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ERP Planning ERP Planning: Starting Right with ERP

 
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By Rick Cook

The beginning is notoriously the time when it is most important to get something right. In the case of ERP software the beginning isn’t when you start to run your shiny new application. Instead, the beginning of a successful ERP project comes much earlier than that, when you first start seriously considering your company’s strategy and goals and how ERP software might help you meet them.

  1. Initial Assessment—A first step is to look carefully at where you are and where you want to be. In this assessment managers and executives look at what needs improving in the business. The first part of the process is more about your company and its problems than ERP software and what it can do for you. You want to identify specific goals that you want the company to meet – things like increasing sales X percent, reducing inventory by Y percent, cutting time to ship by Z percent and so on. You want quantifiable figures to go with specific goals. Those numbers should be challenging but doable.

    Incidentally, while this may not be a detailed planning session, you should give some thought to how you're going to achieve those goals. For example, increases in sales can only come from selling more to your existing customers or getting new customers, or some combination of both. Give some thought to specifically how you'll increase sales, so you'll be better able to understand how ERP technology can support those methods. The culmination of this should be a meeting of executives, managers and other key players to discuss the result of the session(s) and modify them if necessary. You want as broad a representation as possible in this meeting to give everyone an opportunity to shoot holes in the plan for the purpose of modifying the plan to make it better.

  2. First-Cut Education—Once you’ve got an idea of where you are and where you want to be, the next step is to get an ERP education in order to familiarize your people with what this application can truly do for your company. This involves one or more training sessions to explain the specifics of Enterprise Resource Planning software and how it may benefit your company. This is also the time to start asking hard questions about how much ERP software will cost and what the advantages or benefits the application should deliver to the company. At this stage you will have only the roughest idea of costs and benefits, but you should make a first pass at working these things out and laying them before the stakeholders. This meeting or series of meetings should involve affected staff from all departments at all levels of the company. Not only do you want as much input as possible, this is the beginning of the process of selling ERP to the people who will implement it and then live with it.

  3. Vision Statement—Out of this assessment process comes a vision statement of what your company’s problems are, what your goals to fix them are and how an ERP application can help you meet these goals. The vision statement needs to be short but specific. If your objective is to reduce inventory by X, the statement should say how ERP and business process change will let you meet that goal. This statement is critical because it guides the next step: The cost/benefit analysis.

  4. Cost/Benefit Analysis—Now comes the fun part. You need to dig into the glittering generalities and attach (semi) firm numbers to each part of the process. You need to figure out how much each part of the implementation (hardware, software, resources, labor, consultants, etc.) is going to cost. You also need to quantify the benefits you expect the changes to deliver. Then you need to calculate the cost each year and the return in benefits in each of those years.

  5. Yes/No Decision—Finally comes the time to make a go/no go decision for implementing ERP software. By this time you should have an excellent idea of what the process will cost you and what you can expect in the way of return. Sometimes the project won’t make sense. The numbers don’t add up and the payoff either never arrives or it is too far in the future to make ERP economically feasible. More often though you’ll find that if the project it properly implemented in a reasonable amount of time you’ll have a payoff surprisingly quickly.

    Occasionally you'll discover that the ROI isn't there if you do a complete ERP implementation at once, but that if you implement incrementally, starting with the pieces that deliver the biggest return, you can make it work. Whichever way it turns out, you’ll be able to make your decision in confidence, knowing you’ve carefully considered all the factors.

    Of course there are still a lot of major decisions and hard work ahead. You’ll notice you haven’t even begun to consider which ERP package you want to invest in. That comes in the next phase. What you will have done at the end of this process is laid a solid foundation you can build on with confidence if you choose to go ahead with the ERP implementation. End

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Sometimes you'll discover that the ROI isn't there if you do a complete ERP implementation at once, but that if you implement incrementally, starting with the pieces that deliver the biggest return, you can make it work.

 

 

 

 

 

 

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