Should You Upgrade Your Systems?
It depends. Being the first to upgrade for each new fad is a waste of resources for little, if any, benefit. On the other hand, if the upgrade supports your ability to serve customers and grow profitably, it will become a “must”.
Inaction Isn’t an Option: The Southwest Airlines Debacle
Let’s take the Southwest Airlines debacle as an example. Although there were some extenuating circumstances (weather events and an infrastructure that supports point-to-point flights), the crux of the problem was that their systems failed. Weather caused delays and cancellations. Next, because Southwest doesn’t use the hub and spoke system, they do not have resources gathered in hubs throughout the country. Thus, when a flight was cancelled, they didn’t have their equipment (planes) and resources (pilots, crews, etc.) in the “right” place at the “right” time to quickly pivot.
They could have moved resources to the correct places; however, their systems were not upgraded to handle these ever-changing conditions and so flights came to a screeching halt. Southwest had insurmountable challenges resulting in cancellations to OVER 90% of their flights and countless unhappy passengers. Clearly, in hindsight, a systems upgrade would have been worth it!
How to Know If You Should Upgrade Your ERP System
How do you know if you should upgrade your ERP system? Of course, there is not a magical answer; however, there are several questions to consider:
- Does your ERP system support your customer needs? Customer needs are constantly evolving. Do you have high levels of service? OTIF (on-time-in-full) or OTD (on-time-delivery). Can you quickly pivot to changing customer conditions? Are you aware of these changes? Can you provide the visibility customers need?
- Will your ERP system support your FUTURE customer needs? Too many clients are running on the hamster wheel to keep up with current conditions and don’t have time to look to the future. Focus on where your customers are going and whether your systems will support their future needs.
- Does your ERP system support process upgrades? For example, if you would like to have inventory in the “right” place at the “right” time to achieve high service levels yet you could reduce your inventory levels to free up cash flow, does your system support this type of upgrade?
- Will your system support automation and digitization? For example, could you collect information about your machines with IoT capabilities and feed back to your systems so that you can use AI (artificial intelligence) to predict your machinery needs instead of focusing on preventative maintenance? Or could you simply attach a robot or automate a mundane process?
- Will your system connect with customers & suppliers? Viewing just one link of a supply chain is useless. You are only as strong as your weakest link. For example, to provide visibility of order status, you should connect with your suppliers, your suppliers’ suppliers and so on.
- Does your ERP system support your data needs? The only route to success is to be able to collect and analyze data so that you can stay ahead of changing conditions to make directionally correct strategic decisions. Business intelligence, predictive analytics, what if scenarios and more.
- Is your ERP system a hodge-podge of functionality or will it work like a well-oiled machine? It is fine to have add-on software so long as it works seamless together and as issues occur, the parts work together to resolve rapidly without finger pointing and wasted time. If not, you need to upgrade your system.
- Will your system keep up with modern functionality needs? For example, if your system doesn’t have a strong CRM (customer relationship management) system, it is doubtful you will keep up with customer needs. Does it have a forecasting system, an e-commerce system, an MES (manufacturing execution) system, and a WMS system (warehousing management) that acts as part of your ERP system? These are often separate systems or modules but they must seamlessly integrate.
If Your Answer is Yes, Perform a Selection Process
Clients frequently call to ask for help in selecting an ERP system. Unfortunately, it is not for the faint of heart. If there is one thing that is a certainty, it is that ERP salespeople are sharks. Some are likeable, friendly sharks, but sharks nonetheless. They easily sell ice to an eskimo.
Review our ERP category on our blog for several articles on ERP selection, but a few of the key steps include:
- Assess business requirements: Determine what your system needs to do in detail to support your needs.
- Document business requirements: Although we’ve tried to find a way to minimize the workload associated with this step, it is vital to keeping the sharks at bay.
- Source potential ERP suppliers: Narrow the list to ones that support your type of business and customer needs effectively.
- Develop an RFP & Scoring Method: Even for small selection projects, it is good to document at least the key points to further narrow your list of potential ERP suppliers.
- Demo the software: It is important to visualize how you can use the software.
- Ask second-level questions &/or perform deep dive demos: The devil is in the details. The software can look amazing yet not support your business. It happens frequently. The key is in asking the underlying questions and seeing how the software handles your specific needs. Will it handle the 80/20 or only 70/30? It will make a huge difference to your success – and resources invested to achieve success.
- Pricing comparisons: There is no doubt that software suppliers must sit at a bar and find ways to make pricing apples to oranges so they are impossible to compare because after 100+ projects, there are still curve balls to work through every time. You must get it to “apples to apples” to understand if your likely investment and comparison.
- Partner comparisons: The 80/20 of success will be implementation (assuming you get a decent fit for functionality). This will boil down to your partner and the capabilities of the specific resources you will work with on the project. Even with the best of partners, you can go down the “wrong” path easily and waste countless hours before pivoting. In fact, it is only the better partners that will tell you when they discover it is the wrong path because they don’t want to tell you that time has been wasted. The better your partner, the better your success.
- Summary comparison of functionality, partner and implementation which results in a final selection.
If Your Answer is No, Don’t Do It!
It is often easier to blame process issues on the system. Or, it could be for a lack of knowledge of how to expand the use of your system. Refer to our recent article, The MacGyver Approach: Leveraging Your Under Utilized Asset to find ways to upgrade your results without upgrading your system. Or ask experts to evaluate your situation. Don’t pursue an upgrade if it isn’t needed! Upgrading your system unnecessarily could be the quickest route to insolvency or customer debacles.
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