To remain competitive, U.S. manufacturers must continually cut costs while at the same time improving productivity, quality and service. Customers, of course, want faster delivery and lower prices, too. Fortunately, ERP software can help you accomplish all this and more.
It is a solution that cuts costs and boosts productivity by integrating all your production processes into one cohesive system. It can improve on-time deliveries and inventory control while simultaneously reducing administrative overhead and can also simplify your manufacturing processes by increasing visibility throughout the organization. It can also turn inefficient companies with high cost structures into lean, mean operations that can compete with anyone in the world.
But questions abound: Can ERP really work for your business? If so, how do you find the right system, what does it take to install it and what kind of ROI can you expect? How long does it take to get it up and running, and how much training is involved? What steps are required to implement it, and who needs to get involved? Most of all, can ERP software actually deliver on all that it promises to do?
If you’re considering ERP software for your business, these are legitimate questions. ERP can literally transform a manufacturing business, but only if you do it right. So, if you’re ready to take your business to the next level, here are five steps to take to prepare for successful implementation of an ERP system. But first, let’s review exactly what an ERP system involves.
What Is ERP?
In the 1970s, ERP software emerged as a few unrelated programs slapped together to improve various parts of the manufacturing process. The very best ERP systems evolved into the systems of today: comprehensive, fully integrated software systems created to manage the entire manufacturing process from one central location while simplifying operations and improving productivity.
In essence, ERP software serves as a central hub for all activities in a manufacturing business. It consists of different modules for estimating, quoting, work orders, delivery and billing and handles the financial aspects of work generation, including purchasing, inventory management, administrative overhead, and all the accounting and financial activities. ERP allows companies to:
- Estimate, quote and bid
- Generate work orders and sales and purchase orders
- Purchase raw materials, outside resources and services
- Schedule people, resources and equipment
- Track work in progress
- Monitor and manage inventory
- Manage shipping and delivery
- Generate invoices and track accounts receivable
- Eliminate all manual spreadsheets and databases
1. Assemble a team
Selecting and implementing an ERP system shouldn’t be left solely to the IT department. In addition to simplifying mission-critical processes, ERP has strategic capabilities that go far beyond managing inventory and scheduling jobs. As such, the decision to implement ERP software is a strategic decision that requires the input and support of the entire management team, not just IT. To ensure success, decisions should be made by a cross-functional team that represents all of the essential activities of your business.
Once assembled, the ERP team has responsibility for:
- Researching, evaluating and selecting the appropriate software package
- Setting specific goals and objectives (such as improved deliveries, better inventory management)
- Working with the ERP vendor to create and execute an implementation plan
- Communicating the need for ERP and its benefits to the company and employees
- Following through on the plan and holding people accountable
When setting objectives, be as specific as possible. For example, “improve delivery times by a minimum of 50 percent” yields better results than the more generic “improved deliveries.” Specific goals lay a foundation for implementation and provide performance metrics to measure the success of the implementation and ROI. Be sure to recognize this group for a job well done after the ERP system is up and running.
2. Choose the right software
With so many different ERP systems to choose from, identifying the right software package can be a daunting and time-consuming task. However, given the cost, integration and long-term impact of ERP systems, you need to invest as much time in the evaluation process as possible.
The best approach is to narrow down the list of vendors to three to five. Once you have the finalists, conduct interviews with each and “demo” their software. Ask each company to come to your location for a test run.
When evaluating different packages, look for the “four Cs” of an ERP system:
- Complete. The software should integrate all aspects of a manufacturing business – from bidding jobs to purchasing and materials management to invoicing accounts receivables and producing financial statements. Anything short of that and you’ll wind up with a cobbled-together system that may not work as intended.
- Comprehensive. Look for software that incorporates the latest technology, advanced features and menu options, but is also intuitive and easy to use. One of the easiest ways to assess a system’s ease of use is to spend time moving through the system’s screens. Are the screens visually uncluttered? Does the system’s flow make sense?
- Customizable. The software should allow users to create custom reports and use custom options without requiring vendor modifications to the software. Make sure the customization features are built in from the start.
- Cohesive. Some ERP systems are a series of different software programs patched together into one package. The best ERP software is written from the ground up by the same company, so that all the different functions work together as an integrated system.
In addition, ERP software should be:
- Flexible. The software should adapt to the way you do business. If it requires you to change your structure or mode of operations, look for another product.
- User friendly. Menu items should be self-explanatory, and the screen layout should be easy to navigate. Learning the software shouldn’t require extensive reading of manuals, but it should include an online help system that makes it easy to find desired information.
- Fully integrated. When you make a change at one point in the system, the software should automatically make the change throughout the entire system. Don’t invest in software that requires you to manually input the same change on multiple screens.
3. Choose the right partner
With ERP, you’re buying more than just software. You’re engaging in a long-term relationship with a partner that can impact your future success. Investing time up front to evaluate the vendor as carefully as the product will pay substantial dividends in the long run. When evaluating the company, pay attention to three key areas:
1. Company history. The best ERP companies have a proven track record of successful implementations, longevity within the industry and stable ownership. Be sure to ask:
- How long has the company been in business?
- Has it acquired or been acquired by other companies?
- What is the current ownership structure? How long has it been in place?
- How many successful implementations has the company completed?
2. Consultant experience. The consultants who will install the software, conduct the training
and guide the implementation are critical. Extensive hands-on experience in manufacturing is paramount. Ask them:
- How long have the consultants been with the company?
- How many successful implementations have they completed?
- Have they worked in manufacturing or is their experience limited to the software/ technology?
- Do they have hands-on experience in scheduling, materials management, inventory control and other critical areas?
- Will they take the time to understand your goals and objectives?
3. Culture. How the company does business and interacts with customers has a direct impact on your implementation. To evaluate the culture, ask:
- Are the people friendly and personable?
- Do they take the time to learn about your business and your unique challenges?
- Do they respond to questions in a timely and positive manner?
- Is service and support part of the company or is it outsourced?
- Do they have a strong R&D function driven by their manufacturing expertise?
When evaluating a vendor, check references, including current users to see how they use the software, the problems they’ve encountered and how the vendor responded. Don’t leave without asking: “If you had to do it all over, would you work with them again?”
4. Provide management support
The most critical aspect of any ERP implementation is getting senior management on board and committed. ERP requires a substantial change effort for most companies, and if the management team isn’t fully committed, results will fall short of expectations.
This doesn’t mean you have to attend every meeting or become an expert in the system, but active participation sends a strong message to employees. If you support the new system in an active and visible manner, people will follow your example.
In larger companies, management support requires the entire management team, especially those who head critical functions such as purchasing, inventory management and accounting. It also helps to have an ERP champion, or “enforcer” to lay down the law with respect to the implementation process. In smaller companies, this is often the owner or CEO. In larger companies, the CEO typically delegates the role to a trusted senior manager.
5. Get employee buy-in
Even when people know that change is necessary and/or good for them, they will often resist to some degree. Therefore, every successful ERP implementation must include a concerted effort to get employees to buy in to the new system.
Start by expecting some resistance to occur, then seek to understand the reasons. The more you know about their resistance, the better you can address their issues to ensure a successful implementation. A few ways to encourage buy-in include:
- Communicating the need for the change. Explain how ERP will make their jobs easier and how the company will benefit as a whole. Point out how difficult it will be to remain competitive without it.
- Demonstrate your commitment and support. When staff members see that management is fully behind the initiative, they are more inclined to support it.
- Get people involved. Tell employees, “We’re depending on you to learn this because we’re going to come to you with our questions.”
- Assign specific tasks and responsibilities. Often, resistance is due to a fear of the unknown. When people know what is expected of them, they will more readily embrace the change.
With these five strategies, you should be ready for implementation. To ensure that the next and final leg of the journey is streamlined, as well, be sure to keep an eye out for part two of Global Shop Solutions’ ERP implementation guide in the March issue of FAB Shop Magazine.