How to ask the right questions to create the right ERP future for your company

We are often asked the question, “What Enterprise Resource Planning (ERP) software should be using?” In this article, we will review the initial tasks leading up to the selection of the right business application for your company, specifically: 1) Discovery, 2) Business Process Analysis, and 3) Software Selection.  These three steps often go together whenever a significant change in the business prompts the discussion about whether the current system is adequately supporting the client’s business.

Why is a discovery important?

Many companies are often unsure if they are maximizing their Enterprise Resource Planning (ERP) applications, their team members are utilizing it correctly, or they are simply overlooking opportunities to operate more cost-effectively.

Organizations that have been running an ERP application for a few years have often implemented their software in a hurry. They tended to shortcut the process to go live quickly and find, that years later, that they’ve left valuable functionality behind. Also, organizations that have been running an ERP system for several years find that they have lost internal expertise and are struggling with the software because a few personnel knows how to use it well. In the worst case, we find that companies are using the wrong software for their business or have outgrown it such that it no longer meets their needs.

Operations and Finance executives receive a steady stream of materials, cold calls, and email offering the opportunity to transition their ERP applications to something better. The industry has evolved. A decade ago, the number of alternatives was manageable. Today, there are over 50 viable ERP applications that an organization could consider. Maybe four or five are a reasonable fit. And perhaps two are perfect.

However, in general, companies don’t evaluate ERP applications on a regular basis. They often:

  • Don’t know the functionality of alternative solutions
  • Haven’t taken the time to document business processes
  • Haven’t been exposed to best practices

This is where engaging a knowledgeable strategic partner to conduct an initial discovery is very helpful. Its team works with the software, understand business processes, and has experience working with many companies.

Here are some possible outcomes of a discovery engagement:

  • You don’t need to upgrade today
  • You need to perform an upgrade which is a lot less expensive than doing a full implementation and retraining the entire team
  • Your internal team has no idea what it’s doing and just needs to be trained (or retrained)
  • There are modest system and process changes you can make today to significantly improve business operations
  • You need to upgrade in one or two years
  • You can wait two or three years and then evaluate if another software application is what the business needs

Sometimes, mid-sized manufacturing and distribution companies are just running old, arcane software that never met their needs in the first place. The process of replacing such an application is very expensive and it is absolutely critical that the right system is selected!

What is business process analysis?

In business process analysis, the basic approach is to “disassemble” and closely review the work being done in an existing department. As an example, look at the sales department’s business processes. Key interview questions include:

  • How is the sales team executing on those processes today?
  • How do those processes fit within the business as a whole?
  • Are orders coming in online, via telephone, or EDI?
  • What additional processes are required to ship product out the door and bill the customer?

Business process analysis entails going in-depth into an existing departmental process to first understand how team members are working it today and compare to what their business is really calling for. Sometimes work is being done in a haphazard manner because the existing procedures don’t match what the business requires. Sometimes they’re just missing opportunities to use the system to streamline their work.

In addition to team members not understanding what they’re doing, they don’t know what the business, as a whole, could be doing. Key interview questions include:

  • What are customers asking for?
  • Are there ways to re-engineer the processes to improve system-process fit?
  • What steps, if taken, would improve adoption by team members?
  • Do the existing processes address customer and supplier requirements?
  • Are the existing processes support the organization’s strategic objectives?

One of the first steps in business process analysis is to review “as is” and “to be” processes. “As-is” refers to how the organization is operating currently. Key interview questions include,

  • How are team members executing their day-to-day processes?
  • Do they understand why or are they just hitting the keys because “that’s how it’s always been done”?
  • How well do the business processes fit the functionality of the current system?

The objective here is to understand what team members are doing and why. Once done, the next step is to define the “to be” processes based on what the software is capable of doing and how the business processes should be structured based on the organization’s demands.

Finally, comparing the “as-is” and “to-be” processes provide a straightforward way to identify “gaps”. In other words, the team is currently doing A. The software can support B. The business’ strategic plan requires C. A comparison of A, B, and C will highlight gaps (opportunities to improve) in both the software and the business processes.

How do we approach software selection?

There are many dozens of ERP applications on the market today. Some of them are very good and some of them not so. Some specialize in certain niches while others try to sell to the broader market. All have strength and weaknesses. A software selection often begins with looking at a subset of those ERP systems.

Begin by looking at those which are viable. Certain software publishers are very small and they’re future is questionable. It’s not a situation you want to stake your professional reputation on.

Second, identify the functionality that the organization needs and what fits the company’s “to be” processes.

Third, determine what fits the organization’s architecture and environment. For example, certain companies are very adept and have large I/T departments. They are very adept, want all the bells and whistles, and want to be able to customize and maintain the ERP application themselves. Other companies just want to run their business. They want the ERP system to be turnkey and want it to be in the cloud. They just want it running, “out of the box”, and want to be able to come to work and run their business.

The cost of hardware and software is, of course, a major consideration. Some applications are far more complex and are much more expensive to implement and support than others. We often see a tradeoff between complexity (lots of features) and ease of implementation. Complexity makes the implementation more difficult, expensive, time-consuming.

An often overlooked aspect of cost is the level of effort required to complete an implementation or upgrade. Engaging consulting services can shorten the learning curve and implementation effort and cost. However, the internal effort required has a cost as well. The higher the complexity, the higher the overall cost. Note: The internal effort required could be significant. For some software applications, 3 to 6 months will suffice. For others, elapsed time could be 8 to 12 months. But for very complex software, it could be 2 years or longer. The implementation process generally requires a person and, in extreme cases, a team of people from each department. The cost estimation process must include the internal resources required. The risk of failure increases significantly if a provision for internal resources is not included in the project plan.

In conclusion

We reviewed the rationale for approaching three tasks together: Discover, business process analysis, and software selection. It is critical that these be completed before making a final decision to implement an ERP system. The goal is to avoid selecting the wrong software and spending excessive amounts of time and money on an application that does not support the strategic objectives of the organization.