ERP system selection methodology: Difference between revisions

Revision as of 20:49, 7 March 2017

Revision as of 21:47, 7 March 2017

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Because implementation of a new ERP system "requires people to do their job differently" (Wallace and Kremzar<ref name="MakingItHappen"/>), it is very important to understand user requirements, not only for current processes, but also future processes (i.e., before and after the new system is installed). Without detailed user requirements, review of systems for functional best-fit rarely succeeds. The requirements must go into sufficient detail for complex processes, or processes that may be unique to a particular business.

;Reliance on Vendorvendor demos

Relying only on Vendor demos can be sometimes costly to the organization. Organization should hire ERP Consultants and experts before going for ERP system selection. Vendor demonstrations tend to focus on very simplistic processes. A typical demonstration shows an ideal [[order to cash]] process where a customer orders a quantity of product that is in stock. The reality in most businesses is that most customers have varying and more complex commercial arrangements, and products are not always in stock.

;Over-emphasis on system cost

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;Selection bias

It is not unusual that the decision on which system to purchase is made by one individual or by one department within the company who/which does not posses the entire knowledge of workings of the company and the problems faced by them. In these situations, an ERP system that may be excellent at one function but weak at other processes may be imposed on the entire enterprise with serious consequences for the business.

;Failure to use objective professional services

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;Inability to understand offering by ERP vendor

"It is estimated that approximately 90% of enterprise system implementations are late or over budget".<ref>Martin, M., 'An ERP Strategy', ''[[Fortune magazine|Fortune]]'', 2 February 1998, pages 95–97.</ref> A plausible explanation for implementations being late and over budget is that the company did not understand the offering by the vendor before the contract was signed.{{Citation needed|date=September 2010}} A typical example of this would be the scenario where a vendor may offer 5 days of services for the purpose of [[data migration]]. The reality is that there is a huge amount of work required to input data onto a new system. The vendor will import the data into the new system but expects the company to put the data into a file that is easy to import into the system. The company are also expected to extract the data from the old system; clean the data and add new data that is required by the new system. "ERP, to be successful, requires levels of data integrity far higher than most companies have ever achieved – or even considered. Inventory records, [[bill of materials]] (BOM), formulas, recipes, routings, and other data need to become highly accurate, complete and properly structured".<ref name="MakingItHappen">Thomas F. Wallace and Michael H. Kremzar, ''ERP: Making it Happen''. ISBN 0-471-39201-4.</ref> This typical scenario is one of many issues that cause implementations to be delayed and invariably lead to requests for more resources.

;Focus on added features/flashiness

Don’t let ERP providers distract you with flashy, over-the-top features, it’s often a plot to get you distracted from the cost or other necessary features that may be missing. While extra “stuff” is great, it’s imperative to look at your business’s wants and needs. Establish the needs, then add the wants if possible. Ask questions throughout the vendor selection process to avoid getting distracted by any additional, unnecessary features. Keep digging and learning more about the vendor to find out exactly what they offer for a price; many added features cost extra, so you’ll need to find that out as well.<ref>"http://www.workwisellc.com/erp-selection-mistakes-to-avoid"</ref>

== A proper system selection methodology ==

To address the common mistakes that lead to a poor system selection it is important to apply key principles to the process, some of which are listed below:

;Business Process Evaluation

It is important to evaluate the ERP system with current business process within the organization. The system should be able to integrate all functions and should give insights about the current as well as future state of business process. The organization should first look closely to its business process requirements and then proceed to select the ERP system.

;Structured approach

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;Objective decision process

"Choosing which ERP to use is a complex decision that has significant economic consequences, thus it requires a multi-criterion approach.".<ref>Oyku Alanbay, 'ERP Selection using Expert Choice Software', ''ISAHP 2005'', Honolulu, Hawaii, July 8–10, 2005.</ref> There are two key points to note when the major decision makers are agreeing on selection criteria that will be used in evaluating potential vendors. Firstly, the criteria and the scoring system must be agreed in advance prior to viewing any potential systems. The criteria must be wide-ranging and decided upon by as many objective people as possible within and external to the enterprise. In no circumstance should people with affiliations to one or more systems be allowed to advise in this regard.

;Dedicated personnel to select and implement ERP package.

It is advisable to put together a team that has some expertise in selection and implementation of the ERP package. This will ensure smooth transition of the company and would also help the company to clear any doubts regarding various aspects of the ERP package.This team can work with the ERP consultants to efficiently carry out the business processes.

;Full involvement by all personnel