In my previous blog, An SMB Manufacturers’ Guide to ERP Implementation, Pt. 1: An Introduction, I explained the reasons why business leaders ought to consider implementing a more advanced enterprise resource planning solution. Now, let's get into the nitty-gritty of how the implementation process should run.
Get Objectives Straight
The first step is to really understand what the executive objectives are. We start with a business strategy review, and if Tribridge is facilitating this, we would sit down and interview the executive team. If the customer wants to do this on their own, they need to clearly identify what that strategy is.
Some of the things they need to understand are:
- Is their business growing?
- Is the strategy to continue to accelerate growth?
- Will that be done through future acquisitions where they may need to integrate in new businesses, products or capabilities?
- Do they think they want to be acquired in the future?
- If so, they may want to optimize their systems and investments in preparation for that?
Those are really the business strategies – if they're doing a lot of acquisitions and integrations, then it's really important to understand that, and to think about how to set up their systems and processes to be able to quickly and efficiently integrate the new business.
Here are few other important questions:
- What is the business looking to achieve by implementing an ERP and a business transformation – from a business, technological and organizational standpoint – what are they trying to achieve?
- Are they looking to reduce costs?
- Are they looking to improve customer service levels, reduce lead times, improve working capital by freeing up cash, or streamline, standardize and automate business processes?
- Are they looking to have improved visibility around costs and profitability by product or by customer?
- How will success be measured, and what does it look like?
- What are the key metrics and the current baseline for each of them?
Those are all important things to understand the real driving and motivating factors for an implementation.
For instance, if our profitability is 6 percent today and we want to reduce costs and improve our operations after the transformation and we want to increase our profitability to 8 percent. This is one example of a quantitative metric.
Another might sound like, "Our current inventory level is at $25 million and our service levels are only at 90 percent. We would like to optimize inventory to reduce it by 10 percent and, at the same time, we'd like to improve our customer service levels to 97 percent."
Understand the ERP Scope
Also important is to understand the scope of the solution. Many times an ERP system implementation can be broken down into different phases deploying functionality over time.
Common mistakes at this stage include:
- Not having a clear picture of what is included with each phase
- Not defining desired results, or maybe on the other side of that, trying to achieve too much and not being able to deliver on all of it. The object is to identify key success criteria, and then define and manage the scope so it doesn't creep
Now, the next step will be to move on to the review of business needs. Read on to part three of our series to understand this stage, as well as the definition of the future state.