ERP Selection for Manufacturers

You’ve determined that your business is ready to upgrade to an Enterprise Resource Planning (ERP) system. Now, however, you have to determine what ERP solution is best suited for your organization.

ERP selection for manufacturers entails various considerations. On-premise or on cloud? Single vendor ERP suite or best of breed? To customize or not to customize? All of these decisions, and more, will be made during the selection process.

Choosing the right ERP system is critical as it determines the long-term scope of the capabilities and efficiencies you can achieve to ensure you are fully leveraging your investment.

This ERP selection checklist will ease the decision-making process.

Step One: Evaluate your current operations and infrastructure

Before delving into budget and technical requirements, start by assessing what your organization is already doing. This will give you an overview of where ERP can truly be of value to your organization and provide a greater return.

Questions to ask at this stage include:

What work is currently being done? Who is responsible for each task? How long does each task take? What is the frequency?
What is currently not being done? For instance, do you require more traceability or regulatory compliance? What is always shoved to the bottom of the list and why?
What problems are making this work harder than it needs to be?

Next, create a list of your current systems and network capabilities so as you move forward you can evaluate whether an ERP solution will integrate with your existing infrastructure.

Step Two: Create your ERP requirements list

Now that you have evaluated your current organizational needs, it is necessary to prioritize them.

Categorize your requirements into three tiers. Tier one is the must-haves — the essentials that the final ERP solution you choose requires. Tier two is the requirements that are important, but not mandatory. Tier three is the nice-to-haves; those features that would exist in an ideal ERP but are expendable. These tiers will help guide your choice.

During this stage, liaise with key stakeholders such as senior management, department heads, and users to ensure everyone’s requirements are considered. This will help significantly with buy-in and implementation.

Step Three: Determine your upfront budget

The amount an organization is able to spend on an ERP solution is, of course, a major factor in deciding what system to choose. According to a 2019 Software Path report, businesses can expect to spend $7,200 on average for each user of their ERP system over a five-year period, depending on organizational size and the number of users.

The following play a factor in determining the upfront cost:

Whether you choose an ERP suite or best-of-breed (BoB) solution
How the system integrates with your current systems
The age of the technology – if the software is verging on obsolete you will require another upgrade sooner rather than later
Cloud vs. in-house server
Whether you have an in-house IT technician who can maintain the system or require outside support
The integration tools that come with the ERP
Necessary or desired customization

ERP systems are not one-size-fits-all. There many considerations and customizations that can be made to fit your specific needs.

However, the more customizations that are required, often the higher the price tag will be. Consider your budget when determining what customizations are must-haves and what are nice-to-haves. If you are customizing everything, there may be a better solution on the market that meets your needs out of the box.

Step Four: Determine your total cost of ownership

Many ERP systems are used for upwards of ten years, placing importance on considerations of long-term maintenance and support costs.

The following play a factor in the total cost of ownership:

Ongoing maintenance costs
Ongoing support costs
Implementation timeframe and costs
Training time and resources
Data integration and choosing a single source of truth

Take this opportunity to evaluate your expectations for return on investment. The ERP solution you choose should bring efficiencies to your business, which in turn can decrease operational expenses. Ideally, you will also see an increase in revenue by being able to do more with less. The efficiencies that are gained could result in reallocating existing resources to revenue-generating activities.

Step Five: Evaluate your options

Once requirements and budget have been set, evaluating your ERP options will be a much smoother process. You will be able to identify what systems meet your needs, which require more customization, and beyond.

When evaluating software vendors, look for those who have a history of proven experience with your business size and industry. Some vendors will also support implementation, while others will not.

From there, the next steps are to create an implementation strategy, migration plan, and training.

Choosing a Selection Partner

To truly make the most of your selection process and ensure you choose the right ERP for your organization, a partner is essential.

According to a recent Gartner study, teams spend 16.3 months on average to complete a new IT purchase. Gartner also estimates that 55% to 75% of all ERP projects fail to meet their objectives and one of the biggest reasons for that is poor project management. Working with a qualified, experienced partner can significantly reduce this timeframe while ensuring you are doing everything possible to make your ERP project a success.

There is a lot to consider when adopting an ERP solution for manufacturers, especially if it is your organization’s first time using one. You do not have to go it alone or through guesswork. Selection partners or resellers have a track record of proven experience as ERP evaluators and implementors, working with manufacturers of all sizes.

At SHEA Global, we partner with our clients to take them through the ERP selection process from start-to-finish, helping determine their requirements, budget, select a solution, and implement it.