ERP adoption and implementation can have a wide range of outcomes, so whether you are upgrading your ERP system or considering deploying a new one, it’s important to understand an ERP’s capabilities. With a solid business strategy, and a strong foundation of knowledge, you can determine the best course of action for your manufacturing business and take advantage of an ERP system to streamline business processes and maximize profitability.
While the adoption of ERP systems has grown over the years, several common myths still exist which may impact how you measure the success of your implementation. Dispelling these myths and being more aware of an ERP’s capabilities will help you get the most out of your investment.
So, what are these myths?
MYTH: My company is too small for an ERP
TRUTH: A few years ago, it was true that many ERP systems were too expensive and complex for small companies. But in recent years the barrier to entry has been significantly lowered due to developments such as:
You no longer need to invest in expensive hardware, network infrastructure and IT expertise.
SaaS (Software as a Service)
Previously, purchasing an ERP required a large capital spend. Now, with subscription models, you can pay monthly, turning a capital expense into an operational expense.
Modular design and integrations
Instead of having to buy the entire ERP system, you can often buy just the modules or components you need. In addition, integrations to external systems are much simpler, cheaper and more flexible than in the past, allowing you to purchase separate, smaller “best of breed” systems and integrate them.
Another thing to consider is the hidden costs of the ‘status quo’. A small company may think an ERP system is expensive, but how much time and money are you wasting due to manual processes, double entry of data, too much/not enough inventory, expediting, and delayed order to cash cycles? And to top it off, business leaders struggle to make critical business decisions due to lack of timely and accurate information.
MYTH: Price is the most important selection criteria when choosing an ERP
TRUTH: A study done by Deloitte showed that for first time buyers of an ERP, price was the most important factor. But second time buyers had learned an important lesson: the level of relationship and support with the vendor became most important. You are not just buying a piece of software. You are buying a critical business system that will underpin your entire business for years or decades as it grows and changes. Your ERP vendor will be your trusted business advisor in this “marriage”, and a strong and supportive relationship is far more important than the price.
MYTH: An ERP needs to be implemented all at once
TRUTH: An ERP can be implemented in stages to ensure that you can comfortably and efficiently use all the tools and processes. Critical modules should be introduced first where you would most benefit, such as for financial data, etc. These Phase 1 wins will motivate everyone for the next phases, where other segments of your business can implement the ERP. “Eat the elephant one bite at a time” to ensure success.
MYTH: An ERP should fit all your existing processes and departments
TRUTH: There are two points to note here. First, don’t automate bad processes. Just because you’ve “always done it that way” doesn’t mean you should continue doing it that way. Use this opportunity to conduct a full review of your business processes – and be open to change. The importance of this review cannot be underestimated. Many companies skip this step and wonder why they end up with an ERP that seems to simply replicate what they were doing in the past. The second thing to note is that not every tiny or infrequent process needs to be modeled in the software. Sometimes it’s more hassle than it’s worth, and it’s perfectly fine to do some of these little tasks outside the ERP.
MYTH: ERP projects are owned by IT departments
TRUTH: ERP projects must be owned by the C-suite. Because ERP systems are usually installed by IT, or because it is software, ERP selection is often thought to be owned by IT. While IT has a strong role in selection, implementation, and management, the C-suite and business owners must lead ERP projects. They are the ones who have deep departmental knowledge and a view of the complete business and its requirements. Without this, you run the risk of having software that doesn’t fit all the needs of your business.
MYTH: We will go live in a few months
TRUTH: Businesses can often be overly optimistic about the time it will take to implement an ERP without considering how complicated their operations are. It’s important to remember that when you implement an ERP, you need to really think through how many ‘degrees of change’ are you introducing – to roles, to systems and to processes. If you are changing a system and your business processes, you are introducing two degrees of change. This awareness can help you recognize the resulting implications, the resource requirements, and the planning you need to do for effectively managing this change. Being aware of these additional resource requirements will help you get a more realistic go-live date.
If you are considering an ERP, it’s vital that you first identify which pain points you are trying to solve, and which areas of your business will benefit. Look for a vendor that has experience in the industry you’re in to avoid lengthy implementations and customizations. They can also provide an array of best practices and guide you every step of the way.