Manufacturing Insights — Part 2: Checklist for Successful ERP Projects
This is the second of our three-part series on the future of manufacturing. Check out Part 1: The Impact of the Internet of Things, and Part 3: Getting Data Right.
In our previous discussion, we mentioned how the Internet of Things can integrate devices into enterprise resource planning (ERP) systems, providing up-to-the-minute information with minimal manual intervention.
This article is about new ERP projects. These can be an expensive exercise and the results won’t meet business objectives unless the project is done right.
It’s a crucial question because manufacturing companies rely on sound enterprise resource planning. They can’t be efficient and effective without it. So how can you avoid costly and time-consuming mistakes?
Our ERP Checklist provides some key pointers. If you’re about to start, consider it a primer. It can be a useful review though even if you’re halfway through an ERP project.
- Get the business objectives clear. The objective isn’t a new ERP. It’s to deliver specific business outcomes. So what are they? Make sure you schedule an executive-level workshop to hammer them out. Be specific and make sure these objectives have been clearly delineated before you start. Some examples: Halve the manufacturing cycle/throughput time; Remove four FTEs by avoiding any rekeying between the ERP and website; Eliminate labeling errors with automation.
- Identify the key requirements. Document the key things the systems must do, or must enable, or must achieve. This might be a list of forty or fifty statements in everyday business language — for example, “Telesales staff must see accurate stock info and pricing on any products within thirty seconds.” Often the emphasis is on current processes, but the focus should be on better outcomes. All the heads of departments need to agree and to sign off (yes, put ink on paper!).
- Identify who is involved and who is accountable. Who is accountable for delivery? This should include not only delivery of the technology, but all the business outcomes identified at the start. Are there experts in your business who will need to be on the project team? Will they need their jobs backfilled? Is everyone clear on their roles? Will you involve some of your own people in the details, so they can become superusers?
- Get clear on the cost-benefit model. Although you may not yet know the detailed costs, you can establish the cost-benefit model. This means understanding how this project will deliver hard benefits so that, when compromises are necessary, you can identify what’s worth keeping and what to drop. The cost-benefit should be based on improvements in key performance indicators (KPIs): for example, “identify the target OTIF (on time in full) and compare to current measurements of the same KPIs.”
- Select your product(s) rationally. There are hundreds of systems available: IFS, Nav, AX, SAP, SAGE, Epicor, Oracle, and Syspro, and so in. Clear the field by letting the business requirements guide you: if you have specific selection criteria and a scoring system, you’re less likely to get dazzled by salespeople. Make sure all the business stakeholders are part of the decision-making process, so they have a vested interest in success.
- Select your partner(s) rationally. A partner will configure, customize and support your systems. As you will have a long-term relationship, it’s critical that there is a good cultural fit and trust. Get references, and check everything: are they experts in your sector, are they financially secure, have they got a stable team? And make sure you have time to negotiate a good price and contract, rather than caving due to pressing deadlines.
- Create a reasonable and comprehensive plan. The vendor or implementation partner needs to provide you with a credible plan, and you need to add your own plans for things like communication, data setup and retraining. Most importantly, the plan needs to show all activities to deliver the business objectives, not just delivery of the technology, and should span all the resources and commitments, not just the supplier’s.
- Define target business processes. Working with the implementation partner, you need to design your target processes. Many ERP projects fail because companies try to configure new software to match the way they always have worked. This often leads to expensive custom programming.
- Prepare for process and organizational changes. New systems bring new ways of working. These need to be planned, documented and rolled out carefully. Communicate with everyone affected. Without proper management, many people will go to great lengths not to change how they work!
- Prepare for data migration, cleansing, and setup. This task can be the biggest and most critical part of the project. Take this opportunity to clean your data and improve its accuracy — after all, one of the key benefits of an ERP is the information it can provide. Start cleaning today — don’t wait until the point of go-live. Don’t migrate inaccurate data to the new system!
- Plan device integration. Before integrating shopfloor, in-vehicle, or other devices with new systems, test them, hopefully in collaboration with device suppliers. For example, are the devices suitable for the physical environment? Consider temperature, humidity, vibration, and the like. Plan, manage, and test your device integration, and then test it again!
- Do your testing and conference room pilot. By making the vendor run their product through your business processes, you can check that the system and business practices will fit and that the key staff is ready. It’s a great way to get superusers onto the system; it may also be an opportunity to identify additional benefits that weren’t thought of at the beginning — or a last chance to spot unforeseen problems!
- Phase the implementation/changeover/go-live. A “big bang” go-live can be risky. Different parts of the new system may be ready at different times; different phases will deliver different benefits. So plan for a phased adoption of the new system(s) and decommissioning of the old ones. This needs to be thought through and carefully managed.
- Train and monitor staff. Staff will need training and coaching. And there may be a period of tweaks and minor amendments. This needs careful monitoring to ensure that employees don’t adopt bad habits or workarounds. Also, for many people, change is daunting. It can be stressful for people when they have to do their jobs in new ways, so make sure you’re allowing them to communicate their concerns.
- Review frequently and maintain ownership. The project owners need to make sure that the business objectives and cost benefits materialize. And then it’s critical to have clear, ongoing ownership so the objectives and benefits don’t slip away down the road. Ongoing monitoring must be part of the routine, and new issues must be addressed quickly and without a fuss. There needs to be an annual budget for vendor support, for training of new staff, for fixes, and for amendments so the system continues to remain aligned as working practices and products change — as they inevitably will.
A new ERP system is a powerful way to help your business grow. But too often we see lack of focus on these key points, and as a result project costs balloon and the project gets bogged down. But when an ERP project is done right, the benefits can be transformational. Many of our clients have found new confidence to grow simply because suddenly their business had a platform for scaling up.
Read the rest of our special series on the future of manufacturing:
Manufacturing Insights – Part 1: The impact of the Internet of Things.