This is understandable.  Most small to medium manufacturers are running at full throttle managing operations, production, supply chain, ordering, inventory and other key areas.  Taking the time to strategically calculate those metrics that factor into the “return” part of ROI often involve effort in analyzing indirect savings, which typically do not appear on the bottom line. Instead, these indirect, but still quantifiable benefits, are the savings that come from operating more efficiently or from expenses avoided.

Given these very real challenges, we’ve seen that the best performing manufacturers take the time and effort to track both direct and indirect benefits as part of ROI calculations.  These companies keep front and center the annual total savings they achieve since implementation.  They then divide the average total savings, typically over three years, by the initial cost.

Three ROI Conversation Starters

After working with many ERP implementation projects over the years, here are a few conversation starters to get the ROI discussion going:

1. Consider process improvements: ROI must involve a look at the process improvements ERP supports, including a more streamlined ordering process, reduction of physical inventory counts, improved production quality, better scheduling and more.
2. Focus on savings resulting from access to real-time information: ROI must look beyond hard savings like reduced inventories, cycle times,  etc. and recognize those benefits achieved from more accurate materials planning, integrated databases, streamlined information reporting, dashboard reporting and other uses of real-time data.
3. Don’t forget to look at “soft savings”: The highest performing manufacturers assess the economic impact of other “soft savings” intangibles such as the dollars achieved from customer satisfaction, enhanced supply chain communication, improved decision-making quality, delivery performance, etc

While not an exhaustive list by any means, these “conversation starters” help put the focus on ROI metrics that track reduction in operational costs, improved utilization of resources, reduction in waste, and other key metrics.

Once these conversations get started, theoretically speaking, a meaningful ROI calculation won’t be far behind.

Written by Alan Salton, President of abas-USA

ABAS is a leading provider of cost-effective ERP solutions for midmarket manufacturers and distributors. abas Business Software is an ERP and eBusiness application designed specifically for manufacturers in the Assemble-to-Order, Make-to-Order and Engineer-to-Order environment. Learn more about their ERP solutions at www.abas-usa.com.

The Product Data Management module provides a folder structure within which you can create your own document organization.  Documents are added into the folder via several options including upload, link, web link, link to existing and others.  Form templates can be developed to capture and store ad-hoc information within the folder structure. This can include checklists, process compliance, design assumptions and much more.  Documents can be scanned directly into Plex Product Data Management from a desktop scanner.  Once added, PDM documents can be quickly located via masked and Google like searches.

Plex provides a strong security structure to ensure document control.  Plex user rights and roles dictate available capabilities within the PLM. Individual document rights can be set with access and change control rights are embedded within the document. Documents can also be assigned to groups, have retention periods and review frequency established, and change approval policies defined.

Users with appropriate rights can check out a document. While the document is checked out, changes are prevented to ensure the integrity of the document.  Upon check in, an approval task can be generated via Plex’s integrated workflow.  Revision history is retained with the ability to fall back to prior versions. Distribution groups for documents can be created and all distributions are logged. Document reviewers are provided an inbox of documents pending review. At any given time it is possible to see all documents currently pending approval or in check out mode. Plex PDM is integrated into the full PLEX ERP via a universal document attachment icon located liberally throughout the master data records and order records.

Plex’s Document Management System provides universal access via their software as a service model, unlimited storage, unlimited file types that include documents, links, videos, etc, workflow enabled collaboration, and full audit control of document history.

Plex’s workflow is one of the most intuitive and broad capabilities that I’ve seen. The workflow enables automation of processes and then provides the insights necessary to document process compliance and to measure process performance.

Every workflow definition includes an action or trigger information, while down stream assignments can include a group, actions and results, notification emails, process standards like time to complete, as well as quality and compliance checklists.

Plex’s process monitoring capabilities then enables monitoring of workflows pending, average time to complete workflows, number of exceptions, etc.  With this documentation in hand, companies can demonstrate process compliance to regulators as well as focus continuous improvement efforts on process bottlenecks.

Plex rounds out its Product Lifecycle Management suite by joining its product data management and workflow capabilities with the product master in Plex.  Every product has an integrated revision management system to enable stage gating and design integrity.  Product design status can be monitored. The product status dictates where a part is at in the design process and actions are enabled or disabled based on the status.  Plex’s “Effects” capabilities enable users to determine the impact scope on the population of products and inventory due to a proposed design change.  A change history is maintained for every product.

Plex has successfully married a software as a service architecture with document management, workflow, and product design control to deliver a potent Product Lifecycle Management system.

So, how does an organization increase the probability of a successful and timely implementation?  While there are many answers to that question, assigning the right employee to be the ERP Project Manager may be at the top of the list. 

What characteristics should a Project Manager possess?  What should his/her strengths be? You might want to look at the profile of a successful athlete, such as an NFL quarterback, perhaps a head coach or even that of a school Principal.

A Successful ERP Project Manager Must Have the Same Traits as Any Great Leader

• Motivator
• Good Listener
• Intelligent
• Resourceful
• Respectful
• Effective Communicator
• Empathetic
• Hard Working
• Desire to Win

A new ERP system should integrate most every department in the company, such as Customer Service, Accounting, Information Technology, Quality Control, Sales, Payroll, Manufacturing, Human Resources and others. Therefore, the Project Manager must also have the knowledge and experience on how all these functional departments affect each other, the information flow and the personalities involved.

The Project Manager has to have the ability to communicate the following to fellow employees, department heads, and top management:

• The goals of the ERP implementation
• Steps necessary to execute the software implementation
• Tasks needed to keep the project on-time and on-budget
• Meetings requirements
• Importance of departmental roles and responsibilities

In conclusion, the Project Manager is a key factor in the success of any ERP implementation.   Selecting the right ERP Project Manager is one of the first steps in delivering a success ERP implementation project.

Where Do You Start?

Companies are continually asking the question “Is it time to change our ERP software or should we continue with the current applications?” This is not an easy question to answer, as an ERP implementation requires a significant investment of time, resources and capital.  Conversely, upgrading to the latest release of the exiting application is rarely a “plug and play” exercise due to the significant number of modifications and additional systems that have grown up around the legacy software. These enhancements essentially become “cement shoes” inhibiting any flexibility.  Additionally many have discontinued maintenance and would face significant fees to upgrade the software.  To add even more complexity to the situation is upgrading an older legacy system is in essence a re-implementation.

Points to Consider

• Existing Business Processes – Business process  improvement is the biggest reason we see people changing their ERP systems.  The older ERP systems are much more rigid in their capabilities and forced companies into processes dictated by the system.
• Business Transformation - Most companies have changed how they transact business since implementing the original legacy system weather that entails adding additional facilities, more international business, or incorporating other channels of transacting business (to name a few)
• Technology Changes - Today’s employees are accustomed to the flexibility and look and feel of desktop software as well as transacting commerce via the internet. This adds an additional perception of rigidity of using the legacy applications and often leads to spreadsheets as the most viable workaround.
• Increased Functionality - Most systems implemented 15 years ago were not as deep and wide in terms of functionality as today’s systems.  This contributed to a virtual patchwork of applications running the business.  Additionally the flexibility provided by the work flow capabilities of modern systems eliminate the need to modify the core application thereby leaving the client more able to upgrade to take advantage of more current functionality. 

Conclusion

While standing at the crossroads in deciding whether to upgrade your current system or evaluate alternatives, the logical starting point is to analyze and document the existing business processes, educate our clients on the capabilities offered by more modern systems, and develop a vision of a future state based on industry best practices. This assessment can provide an excellent barometer if upgrading the current system or moving to newer technology is a better option.

With the complexity inherent in selecting the proper path, it is imperative to analyze all the options, evaluate all the considerations, and provide a road map that gets to your destination while minimizing risk and maximizing efficiency.

IFS is a very focused ERP company. They are not trying to be all things to all buyers. They’re focused on their niche.  They provide one ERP product from one company internationally.

Four Elements That Define IFS’s Market

• Projects
• Supply Chain Management
• Service and Assets
• Manufacturing

This Focus Translate into Seven Vertical Markets

• Aerospace and Defense
• Industrial Manufacturing
• Automotive
• Construction
• Energy
• High Tech
• Process Industries (Food & Beverage, Pulp, Paper, Metals, Chemicals)

With approximately $400 M in annual revenues, IFS ranks in in the second half of Ultra’s top ten list of ERP vendors for the complex manufacturing industry.  In 2012, IFS North American operations grew 65%, which demonstrates that IFS has good velocity in the market of buyers for new ERP systems.

The company has a strong International presence. They are headquartered in Sweden, and have 7,500 customer sites globally.

Markets Where IFS Excels

• Project Centered Manufacturing
• Engineer-to-Order Manufacturing
• Capital Asset Manufacturing
• Field Service Based Products (“As Designed, “As Built”, “As Maintained” Bill of Materials)

IFS is also a good candidate for most complex manufacturing companies including process companies. They allow mixed mode manufacturing in a plant and support most multi-plant requirements.

IFS is a conservative company. They are not focusing on rapid growth. They pay more attention to customer satisfaction, achieving satisfaction ratings in the high 90’s.

The company has zero debt and is now an acquirer. We see IFS being a top 10 vendor for most mid-market manufacturing companies looking for modern ERP capability.

In the last several months, our Business Intelligence Group has had a number of requests from our clients to map additional ERP systems into their Data Marts. In most cases, our client acquired a competitor running a different ERP system. This usually means that the acquired entity will be moving to our client’s “standard” ERP in the very near future.

But this transition often takes months to accomplish, and our clients generally rely heavily on up-to-date information from their BI systems, and don’t want to wait until the transition is complete to have the new entity’s data incorporated into their BI dashboards and reports. By mapping the new ERP data into the Data Mart, this can be achieved very quickly, and with few or no changes to the BI reports.

Here are a few real-world examples of this type of Change. A Data Mart that Ultra developed in 2004 for a mid-tier manufacturer was initially based on 4 ERP systems (they were in acquisition mode). Since then, they have acquired 2 more companies (and 2 more ERP systems). They recently selected a new ERP as their standard, so we are working on the 7th ERP system mapping. This is a new record among Ultra’s clients! This may be an extreme example of Change, but acquisitions are increasingly common in the current business cycle. Another type of Change that is perhaps more common with our clients is a “simple” ERP replacement. This can happen at any time in an organization’s BI lifecycle. We often implement Data Marts at the beginning of the lifecycle with mappings from legacy ERP systems that are planned for replacement, and then map in the new ERP while it is being implemented.

In another case, our client’s home-grown operational system continued to serve them well, but they swapped to a new financial package, so only the Accounts Receivable, Accounts Payable, and General Ledger components of the Data Mart needed to be re-mapped. In each of these examples, our client’s basic business model did not change, so the dimensional framework of the Data Marts continued to fit the business well, and mapping the new ERP into the existing Data Mart was a natural fit. This should always be the case if the Data Mart is properly designed to fit the business instead of any particular ERP.

The take-away from this is that sooner or later, significant Change is coming to most BI systems. In the above examples, new ERP systems imposed a Change on the BI environment. The Business itself also provides a steady stream of Changes; new lines of business, changes in the competitive landscape, supplemental systems or other external data to be merged, new (or deeper) KPIs, the inevitable “I want that for my department too” requests. The list is seemingly endless.

For some businesses, going with the ERP vendor’s “out-of-the-box” BI solution is a viable choice for a quick BI “win,” but depending on the solution’s architecture, it may be difficult to incorporate significant Change (like a supplemental system or an additional ERP). As mentioned at the top of this post, another quick win can be achieved by buying a BI software suite, and pointing it at the ERPs native data. But BI systems constructed in this manner usually fall over when trying to integrate an additional ERP, or when switching to a new ERP altogether.

Having a solid BI strategy and extensible BI system components in place helps organizations embrace Change quickly and cost-effectively, without forgetting the past (transactions in the “old” ERP), and without disrupting the stream of business insight they gain from their BI system.

In upcoming posts, we will look at other “real-world” examples of Change, and the characteristics of BI systems that make the changes easy or difficult to implement. And, we will examine some of the decisions that must be made throughout the BI lifecycle, and their effects on the ability of the BI system to support Change.

Mr. Carr will address the following topics at the webinar titled 5 Tips to Extend the Value of ERP and Meet the Needs of your Business:

• Importance for midmarket companies to stop solving technology challenges in silos and how a fully integrated solution can help a company increase productivity and be more profitable.
• Explain the full ERP portfolio suite and the value of leveraging the solution’s capabilities to its fullest extent across the company.
• Highlight the types of benefits and improvements of ERP and explain how each module can bring productivity improvements.
• Share tips to effectively document business processes to help ensure business requirements translate into ERP requirements.

Erik Kass, Vice President of Product Management, will also be speaking at the event.  Erik is responsible for product strategy and managing the product life cycle at Sage.

To learn more about the session or register for the event, click the registration link below.

Registration URL: http://b2b.ziffdavis.com/webcasts/5-tips-extend-value-erp/

Step #1 – Plan for Change

An ERP project is not an IT project.  It is not a supply chain project, or an operations project.  It is a full scope business change project.  ERP implementations are often the largest projects a company may take on.  The complexity, scope, and risk can be daunting.  The best way to minimize risk is effective planning.  First, the current business processes should be assessed and documented.  Current processes serve as a basis for defining requirements.  Too often the details of certain processes are only known by a few key team members.  Taking the time to dive into the detail of how you do business helps prevent missing requirements and costly change orders.

Step #2 – Assemble the Team

Every project needs a project champion, but an ERP implementation requires more.  Successful projects require a cross-functional team that is on board with the mission.  Each business function should have a representative that is a SME in their area.  These functional leads will be identifying and documenting their processes and vetting the software for functional fit.  Above all, these are SME’s that believe in the project and are on board with overall project mission.  In addition to being project evangelists, they need to have the authority to delegate departmental tasks and remove roadblocks to success.

Step #3 – Understand Scope and Priority

ERP implementations may last anywhere from several months to years.  If time is money, then it stands to reason a project plan should be both aggressive yet realistic.  The implementation should be a priority for the entire organization.  As the project plan is defined and resources and activities are laid out, the exact scope will becomes clear.  The initial plan and any changes must be communicated to the project team, with a continued emphasis on importance and priority. With a clear idea of scope and the pending workload, the project’s momentum is easier to drive and maintain.  A stalled project can be extremely difficult to get moving again.

If you’re struggling with your ERP project or know you may need a little outside assistance, Ultra can help.  From ERP selection to ERP implementation, our team has the experience to help drive your project towards a successful outcome.

Common Pitfalls When Negotiating With ERP Vendors

The goal of every ERP vendor is to sell as much product as they can as early as possible.  As a result, many companies purchase too many modules, users, or applications way before they are needed or that never get implemented.  This causes a negative counter balance to any positive concessions obtained in the negotiation process and also has a negative effect on cash flow.

Other companies fail to negotiate the software license agreement in tandem with the implementation proposal.  Many times the ERP implementation team may be a business partner of the software vendor and may not actually be selling the software. All leverage is lost by not negotiating both as a joint agreement and many times the ERP vendor will push concessions on their implementation partner to facilitate a license sale.

Companies should also not lose sight of the fact that it is a strategic long-term agreement and they should look for protections well into the future.   This would include locking in long-term pricing for additional software and users well into the future (3-5 years) as well as limiting price increases on implementation services, maintenance agreements and other key components of the contract.

It is also extremely important to triple-check the respective user counts as well as the final ERP application footprint.  You need to be assured that what you are buying was what was demonstrated, what is needed, and that there are no limitations on the type of user licenses that are being purchased in accessing this critical functionality.  ERP Vendors like to demonstrate the flashy functionality but then exclude it from the final proposal to minimize the cost.  Conversely other applications may be included that are not needed initially or altogether.

Helpful Tips for ERP Contract Negotiations

• Timing is everything. Make sure you understand year-end and quarter-end for the final vendors.
• Make sure you have two finalists to enhance your leverage.
• Understand there are multiple points to discuss to negotiate in the final contracts and it would be wise to engage a trusted advisor to guide you through the maze of possibilities.
• Understand all the costs (hardware, database and middleware software etc.) prior to making any decisions.
• Have a final legal review prior to executing contracts.
• Establish point a point person(s) for the contract negotiations and instruct other team members not to discuss any details with any of the vendors.

Conclusion

Finalizing a final agreement with your selected ERP vendor can be a very challenging proposition.  It is further complicated by the expansive scope, strategic importance, and range of options.  Most companies have not structured or negotiated an agreement of this type in quite awhile or ever before.

With the magnitude and complexity of these agreements, it is very wise to get advisement from somebody that understands the totality of all the components but also has a full understanding of the flexibility the respective vendors have in structuring the final agreement.

Many companies have contacted Ultra Consultants for this guidance.  Please contact us to discuss how we might be able to guide you through the ERP selection process.

Top Considerations for Choosing an ERP Consulting Firm

1. ERP Firm’s Background - Know who you are buying from. Review the list of employees on their website and validate it against the company’s profile and the employees’ personal accounts in LinkedIn. Are they who they say they are? Are they involved in lawsuits? Do they sell software as well as services? These should be big red flags!
2. Consulting Firm’s Experience - What is the experience of the firm with ERP selection or ERP implementation? Ask to see their last 20 projects references, including type of project, date of project completion, and the results.
3. Individual Consultants’ Experience - What is the experience of the consultants in the firm? How new are they to the firm? Are they 1099’s? Ask for a list of employees and then check them out on LinkedIn. How many projects have they worked in your type of project (with that firm)? Are they performing ERP selection vs. business process improvement vs. ERP implementation?  All are related, but certainly different skill-sets.
4. References – What industries do they work with? And what size companies do they work with? References matter, but you need to make sure these are real as well. Confirm that the references are who they say they are on Linked In, and if there are disparaging remarks made about the other consulting firms, confront those firms with the remarks (you may be very surprised).
5. Project Timeline and Scope - Who is going to work the project? Can they name the specific consulting resources? What is the timeline? Can they provide an MS project plan detailing the steps and tasks in their methodology? Does the Project Plan match their PowerPoint and the proposal? Or is it mostly fluff? If they cannot provide details, maybe they really do not do this for a living.
6. Methodology - What is the purpose and/or goal of their methodology and does it fit with their company philosophy? If they use a business process improvement methodology, can you see examples of their work? Can they teach you their BPI methodology? What other education do they offer?
7. Selection Criteria – Are they using a checklist during the ERP selection process? Why? Who fills out the checklist? How do they know that the answers are correct if provided from the ERP vendors? How is the short list determined? When do you get to see the ERP software? Ask for examples of going from a long list to a short list, which vendors were on the list, and why, and how did the client make their final choice?

I could go on, but I think you get the idea here.  There are lot of things to consider before signing contracts with any ERP firms or consultants.  Do your research, educate yourself, and chose wisely.