By Randy Flamm, president and founder of IQMS.
For manufacturers looking to add, upgrade or replace Enterprise Resource Planning (ERP) software, one of the most apparent concerns is what the system can do.
For example, can the system handle the organisation’s scheduling needs; does it offer production monitoring and quality control; and can it streamline communication? However, while these are important considerations, what an ERP system can and cannot do is only one aspect of the many critical components that should be considered when making an ERP purchase.
ERP selection is not just about catering to the wants and wantnots from the disparate groups that make up an organisation. It is about finding a solution that suits your organisation’s needs, both now and in the future. It should be a longlasting purchase that provides you with the feeling of a partnership. The combination of software capability and vendor credibility should both be a factor in your purchasing decision.
Only by considering functionality against the backdrop of the entire package—the technology and its vendor—can manufacturers ensure they make a right and lasting choice.
The following are the nine key things to consider when evaluating and purchasing a new ERP system.
Platform (e.g. .NET, SQL, hosted etc) is important but should not be prioritised above functionality. Choosing a new ERP system based on a pre-conceived idea that only one platform will fit the selection criteria distracts from the real value an ERP system can provide and may eliminate viable options even before they are considered.
Don’t eliminate potential software vendors based on platform, rather, look for high-caliber functionality, then consider whether the functionality compensates for a platform difference.
Your ERP system must be able to evolve with the rapid pace of technology advancement.
To determine whether a vendor is on the leading edge of technology, find out how committed they are to researching and developing future applications. If certain features are not in the package but functionality specific to those features is offered, is the vendor willing to put it in writing? An ERP vendor that is not on the leading edge of technology may not be a viable option for the long haul.
3 How many vendors are included?
It is important to understand how many vendors will contribute to an ERP solution in total. Some ERP solutions are built upon technology developed by and acquired from multiple sources but are packaged as a single system. This can result in costly system incompatibilities. Maintaining multiple vendor relationships, databases and connections is time consuming and costly and should be a factor in determining the long-term effects on an Information Systems department. Ideally, all software components will be designed, developed, supplied and supported by the same vendor.
4 Product demonstration.
Product demonstrations are an important way to see an ERP solution first hand and they also give you an opportunity to evaluate the vendor. Consider whether questions are answered clearly and concisely. Be persistent when gathering desired information, such as: who writes, develops and supports each system component; are modules interoperable, easy-tomanage and cost effective; what functionality is included; and how might the system best support specific objectives? Don’t be afraid to take charge of the demonstration so you can test drive the solution.
Enter a specific Bill of Material or other data to see how the system reacts.
5 The always useful buzz words.
ERP selection can seem overwhelming with so many catch phrases—i.e. ‘Service Oriented Architecture’ (SOA), ‘Best of Breed’, ‘Lean Manufacturing’—floating around the industry today. Instead of focusing on the buzz words, focus on who is making the buzz. For example, is SOA really best for your organisation or is it just a nice package that SOA vendors are using to sell how they do business today? Will the SOA buzz diminish when these vendors’ product offerings change?
6 Implementation time.
When provided with an estimate for the number of days to complete an implementation, ask how the vendor arrived at the number. Implementation times may vary from organisation to organisation, but the vendor may have a proven plan of how to implement in less time that does not match what their competition is offering. Contact a reference customer to ask whether the vendor met their implementation schedule. If they did not, how much longer did it take to complete the implementation and why did it take longer than expected? Purchasing ERP is not just about the software received, it’s about follow through that brings that software live, and maintains it once installed.
7 Customer referrals.
While existing customer referrals are beneficial, remember two things: first, customers are on the referral list for a reason; and, second, vendors don’t typically give out the names of problem customers. Take due diligence by checking the vendor’s website for case studies, quotes, and customers in the news, then contact those customers directly. Ask for customer referrals from companies that previously used the same system currently used by your firm, or ask for referrals from companies that are similar in size or in the same product industry as your own.
8 Customer retention.
It is one thing to have a short list of current, happy customers. It is something else entirely to maintain the customer relationship over time. Ask the ERP vendor what their customer retention rate is. Do a majority of their customers continue on with them for years, even decades? With the buyouts and recession of past years, no ERP vendor can claim 100% retention, but anything less than 80% should raise a red flag.
9 Objectively observe.
Understand your true market and your position in that market. Whilst it is always good to think where you want to be in five or more years, also think about where you are now. Buy a package that focuses on your current market position, but can carry you to your next goal and beyond. An over-the-counter ERP system bought at the local office supply store will not see a company through to its multi-million pound goals.
On the opposite end of the spectrum, the software solutions used by the huge corporations of the world may be too big. An ideal package is one that can be purchased today, with only the components that are needed, but expand with a business as it grows.