ERP Planning and Implementation

Implementing an ERP requires careful planning:  Business process modeling drives the requirements elicitation and is the key to acquiring, communicating, and validating enterprise knowledge and business requirements.  Two key ideas to keep in mind when implementing an ERP are: Information systems are part of a company infrastructure, and therefore are strategic to the company's survival and success.  The company should believe in and support the changes of the newly implemented system.  User involvement is critical in gaining a more in depth understanding of business needs and preferences, which will help improve business efficiency and productivity and increases the likelihood of them “buying into” the changes (and even becoming its staunch supporters).  Second:  ERP and information systems are there to support business functions and increase productivity, not the reverse.  The driver for an ERP implementation should be to increase a company's competitiveness, not the adoption of a new religion that bends or distorts how a company conducts its business.

Defining an ERP             
What is an ERP?  ERP stands for enterprise resource planning which is business management software, typically a suite of integrated applications that collect, store, manage, and interpret data from product planning, manufacturing, service delivery, marketing and sales, inventory management, and many other business activities.  It is designed to meet the needs of a range of industries, including the financial sector, healthcare, manufacturing and distribution, retail and many other businesses.  (There are dozens of ERP systems currently on the market, each with varying levels of capabilities and selecting the appropriate one for your organization requires a great deal of thought and planning. This topic will be addressed in a future article.) Enterprise resource planning software offers several benefits that contribute to your bottom line: improved employee productivity, streamlined business processes, and lower cost of operations.

ERP applications present an integrated, comprehensive view of essential business processes, often as they take place (in real-time), using common databases maintained by a database management system.  ERP software for business process management streamlines operations and improves productivity by integrating product planning, development, manufacturing, marketing, and sales.  It allows use of a system of integrated applications to manage businesses and automate many back-office services.  ERP databases share information across multiple departments and interconnects applications for specific business processes. These applications facilitate information flow for all business functions and manages exterior stake-holder connections. These systems are vital to business organizations because they integrate varied functions; coordinate transactions and track business resources and commitments.  ERP systems run on various computer hardware and network configurations with database repositories.  ERP software typically consists of multiple software modules developed individually for what best meets specific needs and technical capabilities. 

ERP Modules

Some of the most common ERP modules are those for product planning, material purchasing, inventory control, distribution, accounting, marketing, finance, and human resources.  ERP systems provide a central repository for information shared by all to improve communication of data across the entire organization.  Each ERP module focuses on one business area, product development or marketing, for example, while managing back-office activities and tasks including (in no particular order): One, Supply Chain Management (SCM); Two, Customer Relationship Management (CRM); Three, Sales; Four, Procurement (SRM); Five, Production (PLM); Six, Distribution (SCM); Seven, Accounting; Eight, Human Resources (HR); Nine, Corporate Governance; Ten, Business Intelligence (BI); Eleven, Enterprise Asset Management; and Twelve, E-Commerce.

Planning Ahead
As with any implementation, meticulous preparation is needed along with realistic goals and promises.  The key is to not over-promise and under-deliver.  Fifteen of the biggest mistakes to avoid include: One, the lack of top management commitment; Two, inadequate requirements definition; Three, poor ERP package selection (a topic for a future article); Four, inadequate resource allocation for the project; Five, running over budget by unconscionable variances;  Six, ill-advised cost cutting;  Seven, resistance to change/lack of buy-in;   Eight, miscalculation of time and effort;  Nine, misfit of application software with business processes;  Ten, unrealistic expectation of benefits and ROI;  Eleven, inadequate training and education;  Twelve, poor project design and management; Thirteen, poor communications; Fourteen, grinding the organization to a turtle pace, or the severest of all consequences;  Fifteen, stopping production and/or not delivering orders to your customers. 

Managing the ERP implementation complexity
To manage the ERP implementation complexity, it is best to divide the ERP project into sub-projects based upon the modules, each ideally having a dedicated team involved in the requirements elicitation. A thorough operations and workflow analysis of all the functional areas as well as an understanding of the needs and preferences of multiple stakeholders is vital for a successful implementation.  The documented requirements should be as specific as possible.  Any vague descriptions or goals could lead to problems down the line.  Some people may know exactly what they want, but if it is not described in detail, they run the risk of not getting what they want.  A system should not only match the requirements but also fulfill the needs of the company.  Being as technically precise as possible is a key characteristic of good requirements.

Special Considerations

When creating an ERP, careful consideration should be given to the following (but not limited to): One, a defined workflow should be created that makes data movement seamless. Two, the creation of a common database or multiple shared databases should be made accessible through all applications.  Three, an integrated system operating in or near actual real time without any reliance on periodic updates should be used.  Four, in determining the database and information management software structure, does the client want a single central or multiple interconnected databases with data flow to and from all?  Five, deciding upon the location of the database hosts: should it local, remote, or cloud-based?  Six, there should be a consistent look and feel across modules, and the ease of navigation of the user interfaces.  Seven, when planning for future system modifications, the scalability, customization, and the easy integration of additional modules as needed should be considered.  Eight, the applications, and interfaces should be created with suitable read-only or edit access controls to process data.  Nine, when a writer submits content for review, a safeguard should be in place only allowing the editor access to it to prevent duplication and conflict.  Ten, workflow management should entail data updates and actions following a logical sequence based on business needs.  Eleven, search and report utilities should be created.  Twelve, report generation should be made available in either dashboard form or data-editing applications like spreadsheets on management, department, team, and individual levels. Thirteen, decisions about the type of communication in the ERP system should be made: automated mail generation, instant messaging, chat, and/or general broadcasts at individual and group levels?

Functional Requirements Drive ERP Solutions.              
Functional requirements drive qualified ERP solutions.  The requirements for an ERP system tend to change based upon the industry they serve.  What’s clear here is this: it is very important to understand your functional requirements so you can make good assessments of which ERP software solution can indeed satisfy your demands.  The consequences of making a poor software selection will lead to a major drain of scarce company resources.  Functional specification weights should be assigned relative to the importance — or business value — of the underlying business process.  For our systems selection, the following four-point scale to weight functional specifications should be used: Four: Required and cannot be worked around. Three: Required, but can be worked around if missing.  Two: Nice-to-have.  One: Future use.

Conclusions

In this article, I put forth a general overview of the ERP planning process. More specifically, I have defined an ERP, briefly discussed the potential ERP Modules, highlighted the importance of planning ahead along with managing the ERP implementation complexity, provided special considerations for the process, and discussed how the functional requirements drive ERP solutions as well as how to prioritize these requirements.  

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