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Scott A. Holter, CPIM April 9, 2014
Getting the Most Out of an ERP
System
The Entrepreneur’s Edge
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Managing the Maintain, Upgrade, or Replace Dilemma for ERP Software
Closing Gaps in Existing ERP Systems
• Functional
• Utilization
• Structural
• Technological
Finding a replacement ERP System
Presentation Outline
2
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• How ERP Systems Lose
Their Effectiveness
• Squeezing More Out of
Your System
• Planning for Replacement
Managing the Maintain, Upgrade, or Replace Dilemma for ERP Software
3
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Requirements and Expectations Change Over Time
• Business Model or Processes Change
• Customers’ Demands Change
• Governmental Agencies and Regulators Demand More
• Knowledge is Lost as Employees Leave
• Poorly Implemented from the Start
Our ERP System Doesn’t Seem to Work as Well as Expected…Why Not?
4
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Distributor acquires a manufacturing business
• New requirements include
– Routings
– MPS/MRP
– Scheduling
– Shop Floor Control
– Quality Management and Control
– Preventative Maintenance
Business Model or Process Changes – Examples from among our clientele
5
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Assembler backward integrates and adds injection molding business
• New requirements include
– Tool / mold management
– Finite scheduling of machines
– Infinite scheduling of labor
– Co-products (multiple products made from one mold)
– By-products (such as re-grind)
Business Model or Process Changes – Examples from among our clientele
6
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Job Shop (Contract) manufacturer launches its own product line
• New Requirements Include
– Standard Costing
– Engineering Change Control
– Complex Pricing routines to support sale of single product to many customers
– Retention-based CRM (rather than opportunity/project-based CRM)
Business Model or Process Changes – Examples from among our clientele
7
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Capital equipment manufacturer begins to service and repair customer’s equipment
• New Requirements include
– Help Desk
– As-Built and As-Maintained BOMs
– Serialized Equipment
– Service quotation and order processing
– Preventative maintenance and other service contracts
– Service technician scheduling, dispatch, and repair orders
– Mobile computing
Business Model or Process Changes – Examples from among our clientele
8
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Domestic manufacturer acquires overseas business unit and increases export sales
• New Requirements include
– Currency translations
– Financial consolidations and eliminations
– Multi-currency quotations, sales orders, and invoices
– Value Added Tax (VAT) charges and collections
– Trade documents produced in foreign languages
– Processing language selectable by user
Business Model or Process Changes – Examples from among our clientele
9
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Large multinational metal processor purchases five (5) small electronics companies around the world
• Tier 1 ERP solution perceived as overkill for new high-tech companies
• New Requirements include
– Smaller, simpler solution
– Language and tax localization for South Korea, UK, and Ontario CN
– Reference designators (“bubble numbers”) tying BOM to drawing
– Serialized components and serialized assemblies
– Revision-controlled perpetual inventory
Business Model or Process Changes – Examples from among our clientele
10
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New requirements include
• E-Commerce and Electronic Data Interchange (EDI) orders
• Consignment and minimum inventory
• Package, box, and container size specs
• Palletization
• Customer-specific labels
• Customer-specific formatted shipping documents and invoices
Customers’ Demands Change
11
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New requirements include
• Certificates of Analysis / Conformance
• Advanced Ship Notices
• Lot, heat, batch, or serial traceability
• Flexible performance (KPI) reporting
• Industry-specific compliance requirements for automotive, medical, aerospace, etc…
Customers’ Demands Change
12
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New requirements include
• Sarbanes Oxley
• Sales and value-added tax compliance
• Dual or foreign language formatted labels and documents
• Underwriters Laboratory
• FDA – Food and Pharmaceutical
• AIAG – Automotive
• EPA – Emissions monitoring and control
Governmental Agencies and Regulators Demand More
13
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• System successfully implemented initially
• Setup and processing rules known mainly by cadre of key employees
• Key employees retire or leave company
• Company loses expertise with current system and processes
System Expertise Leaves with Departing Employees
14
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Transaction processing often implemented without decision support
• Sales Order processing
• Shipments
• Invoicing and Accounts Receivable
• Purchase Order processing
• Receiving
Partially Implemented from The Get Go
15
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Continued…
• Vendor Invoice processing and Accounts Payable
• General Ledger
• Basic BOMs and Routings
• Basic Inventory Control, including Physical Inventory
• Basic Work Order Processing
• Standalone Customer Relationship Management (CRM)
Partially Implemented from The Get Go
16
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Often not or partially implemented
• Quoting
• Estimating
• Engineering Change Control
• APICS Principle-Based Modules
– Master Production Scheduling / Material Requirements Planning
– Capacity Requirements Planning
– Detailed Finite / Infinite Scheduling
– Lot Traceability
– Cycle Counting
Partially Implemented from The Get Go
17
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Often not or partially implemented continued…
• System-Generated Financial Reporting
• Business Intelligence / Analytics
• Quality Management and Control
• Fixed Asset Maintenance Management
• Fixed Asset Accounting
• Workflow Management
• Integrated Customer Relationship Management (CRM)
Partially Implemented from The Get Go
18
Click to add headline Substitutions for Partially Implemented ERP System
19
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ERP Software Results / Scorecard – State of the market
• Standalone quotation and estimating process with limited pipeline visibility
• Slow Engineering Change Order process
• Slow responses to customers with delivery promise dates
• Unreliable delivery promise dates
• Fill rates less than target
• Excess or shortages in finished goods inventory
Partially Implemented from The Get Go
20
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ERP Software Results / Scorecard – State of the market continued…
• Obsolete and suboptimal production schedules
• Extensive management intervention in schedules
• Duplicate entry to maintain Excel-based production schedules
• Duplicate entry of production and labor
• Overtime and idle time in same week
• Part and raw material shortages
• Excessive expediting of parts and raw materials
Partially Implemented from The Get Go
21
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ERP Software Results / Scorecard – State of the market continued…
• Inaccurate perpetual inventory records
• Quality data collection after-the-fact
• Quality data maintained offline with limited visibility
• Maintenance schedules not integrated with production schedules
• Sales personnel “blindsided” from lack of insight into “back office”
Partially Implemented from The Get Go
22
Click to add headline Utilization and Effectiveness of ERP- a Client Example
23
Click to add headline Utilization and Effectiveness of ERP- a Client Example
24
Click to add headline Utilization and Effectiveness of ERP- a Client Example
25
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• Transaction processing / clerical perspective toward systems
• Accounting-driven implementation lets Operations and Sales “off the hook”
• Excel preferred for unstructured work like CRM, quoting, and estimating
• Excel preferred for journal entries and financial reporting
• Information sharing not pursued as a strategy
Reasons for incomplete / partially implemented systems
26
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• Lack of supply chain management foundational knowledge
• Software doesn’t “fit”
– Discrete system for a process manufacturer
– Distribution package for a manufacturer
– No modules for tangential functions leads to point solutions
Reason for incomplete / partially implemented systems
27
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Functionality Gaps
• Upgrade – newer version may provide the feature
• Purchase add-on modules from software publisher/vendor
• Purchase add-on from Independent Software Vendor (e.g. O2 for MAS500)
• Third-party interfaced product (e.g. Preactor or Planet Together for Scheduling)
• Workflow management tools
• Customizations and personalizations done within system tools
• Source code modification – last resort
ERP Software Gaps and How to Close Them
28
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Utilization Gaps
• Provide conceptual/foundational education
• Software training
• Miniature implementation/re-implementation project
– Educate
– Design, Model, and Simulate
– Setup and Prepare
– Train
– Deploy and Monitor
ERP Software Gaps and How to Close Them
29
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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
ERP Software Gaps and How to Close Them
30
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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
ERP Software Gaps and How to Close Them
31
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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
ERP Software Gaps and How to Close Them
32
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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
ERP Software Gaps and How to Close Them
33
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• Functional
• Utilization
• Structural
• Technological
Strategic Benefits of Modern ERP Systems
34
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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
Functional
35
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1. Ancillary/tangential systems frequently part of integrated ERP continued…
• Distribution planning (supply chain)
• Production quality
• Supplier quality
• Maintenance
• Field Service Management
• Production Scheduling
Functional
36
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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)
Functional
37
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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
Functional
38
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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
Functional
39
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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
Utilization
40
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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
Structural
41
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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
Technological
42
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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
Technological
43
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1. Functional
2. Utilization – Ease-of-Adoption
3. Structural
4. Technological
Strategic Benefits Summary
44
Questions / Discussion
Click to add headline Replacing an ERP System
45
Strategies for ERP Replacement
Click to add headline ERP Industry Background
• 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
Click to add headline ERP Industry Background
• 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
Click to add headline ERP Industry Background
• 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
Click to add headline ERP Industry Background
• 21st Century – 2nd 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
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Importance of Choosing
Your ERP Partner
ERP Partner Selection
Click to add headline ERP Partner Selection
• 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
Click to add headline ERP Partner Selection
Decision Dimensions to
Consider
Click to add headline ERP Partner Selection
“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
Click to add headline ERP Partner Selection
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
Click to add headline Strategic: Company-based
1.1 Business and
departmental
1.2 Supply chain
1.3 Manufacturing mode
1.4 Information technology
Click to add headline Strategic: Company-based
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
Click to add headline Strategic: Company-based
Business / departmental
• Strategic Competitive Focus
• Low-cost / low-price
• Product differentiation
• Customer service
• Hybrid
Click to add headline Strategic: Company-based
Supply Chain Model(s) • Engineer-to-order
• Make-to-order
• Configure-to-order
• Assemble-to-order
• Make-to-stock
• Distribution
Material Acquisition
Manufacturing
Distribution
Click to add headline Strategic: Company-based
Manufacturing Mode • Continuous flow process
• Batch process
• Repetitive / rate-based discrete
• Intermittent / batch discrete
• Project / one-off discrete
Click to add headline Strategic: Company-based
Information Technology Continuums • Technology follower / early adopter
Follower Innovator Middle of the Road
Click to add headline Strategic: Company-based
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
Click to add headline Strategic: Partner-based
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 3rd party resources
• Local support – does it matter to you
Click to add headline Strategic: Partner-based
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
Click to add headline Strategic: Partner-based
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
Click to add headline ERP Partner Selection
Sample Client Strategic Profile
Click to add headline Sample Client Profile
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
Click to add headline Sample Client Profile
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
Click to add headline Sample Client Profile
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
Click to add headline Sample Client Profile
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
Click to add headline Sample Client Profile
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
Click to add headline Sample Client Profile
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
Click to add headline Strategic Evaluation
Research
• Trade associations, magazines
• Internet
• Other companies
• Consultants, industry observers
• Software vendors / partners
• See Samples
Click to add headline Strategic Evaluation
Req ID Subtopic Attribute (Short Description)
Client
Priority A B C D E F G H I J K
3 Size and Scope Tier 3 ($30- 70MM) Required Exceptional Exceptional
Above
Average
Above
Average Exceptional Exceptional
Above
Average Exceptional Exceptional
Above
Average Exceptional
4 Size and Scope Tier 2b ($70 - 150MM)
Nice-to-
Have
Above
Average Exceptional Exceptional Exceptional
Above
Average Exceptional
Industry
Standard Exceptional
Above
Average
Industry
Standard
Industry
Standard
10
Manufacturing
Strategy Make-to-Stock Discrete Key
Above
Average
Above
Average Exceptional
Above
Average
Above
Average
Above
Average Exceptional Exceptional Exceptional
Above
Average Exceptional
12
Manufacturing
Strategy
Make-to-Order Discrete (Job
Shop) Key
Above
Average
Above
Average
Below
Average
Industry
Standard Exceptional Exceptional
Industry
Standard
Above
Average
Above
Average Exceptional Exceptional
13
Manufacturing
Strategy Engineer-to-Order Discrete
Nice-to-
Have
Above
Average N/A
Below
Average
Below
Average Exceptional
Above
Average
Above
Average N/A
Above
Average
Above
Average
Industry
Standard
15 IT Strategy Technology Leadership Key
Above
Average Exceptional
Above
Average
Above
Average Exceptional Exceptional Exceptional
Above
Average
Above
Average
Above
Average
Above
Average
16 IT Strategy
IT Staff Technology Self-
Sufficiency Key
Industry
Standard
Industry
Standard
Above
Average
Above
Average Exceptional
Above
Average Exceptional
Above
Average
Above
Average
Above
Average
Above
Average
18 IT Strategy Analytical, Data-Driven Key Exceptional
Above
Average Exceptional
Above
Average
Above
Average Exceptional Exceptional Exceptional Exceptional Exceptional
Above
Average
19 IT Strategy External Collaboration Key
Above
Average Exceptional Exceptional Exceptional
Above
Average
Industry
Standard
Above
Average
Above
Average
Above
Average
Above
Average
Above
Average
25
Industry Specific
Support Automotive Required Exceptional Exceptional Exceptional Exceptional
Above
Average
Industry
Standard N/A
Below
Average
Industry
Standard
Industry
Standard
Industry
Standard
34
Industry Specific
Support Medical Required Exceptional N/A
Industry
Standard N/A
Industry
Standard
Above
Average N/A
Below
Average
Industry
Standard
Below
Average
Below
Average
37
Industry Specific
Support Plastics / Polymers Key Exceptional
Industry
Standard
Industry
Standard
Above
Average
Industry
Standard
Industry
Standard N/A
Below
Average
Industry
Standard
Industry
Standard N/A
39
Industry Specific
Support
Non-Consumable Tooling
Intensive Key Exceptional Exceptional Exceptional Exceptional
Above
Average
Above
Average
Industry
Standard
Industry
Standard
Industry
Standard
Above
Average
Above
Average
Click to add headline Functionality Topics
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
ERP Groups/Topics to Dig Into
Click to add headline Functionality Requirements
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.
Click to add headline Functionality Requirements
Approach 1. Do-it-Yourself
• Online template or “clean sheet of paper”
• Online knowledgebase
2. Consultant facilitator / architect
• Online knowledgebase
• Proprietary tools and knowledgebase
Click to add headline Functionality Requirements
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
Click to add headline Functionality
Requirements
Requirement and Use/Application
Requirement Use / Application in Our Company
Estimate and quote with non-existent items
Win 20% of custom jobs (job shop) 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
Click to add headline Technology Topics
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 Client, Browser, Tablet, Phone)
Integration Tools
Security
Tend to be features, not functions
Click to add headline On-Paper Comparisons
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, applications descriptions?
Consulting firm and online research can be expensive. Are the time savings and quality worth it?
What incentive do vendors have to respond completely and accurately?
Understand consulting firm’s research process
Start with module configuration needs and only most critical, deal-breaker requirements, especially those that are high-degree of difficulty.
Examine samples from prior engagements
Click to add headline Comparison Matrix
Req ID Topic (Client Sort)Subtopic Attribute (Short Description)
Client
Priority A B C D E F G H I J K
778
Manufacturing
Execution Work Order Creation
Conversion of planned orders directly
into work order
Nice-to-
Have Y Y Y Y Y Y Y Y Y Y Y
783
Manufacturing
Execution Work Order Creation
Link a work order to sales order (order
line item/release)
Nice-to-
Have Y Y Y Y Y Y Y Y Y Y Y
785
Manufacturing
Execution Work Order Creation
Warning or hold capability for work
orders with open engineering
changes
Nice-to-
Have N Y N Y T T Y T Y Y N
786
Manufacturing
Execution Work Order Creation
The Work Order maintains both the
quantity to be produced and the
customer's required quantity.
Nice-to-
Have Y Y Y T Y N T T Y Y Y
787
Manufacturing
Execution Work Order Creation
Material availability inquiry at work
order release
Nice-to-
Have Y Y Y Y Y Y Y Y Y Y Y
789
Manufacturing
Execution Work Order Creation
Multiple outputs for a single work
order
Nice-to-
Have Y Y Y Y Y Y Y Y Y Y N
790
Manufacturing
Execution Work Order Creation
Multiple output work order creates
multiple scheduled receipts
Nice-to-
Have Y Y Y Y Y Y Y Y Y Y N
791
Manufacturing
Execution Work Order Creation
Work order release allocates required
components / materials Required Y Y Y Y Y Y Y Y Y Y Y
794
Manufacturing
Execution Work Order Creation Material pick list Required Y Y Y Y Y Y Y Y Y Y Y
797
Manufacturing
Execution Work Order Creation Consolidated material pick list Required T N N Y Y T P T T T N
798
Manufacturing
Execution Work Order Creation Shop traveler for a work order Required Y Y Y Y Y Y Y Y Y Y Y
799
Manufacturing
Execution Work Order Creation Bar-coded pick list and shop traveler Required Y Y 3P Y Y Y Y Y Y Y Y
800
Manufacturing
Execution Work Order Creation
Automatic print of attached / linked
documents and files Required Y Y T N Y P Y T Y Y Y
801
Manufacturing
Execution Work Order Creation
Automatic generation of lot / serial
numbers Required Y Y Y Y Y N Y Y Y Y N
802
Manufacturing
Execution Work Order Creation Automatic print of lot / serial labels Required N Y Y Y T N T T T Y N
Click to add headline Software Evaluation Model
On-Paper Research and Analysis
Proof of Satisfaction to Highest Weighted Requirements
Proof of Concept Demonstration / Workshop
20-30 Candidates
4-6 Candidates
2 Finalists
Winner
Using Functional and Technology Requirements
Click to add headline Software Evaluation
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
Click to add headline Software Evaluation
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
Click to add headline Software Evaluation
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
Click to add headline Software Evaluation
Software Demonstration Types
• Vendors’ overview demo
• Prequalification / Pre-screen
• Scripted Day-in-the-Life
• Proof-of-concept workshop
Click to add headline Software Evaluation
# 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
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Cost Dimensions
to ERP Purchase
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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
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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
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Implementation and On-Going Support
Dimensions
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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
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Partner Source Considerations
• Vendor – Local? Cost? Available?
• VAR – Local? Quality?
• Other 3rd parties – Quality?
• Independents – Current? Local?
• Combination model often win-win
• Validate with customers
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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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Internal Resource Considerations • Skills to retain in house or outsource – initial and on-going
• Choose a vendor that fits with your strategic spot on the continuum
• Validate your choice with other companies
Do It Yourself Combination Consultant Driven
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On-Going Support Options • Direct vendors typically include phone tech support
in annual assurance fee
• Phone support is not the same as consulting
• Vendors that sell through resellers generally do not offer phone / tech support
• Resellers typically offer phone support as an add-on service at additional cost
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Decision Dimensions
• Series of hurdles or filters
• Quantitative and qualitative
• Objective and subjective
• Cannot put a weight on each dimension, compute scores, and let math pick the winner
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Decision Dimensions
Qualifier Dimensions Winner Dimensions
Strategic – Company Based Functionality
Strategic – Vendor Based Technology
Cost of Acquisition Implementation Approach and Resources
On-Going Support
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