In the last month, there has been a flurry of ERP related discussions. A client went live on an aggressive timeline with an ERP system with little to no data migration as there simply wasn’t time. As you can imagine, there is quite the mountain of follow-up tasks. In talking with a CEO group, there was a lot of ERP activity. One company went live a year ago and is still recovering in terms of smoothing out since go-live although it was successful. Two others are looking at ERP selection projects and another is looking at better utilizing their ERP system. The bottom line is that folks are realizing they must automate, digitize and better utilize ERP functionality and related technologies (AI, IoT, CRM, e-commerce etc.) to support customers and grow profitably.
Why is ERP Strategy Vital?
ERP is one of the most expensive non-equipment purchases a manufacturer or distributor will make, and it is certainly has the most potential to impact customers. The statistics tell the story. 80% of ERP implementations fail to produce the intended result. The key is whether you are negatively impacting customers or if you spent additional fund, needed additional resources, or didn’t gain the efficiencies upfront.
And, so you might wonder why you should upgrade ERP at all? In the current environment, customer expectations have changed dramatically, profitability is critical, and high-skilled talent is not plentiful; thus, upgrading to a modern ERP system and/or expanding the use of ERP in a way that supports your business differentiators is one of the most important decisions your executive team will make.
A modern ERP system is required to support many customer requirements and some of the automation capabilities. Thus, if you don’t have a modern ERP system and plan to grow, you should evaluate it. On the other hand, not everyone should upgrade their ERP system. Clearly, if it isn’t required to support your growth, you will be diverted from the business at a minimum, and lose business at a maximum. If you already have a modern ERP system (one invested in heavily by the provider and one that has a strong base), it is likely you do not need an upgrade.
You could decide to better leverage your ERP system instead. In the last 20 years, we can count on one hand (and perhaps with just a thumb) the number of clients that couldn’t benefit from further leveraging their existing ERP system. The one exception that pops to mind was solely due to risk as removing a card from their house of cards could bring the house down.
At a bare minimum, every company should develop an ERP roadmap to ensure technology supports business growth and success.
Start with strategy. Evaluate several questions:
- What are your growth plans? Do you expect to buy companies? Expand through organic growth? Partner? Internationally?
- Do you expect to expand, add or change markets, industry segments or customers? What is required to support these plans? Are you familiar with your customers’ plans?
- Do you expect to expand, upgrade, or add products? If so, will that change your business requirements?
- Do you expect to change your supply strategy and related analysis? (insource, outsource, offload, make vs buy, manufacturing type (job shop, process, ETO, CTO), product rationalization, customer/ product profitability, etc.)
- What is unique to your business or industry?
- What is unique from a profit driver standpoint?
Once you have thought through your strategy questions, it is time for an ERP assessment. During an ERP assessment, you should evaluate the following:
- Your business requirements
- Your critical success factors (profit drivers, differentiators)
- The requirements fit with your current ERP system.
- If needed, an ERP system evaluation to select the best ERP system and related technologies to support your business.
- If needed, an ERP partner to support your ERP implementation.
In ERP circles, there are many “good salespeople” selling bells and whistles, and there is a lot of complexity in the cross-section of business processes, ERP functionality, and technical specs. It makes sense to hire an outside, unbiased resource to assess your business requirements, critical success factors, fit with your current ERP system and evaluate ERP software and partner upgrade options.
To learn more about the topic, read our article on better utilizing your current ERP system and selecting and upgrading your ERP system.
As the manufacturing resurgence accelerates, the need for a modern ERP system and use of related technologies will be vital to support customers and profitability. Please contact us with your success stories and your questions for how to succeed during these volatile times. And, please keep us in the loop of your situation and how we can help your organization get in a position to thrive for years to come. Learn more about these topics in our blog and download your complimentary copy of our recently released special report: The Road Ahead: Business, Supply Chain & The World Order