and partner network.
- Total Cost of Ownership: The vendor’s customers can provide insight about TCO. Although many vendor prices initially appear similar, there are several factors which can impact the cost: annual support fees vary from vendor to vendor, and implementation rates and ongoing support all have varying costs. To make the most informed decision, look to understand the TCO over a five year period.
It’s an Industrial Revolution
recent report from the World Economic Forum posits that manufacturing is the key to improve global standards of living, increase economic opportunities and lower unemployment. Manufacturing is transitioning out of the third industrial revolution – which started in the 1960s with the use of information systems and automation – to the fourth, which is characterized by a convergence of capabilities and policies.
Staying wed to the third industrial revolution and not embracing the current technology innovations would be as shortsighted as companies that didn’t leverage the first industrial revolution in the 1780s that used water and steam as sources of mechanical energy or the second in the 1870s that harnessed electric power for industrial production.
Choose and Improve
Choosing a new enterprise software solution is an important challenge and requires careful planning and research. Today’s modern technology supports business process improvements and best practices that lead directly to business performance improvement.
A new year can provide the reminder that it’s time to assess your current manufacturing state and determine what the desired future state of the business looks like. As history has proven time and again, resting on your laurels is a dangerous approach to business when the competition is in an unrelenting quest to improve business processes and enhance the bottom line.
By approaching the evaluation process and ERP selection in an informed manner, companies can ensure they make the right decisions to maintain or establish a competitive edge over other companies in the marketplace.
It’s a new year and there’s no better time than the present to evaluate your enterprise software solutions to start down the path to improving your company’s health.
Happy New Year!
About the Author
Jeff Carr is the founder of Ultra Consultants, an independent research and enterprise technology section consulting firm serving the manufacturing and distribution industries.