ERP system selection methodology: Difference between revisions

Revision as of 12:38, 16 March 2017

Revision as of 10:32, 8 June 2017

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Irrespective of whether the company is a multi-national, multi-million dollar organization or a small company with single digit million turnover, the goal of system selection is to source a system that can provide functionality for all of the business processes; that will get complete user acceptance; management approval and, most importantly, can provide significant [[return on investment]] for the [[shareholders]].

Since the mid-1970s, when there was widespread introduction of computer packages into leading companies to assist in [[material requirements planning]], software companies have striven,<ref>Orlicky's material requirements planning by Joseph Orlicky, George W. Plossi 1994 {{ISBN |0-07-050459-8}}</ref> and for the most part succeeded, to create packages that assist in all aspects of running a business from [[manufacturing]]; [[supply chain management]]; [[human resources]]; through to financials. This led to the evolution of ERP Systems.

Accordingly, a significant number of packages purporting to be ERP systems have entered into the marketplace since 1990.<ref>Daniel Edmund O'Leary, ''Enterprise resource planning systems: systems, life cycle, electronic commerce, and risk'', [[Cambridge University Press]], 2000. {{ISBN |0-521-79152-9}}.</ref> There are packages at the upper end of the market and a vast quantity of other packages that vendors claim to be ERP Systems. There are also packages that claim to be best of breed for certain processes [such as planning] and sold merely as an add-on to an ERP System. The options are many and this, in reality, creates a problem for the company who has to make a decision.

The complexity of selecting an ERP system is further exacerbated by the fact that some systems are geared for discrete manufacturing environment where a distinct amount of items make up a finished product while others are more suited to [[process industries]] such as chemical and food processing where the ingredients are not exact and where there might be re-work and byproducts of a process.<ref>Thomas E. Vollman, William L. Berry, D. Clay Whyberk, F. and Robert Jacobs, ''Manufacturing Planning and Control Systems for Supply Chain Management'', 2005, page 96. {{ISBN |0-07-144033-X}}.</ref>

In the last decade, companies have also become interested in enhanced functionality such as [[customer relationship management]] and [[electronic commerce]] capability.

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;Over-emphasis on system cost

According to Finlay and Servant, “The differential in purchase price between packages is unlikely to be the dominant factor".<ref name="FinancialPackaging">Paul N. Finlay and Terence Servant, ''Financial Packaging Systems'', 1987. {{ISBN |0-85012-584-7}}.</ref> While the cost of an ERP system is significant for a company, other important decision criteria, such as functionality; future proofing; underlying infrastructure [network & database]; and e-commerce capability among others, may be understressed.

;Selection bias

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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.

== A proper system selection methodology ==