A recent survey has shown that 50% of all major companies are either using or in the process of acquiring an ERP system. By 2026 the ERP software market is predicted to have grown to $78.4 billion. But, what exactly is an ERP system?
Essentially, Enterprise Resource Planning, or ERP as it’s more commonly known, is a system that automates your business processes.
ERP also digitizes and integrates your internal controls by centralizing data from various departments such as manufacturing, sales, supply chain and human resources. With this is in mind, the next question you should be asking is, “how to choose an ERP system for my company?’’
6 Things to Consider That Can Help You Make a More Intelligent Decision
Investing in a quality ERP system takes a considerable amount of research. When it comes to a system that’s going to influence the day-to-day running of your company, the last thing you want to do is commit to the wrong system that will only cost you more money in the long run.
To assist you in the process, I’ve compiled a list of six important factors that you should consider before making the final decision about which ERP system you want to invest in.
- State Your Objectives & Requirements Clearly
If you’re considering an ERP system, you already have an idea of why you need it. Compile a detailed list of the specific problems you hope an ERP system will solve.
Note how solving these problems or queries will impact the day-to-day and long-term running of your business. It’s important to know what you want from the ERP software and in what time frame.
- Measuring & Achieving KPI
An important factor to consider would be how KPI will be achieved and measured. While some experts believe this is harder than it appears with an ERP system, it’s easier if you have already drawn up your list of objectives and expectations.
Some of the ways to measure ERP performance include the following:
- Downtime: How long will various departments be offline while the new system is being integrated? What effect will this have on your revenue and your customer service?
- Demand Forecast Accuracy: Will the ERP system be able to predict future demand in your business? How accurate will it be?
- Scheduled Adherence: How effectively will your ERP software allow you to maintain, amend or increase your production schedule?
- IT Spending: The general goal of investing in an ERP system is to save money in every aspect and department of your business. The easiest way to measure if this is effective is to monitor the expenditure in your IT department. If the system is effective, there’ll be a decrease in IT function. If not, you’ll have an increase because IT will have increased issues to resolve.
- Put Your Goals Clearly to the Vendors for the Demo
It’s important to put all your cards on the table from day one. Be upfront about your expectations, objectives and possible concerns.
Indicate your own expected time frame and compare it with the time frame goals offered by the vendor. Ask questions and insist that all aspects of the program be demonstrated.
There are a variety of online demonstrations that you could view to give you an indication of what the sytem offers. This might help you narrow down the options you’d like to shortlist for live demos.
- Checking Vendor’s Past References
Just because an ERP vendor provides you with an amazing demonstration and appears to be above board doesn’t mean you need to be persuaded into buying it. A suggestion here would be to speak to other companies who have dealt with this particular vendor in the past.
Here are a few important questions you need to ask:
- Were commitments and deadlines kept and delivered on time?
- Did you encounter any hiccups that were not outlined in the original demo?
- Were there instances where the promised support was not available?
- Did you end up paying for tools or modules not relevant to your original requests?
- Are there additional costs that were not agreed upon originally?
I’d like to add an additional tip here. Always be skeptical about references where there are only glowing reports. Rather take the time to get a different reference.
I’m not saying look for problems, but at the end of the day, to make an objective decision you need all the facts on the table.
- Vendor to List all ERP Costs on the Table
It’s important to establish what the costs of the ERP system will be at each stage of its inception. Will it be an upfront, total package cost or will the costs be summarized at each new stage?
Which works better for your company? Will there be additional maintenance costs and how will they be determined? Does the ERP program in question fit into your proposed budget?
- Gauge Vendor’s Past Behavior
Ask the vendor for a list of previous clients. Make a few professional calls to establish the credibility of the vendor’s reputation. Do they promise what they deliver? What is their after service like? Consider reading a few objective online reviews about the vendor and the product to establish credibility.
I trust that you have found these tips both useful and practical. It’s critical to approach your interest in an ERP system with a concise and goal-specific plan as indicated in my tips.
By doing this you’ll not only invest in a system that streamlines and improves the efficacy of your whole business but you will save yourself time and money as well. Improve the possibility of your company’s success by investing in the best ERP software system for your company!
Have you recently invested in an ERP software system? Did you find these tips useful or are there additional tips that you’d recommend to potential ERP system users?
Please share these with us in the comments section as we’d love to hear from you! If you’ve found this article useful, please share it with your colleagues or friends!
Jenny Chua heads the Business Development Division in https://twm.com.sg/, with more than 25 years of ERP experiences. Her role requires her to deal with both customers and business partners.
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She is certified in both Sage 300 as well as SAP Business One. With good knowledge of accounting and business process requirement, Jenny is able to share with her customers and provide them good consultancy services.