ERP Software Gaps and How to Click to add headline Close Them Structural Gaps Short- and intermediate-term workarounds, at best • Multiple Companies – set up separate databases/installations • Multiple Plants – set up each plant as a separate company/database/installation • Multiple Warehouses – set up as locations; replenishment planning and transfers done outside the system 30
ERP Software Gaps and How to Click to add headline Close Them Structural Gaps continued… • Multiple Currencies – currency translations done outside the system • Multiple Languages – run separate system in foreign country • Chart of Accounts, Item Numbering, Customer IDs, Vendor IDs – adopt system convention • Inventory/COGS Costing Methodology – adapt to costing systems supported 31
ERP Software Gaps and How to Click to add headline Close Them Technology Gaps (short- and intermediate-term workarounds, at best) • Symptoms – Unable to collaborate with customers and suppliers electronically – Reporting and information access weaknesses – Lack of analytics and graphical reporting – Lack of interaction with Office tools like Excel or Outlook – Limited remote connectivity options – Inflexible – Slow processing speed 32
ERP Software Gaps and How to Click to add headline Close Them Technology Gaps (short- and intermediate-term workarounds, at best) • Solutions are Stop-Gap Only; if weakness is strategic, replacement is likely – Web-based collaboration tools – Port to a modern database – ODBC connections to allow report-writer access – Data warehouse – Citrix or Terminal Server for remote access 33
Strategic Benefits of Modern Click to add headline ERP Systems • Functional • Utilization • Structural • Technological 34
Functional Click to add headline 1. Ancillary/tangential systems frequently part of integrated ERP • Marketing • Sales activity tracking • Opportunity management • Quoting and estimating • Graphical, engineering configurator • New product development projects • Engineering Change Control 35
Functional Click to add headline 1. Ancillary/tangential systems frequently part of integrated ERP continued… • Distribution planning (supply chain) • Production quality • Supplier quality • Maintenance • Field Service Management • Production Scheduling 36
Functional Click to add headline 2. Flexibility to support multiple modes of manufacturing in single system • Make to stock (according to forecast) • Make to order • Engineer to order (according to design/project) • Process/formulation-based • Alternate BOMs and Alternate Routings • Subcontract processing • Product-specific costing methods (some standard, some actual) 37
Functional Click to add headline 3. Customer and Supplier Portals to: – Request quotations – Place orders – Report problems – Request help 4. Inventory Control and Traceability – Lot and sublot tracking – Graded inventory – Dimensional inventory – Consigned inventory – Quality/quarantined inventory 38
Functional Click to add headline 5. Shipping Documentation – Packing slips and bills of lading – Export documents – Quality documents 6. Improved Cost Accounting – Multiple methods – More cost elements/buckets – What-If cost simulations 7. Improved Credit Management 8. Faster period close processing 39
Utilization Click to add headline Increased utilization due to: • More intuitive • More user support structures for self-help • User-friendliness • Flexibility to “have it your way” • Screens and transactions look familiar to users – Standard Windows layouts similar to Outlook, Excel, etc. – Browser and Web Page orientation 40
Structural Click to add headline 1. Most ERP systems, even Tier 3, are: – Multi-company – Multi-currency 2. Shared records among related companies and/or plants – Shared item master – Shared BOMs and Routings – Shared customers – Shared suppliers 41
Technological Click to add headline 1. Remote access through – Web browser – Terminal services/Citrix – Tablet and smartphone apps – Integration with Email 2. Interactive workbenches replace paper reports 3. Object Linking and Embedding 4. Document management 5. Flexible report writing and analytics 42
Technological Click to add headline 6. Customization infrastructure to: • Add fields • Add screens • Add processing 7. Software as a Service 8. Alerts and notifications 9. Workflow management tools 10.Handheld and Touchscreen for non-office users 43
Strategic Benefits Summary Click to add headline 1. Functional 2. Utilization – Ease-of-Adoption 3. Structural 4. Technological Questions / Discussion 44
Replacing an ERP System Click to add headline Strategies for ERP Replacement 45
Meaden & Moore Click to add headline ERP Software Brief History
ERP Industry Background Click to add headline • Pre-1990s Manufacturing Software – Accounting software packages for mainframes and minis – Separate MRP and Job Shop packages for operations – Heavily customized in most instances – Complimentary custom applications developed internally – hard-coded or using tools like dBase
ERP Industry Background Click to add headline • Early 1990s through 2000s – Enterprise Resource Planning conceived – ERP unites accounting, operations, and others – Thousands of custom developers attempt to brand/“package” their software for re -sale – Industry and software company consolidation accelerates but new ones emerge – Environment changes over time: mainframes, minis, fat client-server networks, thin-client and browser-based applications
ERP Industry Background Click to add headline • Early 1990s through 2000s – Software management trend – Custom applications dwindle, remain – Modifying packages’ source code comes and (mostly) goes – Plain-vanilla implementation strategy – Customization and personalization strategy emerges
ERP Industry Background Click to add headline • 21 st Century – 2 nd Decade – Dozens (100+) viable ERP software vendors remain – Most have carved out target markets based on size, scope, industry, or niche features – 5-25 competitors in a target market – Continuum of integration: fully-integrated ERP to core plus best-of-breed. – Vast differences in technology, sophistication, rigidity, and cost to own
ERP Partner Selection Click to add headline Importance of Choosing Your ERP Partner
ERP Partner Selection Click to add headline • ERP Vendor/Partner is a strategic choice that: – Touches virtually every aspect of a manufacturing business – Is a marriage – With rocky relations, at times – Where divorces are painful and expensive – That requires a careful courtship – Requires executive leadership and mid-level management and staff support and input
ERP Partner Selection Click to add headline Decision Dimensions to Consider
ERP Partner Selection Click to add headline “He who knows others is wise; He who knows himself is enlightened.” - Chan As applied to ERP – know what you want from ERP before going shopping
ERP Partner Selection Click to add headline 1. Strategic Factors – Company-based 2. Strategic Factors – Partner-based 3. Features / Functionality 4. Technology 5. Cost of Acquisition and Ownership 6. Initial Implementation and Long-Term Support Approach
Strategic: Company-based Click to add headline 1.1 Business and departmental 1.2 Supply chain 1.3 Manufacturing mode 1.4 Information technology
Strategic: Company-based Click to add headline Business / departmental • Size (revenue, employees) • Tier 1 - $250MM - $1B • Tier 2A – $75 - $500MM • Tier 2B - $30 - $150MM • Tier 3 - $15 - $75MM • Tier 4 - $5 - $30MM • Tier 5 - $0 – 10MM
Strategic: Company-based Click to add headline Business / departmental • Strategic Competitive Focus • Low-cost / low-price • Product differentiation • Customer service • Hybrid
Strategic: Company-based Click to add headline Supply Chain Model(s) Material Acquisition • Engineer-to-order • Make-to-order • Manufacturing Configure-to-order • Assemble-to-order • Make-to-stock Distribution • Distribution
Strategic: Company-based Click to add headline Manufacturing Mode • Continuous flow process • Batch process • Repetitive / rate-based discrete • Intermittent / batch discrete • Project / one-off discrete
Strategic: Company-based Click to add headline Information Technology Continuums • Technology follower / early adopter Middle of Follower Innovator the Road
Strategic: Company-based Click to add headline Other IT Continuums IT Staff: Self-sufficiency to • outsourced service End-user autonomy / rigidity • Data-based / intuition-based • decision-making Customer and supplier collaboration • and interchange intensity
ERP Partner Selection Click to add headline Partner (Vendor) Dimensions
Strategic: Partner-based Click to add headline Vendor Criteria Continuums • Vendor size and reach – large multi-national to boutique shop • Industry / niche specialization • Single source to best-of-breed approach • Availability of 3 rd party resources • Local support – does it matter to you
Strategic: Partner-based Click to add headline Vendor Criteria Continuums • Vendor Viability • Strong financials and longevity are important but don’t prevent acquisition • Even acquirers become targets • Independents resist more than publics
Strategic: Partner-based Click to add headline Vendor Criteria Continuums • Product Viability • Strong, modern, and accepted technology increases odds of life after acquisition • Large installed base (500-1,000+) increases odds of on-going support post-acquisition
ERP Partner Selection Click to add headline Sample Client Strategic Profile
Sample Client Profile Click to add headline Strategic, company-based factors • $50MM annual revenue, 250 employees with plans to grow 2-3X next decade • Intermittent, discrete manufacturer with 75% MTO and 25% MTS • Compete based on low cost/price and don’t need a high-end ERP solution
Sample Client Profile Click to add headline Strategic, company-based factors • More of a technology follower – just want stable and reliable technology • 1-2 person IT staff forces them to rely on outsider expertise to manage our system • Extensive quote and order exchange with customers
Sample Client Profile Click to add headline Strategic, partner-based factors • Open to any sized software vendor but must have a 10-year history as a going concern • Open to reseller or direct-sale channel provided there’s strong local (100 miles) support
Sample Client Profile Click to add headline Strategic, partner-based factors • Prefer a vendor that specializes in or has numerous metal fabrication shops as customers • Core ERP functions must be owned and maintained by vendor, but open to interfaced products for reporting, analytics, asset management, and CRM
Sample Client Profile Click to add headline Using the strategic requirements • Enable a company to reduce the potential list of candidates to 20-30 • Enable an experienced consultant to reduce the potential candidates to an even shorter list
Sample Client Profile Click to add headline Using the strategic requirements • Framework for functionality and technology requirements • Those become implementation vision or checklist, so don’t skip next step • Framework for implementation approach and on-going support preferences
Strategic Evaluation Click to add headline Research • Trade associations, magazines • Internet • Other companies • Consultants, industry observers • Software vendors / partners • See Samples
Strategic Evaluation Click to add headline Client Priority A B C D E F G H I J K Req ID Subtopic Attribute (Short Description) Above Above Above Above 3 Size and Scope Tier 3 ($30- 70MM) Required Exceptional Exceptional Average Average Exceptional Exceptional Average Exceptional Exceptional Average Exceptional Nice-to- Above Above Industry Above Industry Industry 4 Size and Scope Tier 2b ($70 - 150MM) Have Average Exceptional Exceptional Exceptional Average Exceptional Standard Exceptional Average Standard Standard Manufacturing Above Above Above Above Above Above 10 Strategy Make-to-Stock Discrete Key Average Average Exceptional Average Average Average Exceptional Exceptional Exceptional Average Exceptional Manufacturing Make-to-Order Discrete (Job Above Above Below Industry Industry Above Above 12 Strategy Shop) Key Average Average Average Standard Exceptional Exceptional Standard Average Average Exceptional Exceptional Manufacturing Nice-to- Above Below Below Above Above Above Above Industry 13 Strategy Engineer-to-Order Discrete Have Average N/A Average Average Exceptional Average Average N/A Average Average Standard Above Above Above Above Above Above Above 15 IT Strategy Technology Leadership Key Average Exceptional Average Average Exceptional Exceptional Exceptional Average Average Average Average IT Staff Technology Self- Industry Industry Above Above Above Above Above Above Above 16 IT Strategy Sufficiency Key Standard Standard Average Average Exceptional Average Exceptional Average Average Average Average Above Above Above Above 18 IT Strategy Analytical, Data-Driven Key Exceptional Average Exceptional Average Average Exceptional Exceptional Exceptional Exceptional Exceptional Average Above Above Industry Above Above Above Above Above 19 IT Strategy External Collaboration Key Average Exceptional Exceptional Exceptional Average Standard Average Average Average Average Average Industry Specific Above Industry Below Industry Industry Industry 25 Support Automotive Required Exceptional Exceptional Exceptional Exceptional Average Standard N/A Average Standard Standard Standard Industry Specific Industry Industry Above Below Industry Below Below 34 Support Medical Required Exceptional N/A Standard N/A Standard Average N/A Average Standard Average Average Industry Specific Industry Industry Above Industry Industry Below Industry Industry 37 Support Plastics / Polymers Key Exceptional Standard Standard Average Standard Standard N/A Average Standard Standard N/A Industry Specific Non-Consumable Tooling Above Above Industry Industry Industry Above Above 39 Support Intensive Key Exceptional Exceptional Exceptional Exceptional Average Average Standard Standard Standard Average Average
ERP Partner Selection Click to add headline Functionality Requirements
Functionality Topics Click to add headline ERP Groups/Topics to Dig Into Marketing Management Process Master Data Asset Maintenance Sales Automation Sales Forecasting Purchasing Quoting and Estimating Dist’n. Planning/Control Receiving Sales Order Processing Master Prod. Scheduling Inventory Control Shipment Processing Material Req’s. Planning Cost Accounting Post-Sales Service Production Scheduling Accounts Payable Product Master Data Shop Floor Control Accounts Receivable Project Management Quality Management GL / Financial Reporting
Functionality Requirements Click to add headline Functionality requirements building • Typically 50-100 requirements per topic • Include master files and transactions • Should be weighted relatively (High, Medium, Low, etc.) • Require input mainly from users • Consider future needs, not just current, so executives must be involved • Use industry accepted terminology from GAAP, APICS, etc.
Functionality Requirements Click to add headline Approach 1. Do-it-Yourself • Online template or “clean sheet of paper” • Online knowledgebase 2. Consultant facilitator / architect • Online knowledgebase • Proprietary tools and knowledgebase
Functionality Requirements Click to add headline Approach 3. Review Your Business Processes Supported by • Current package(s) • Custom software • Reports • Excel spreadsheets and Access db’s • Manual systems – log books • Include the basics; focus on what’s unique
Functionality Click to add headline Requirements Requirement and Use/Application Requirement Use / Application in Our Company Estimate and quote with non-existent Win 20% of custom jobs (job shop) items and don’t want to set them up Link a Shop Order to a Sales Order For our MTO jobs, print customer information on shop documents Forecasting with seasonality model Products sold to construction market (25% of our revenue) are seasonal Scheduling groups like work together Sequence paint line by color Sequence presses by raw material Record production of co-products Many family dies produce more than 1 item when run (left side / right side) Multiple costing methods within plant Product line ABC costed at standard Product line XYZ costed at actual Consolidated cash application Large corporate customers central AP pays invoices for multiple customers
ERP Partner Selection Click to add headline Technology Requirements
Technology Topics Click to add headline Tend to be features, not functions User Interface Query and Reporting Tools Document Management Business Analytics Training Aids and Help Simple Personalization Tools Database(s) Advanced Customization Tools Network Operating System(s) Workflow Management End-User Access (Fat Client, Thin Integration Tools Client, Browser, Tablet, Phone) Security
On-Paper Comparisons Click to add headline Approaches to Getting Answers Solicit Responses from Vendors Utilize Online or Consulting Firm KB Lowest internal cost alternative Best option if engaging a consultant Will the vendors understand the requirements, Consulting firm and online research can be applications descriptions? expensive. Are the time savings and quality worth it? What incentive do vendors have to respond Understand consulting firm’s research process completely and accurately? Start with module configuration needs and Examine samples from prior engagements only most critical, deal-breaker requirements, especially those that are high-degree of difficulty.
Many Ways to “Yes” Click to add headline
Comparison Matrix Click to add headline Client A B C D E F G H I J K Priority Req ID Topic (Client Sort Subtopic Attribute (Short Description) Manufacturing Nice-to- Conversion of planned orders directly 778 Execution Work Order Creation into work order Have Y Y Y Y Y Y Y Y Y Y Y Manufacturing Nice-to- Link a work order to sales order (order 783 Execution Have Y Y Y Y Y Y Y Y Y Y Y Work Order Creation line item/release) Warning or hold capability for work Manufacturing Nice-to- orders with open engineering 785 Execution Work Order Creation changes Have N Y N Y T T Y T Y Y N The Work Order maintains both the Manufacturing Nice-to- quantity to be produced and the 786 Execution Have Y Y Y T Y N T T Y Y Y Work Order Creation customer's required quantity. Manufacturing Nice-to- Material availability inquiry at work 787 Execution Work Order Creation order release Have Y Y Y Y Y Y Y Y Y Y Y Manufacturing Nice-to- Multiple outputs for a single work 789 Execution Have Y Y Y Y Y Y Y Y Y Y N Work Order Creation order Manufacturing Nice-to- Multiple output work order creates 790 Execution Work Order Creation multiple scheduled receipts Have Y Y Y Y Y Y Y Y Y Y N Manufacturing Work order release allocates required 791 Execution Required Y Y Y Y Y Y Y Y Y Y Y Work Order Creation components / materials Manufacturing 794 Execution Required Y Y Y Y Y Y Y Y Y Y Y Work Order Creation Material pick list Manufacturing 797 Execution Required T N N Y Y T P T T T N Work Order Creation Consolidated material pick list Manufacturing 798 Execution Required Y Y Y Y Y Y Y Y Y Y Y Work Order Creation Shop traveler for a work order Manufacturing Bar-coded pick list and shop traveler Required Y Y 3P Y Y Y Y Y Y Y Y 799 Execution Work Order Creation Manufacturing Automatic print of attached / linked 800 Execution Required Y Y T N Y P Y T Y Y Y Work Order Creation documents and files Manufacturing Automatic generation of lot / serial Y Y Y Y Y N Y Y Y Y N 801 Execution Work Order Creation numbers Required Manufacturing 802 Execution Required N Y Y Y T N T T T Y N Work Order Creation Automatic print of lot / serial labels
Software Evaluation Model Click to add headline Using Functional and Technology Requirements 20-30 Candidates On-Paper Research and Analysis 4-6 Candidates Proof of Satisfaction to Highest Weighted Requirements 2 Finalists Proof of Concept Demonstration / Workshop Winner
ERP Partner Selection Click to add headline Evaluating the Software
Software Evaluation Click to add headline Demonstrations provide • For evaluation of qualitative factors (user- friendliness, flow, and integration) • Quality test of “Yes” responses • Opportunity to assess acceptability of workarounds, tailoring, and customizations • Opportunity to gain employee buy-in for change that’s coming
Software Evaluation Click to add headline Software Demo Preparation • Define your own agenda, but assist vendors with preparation – minimize curve balls • Communicate agenda internally to all attendees • Allow vendors to visit your facility • Provide them with sample data • Give vendors 2-4 weeks to prepare • Ensure vendors are clear on contents
Software Evaluation Click to add headline Software Demo Conduct • Keep all internal attendees on script – questions need to be timed • Let the vendor present – seek first to understand, then to be understood • Document issues and fit mismatches quickly and move on • Observe, don’t pilot test or implement
Software Evaluation Click to add headline Software Demonstration Types • Vendors’ overview demo • Prequalification / Pre-screen • Scripted Day-in-the-Life • Proof-of-concept workshop
Software Evaluation Click to add headline # Demonstration Scenario A B C D 1 Technology, Navigation and User Friendliness 57.00 50.00 54.00 55.00 2 Alert/notifications and workflow 52.00 46.00 56.00 46.00 3 Centralized item master 42.00 37.00 48.00 39.00 4 Engineering change control 49.00 39.00 31.00 49.00 5 Customer quote / order management 45.00 32.00 37.00 28.00 6 Serialization 28.00 37.00 40.00 37.00 7 Multiple plants 38.00 37.00 37.00 38.00 8 Incoming inspection and quality control 39.00 36.00 37.00 49.00 9 Product structure variables 41.00 38.00 28.00 36.00 10 Shipping, including Data Collection 18.00 34.00 32.00 44.00 11 Service and Repair 41.00 33.00 30.00 52.00 12 Customer Demand / Forecasting Management / MRP 34.00 29.00 30.00 38.00 13 Costing / Cost Accounting 17.00 10.00 15.00 32.00 14 Purchase order flow 31.00 28.00 27.00 48.00 15 Production Scheduling and Control 32.00 23.00 30.00 33.00 16 Customer Relationship Management 28.00 31.00 26.00 37.00 Total Score 592.00 540.00 558.00 661.00
ERP Partner Selection Click to add headline Cost Dimensions to ERP Purchase
Cost Evaluation Click to add headline Software Cost Components Traditional On-Premise or Hosted Model Software-as-a-Service Model Infrastructure N/A User Devices (handhelds) User Devices (handhelds) Specialty Hardware (printers) Specialty Hardware (printers) Software Licenses N/A Lower Assurance and Support Higher Assurance and Support Implementation Services Implementation Services Staff Costs Lower Staff Costs
Software Evaluation Click to add headline General Observations on ERP Costs • Software licenses are close within a market segment vendor-to-vendor • Different cost structures than manufacturers • Multiple demonstrations and antagonistic interactions and negotiations can increase buyer’s costs • Timing means a lot, but not everything • Niche leaders have pricing power • Large, stable vendors have pricing power • Conclusion – costs are more useful when picking semi- finalists, not finalists or winner
ERP Partner Selection Click to add headline Implementation and On-Going Support Dimensions
Software Evaluation Click to add headline ERP Implementation Observations • Companies are attempting to implement more features and capabilities than in the past • Business software has become more flexible – no longer “install, convert data, train, go - live” • Companies’ personnel are already taxed running the day -to- day • Consulting costs have gone up as software costs have come down • ERP is a buffet – be conscious and realistic of what you can digest over a reasonable timeframe
Software Evaluation Click to add headline Partner Source Considerations • Vendor – Local? Cost? Available? • VAR – Local? Quality? • Other 3 rd parties – Quality? • Independents – Current? Local? • Combination model often win-win • Validate with customers
Software Evaluation Click to add headline Implementation Sequence • Conflict between time-to-benefit and time required per day/week • Implement what was purchased – “All In” • Phased approach to minimize disruption • By module or feature • By location or department • Companies need to compare software vendors’ approaches with preferred strategy and confirm with customers
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