Best Practices for ERP Selection: Top 5 Considerations

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In the fast-paced landscape of SaaS, AI/ML, and Data Analytics, businesses are drawn to technologies promising to deliver big results while solving specific challenges. While some advancements might yield quick wins for individual tasks, adopting an Enterprise Resource Planning (ERP) solution is far more foundational and demands a holistic perspective. The ERP system is not just a tool; it’s a transformative force impacting every facet of a business, from finances and human capital to supply chain, manufacturing, logistics, and beyond.

Selecting the right ERP solution is pivotal, and certain guidelines can facilitate this decision-making process. Let’s delve into these considerations, starting with the crucial step of aligning business requirements.

Aligning Business RequirementsERP business requirement

When selecting an ERP solution, it’s critical to align with the specific needs of each department. After all, the requirements of someone in human resources, for example, will differ significantly from someone overseeing manufacturing. Getting this initial step right is imperative as it lays the foundation for reaping the full benefit of an ERP system. Another essential part of this early decision-making phase is determining whether to buy a ready-made ERP solution or to build a customized one in-house – a decision that hinges on the unique constraints and capabilities of the business. Companies must also consider the advantages and disadvantages of adopting a best in breed approach, which entails selecting the most advanced system for each individual department, versus a centralized approach that focuses on integrating all processes into a single, unified system.

One approach is to involve representatives from each department in documenting their workflows. This involves identifying current operations today and recognizing where existing gaps may exist. Each identified gap should be viewed as an opportunity for improvement, with prioritization based on the level of organizational friction it creates.

It is important to note that while the gap analysis provides valuable insights, it serves as only a partial requirements document. Ultimately, the chosen ERP selection should not merely replicate current workflows but instead should be viewed as an investment in a new way to operate, aligning with current best practices and effectively addressing challenges faced by the organization. This approach ensures that the ERP system is a tool for transformation, propelling the business towards improved processes and competitive advantage.

Ensuring Technical Fit

Evaluating a potential ERP solution for a business today is a highly complex process. Key considerations include assessing the user experience, ensuring seamless integration into existing systems, and evaluating overall ease of use. As highlighted by Forbes:

At the core of any ERP system is a central database that’s shared by the many disparate elements of a company. Rather than having separate data collection and management programs for each department—one for sales, one for inventory management, another for production, and so on—an ERP system provides a single hub for it all.

Beyond user experience and API integration abilities, choosing an ERP system poses a monumental task for business leaders because of its intricate nature of intertwining various elements within a business and the necessity to adapt to changing business needs. Another critical factor is the decision between a cloud-based, on-premise, or hybrid solution. This choice may depend on factors such as employees’ geographies and workflows; considering whether employees regularly use mobile phones or tablets, and whether this requires a mobile app.

Securing ROIERP Implementation

A successful ERP selection should consider the value the system will provide, necessitating a clear understanding of the total cost of ownership (TCO) on a task-by-task basis. For example, consider an accounts payable (AP) employee earning $20 per hour, processing three invoices per hour at a cost of $6.67 per invoice. This employee works 88 hours per day to complete their tasks.

If the ERP solution automates 80% of the invoices, the AP clerk still manages 30 invoices per day. Still, as a company, 120 invoices will be processed daily (30 manually by the clerk, and 90 invoices via automation).

The formula looks like this:

(Cost of the AP clerk + Cost of the ERP)/ (Total invoices sent).

Many ERP systems fall into the $2-$7 per day per user range. In this example, the company incurs $600 for 30 manual invoices and $5 for 90 automated invoices, bringing the total cost per invoice to $3.92. Factored together, the ERP is saving the company nearly $2.75 per invoice while improving time-to-cash.

Designing an Implementation Plan

Navigating change management complexity becomes particularly challenging when dealing with the substantial transformations inherent in deploying an ERP solution.

As TechTarget highlights, companies embarking on ERP implementation have choices, such as adopting a phased rollout or opting for a more radical “big bang” rip-and-replace approach.

One potential drawback of a phased approach includes creating a rift across an organization; no one likes to be the last to use a new tool. Additionally, this approach can create issues in integrated process flow since teams are now operating on various platforms. However, it also eliminates the overall shock that comes from changing business-wide workflows overnight. The “big bang” approach can shock the whole enterprise all at once, creating discord if not executed well and with a thoughtful roll-back plan in place.

In either case, having a robust implementation plan with organization-wide buy in ensures that all parties understand and are committed to their roles in a successful launch.

Celebrating SuccessesERP optimization

As with all technological advances in a business, embracing the implementation of an ERP solution inevitably involves some initial challenges. As such, it’s critical to celebrate early successes, even if those accomplishments may seem modest at the outset.

Typically, the decision to adopt an ERP system emanates from management and is passed down through the organization. Often, this decision is made without giving employees a complete understanding of why the change is necessary. By actively involving employees from the start, and clearly communicating the vision and benefits and the company’s future vision with a fully operational ERP system, management can build enthusiasm within the team and provide a transparent outlook on the anticipated improvements and changes.

Navigating ERP Excellence

From aligning business requirements to ensuring technical fit, selecting the right product, securing ROI, designing an implementation plan, and celebrating successes—each consideration plays a crucial role in the ERP selection journey. If you’re considering implementing a new ERP, contact the experts at Hartman Executive Advisors, for unbiased ERP selection, implementation, and optimization services. Embark on this transformative journey with confidence, making informed choices that propel your business toward ERP excellence.

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