It’s a common scenario: A company spends the money to delve into a massive ERP implementation only to get stalled or worse, flounder and fall flat (and lose big bucks in the process). Maybe it’s the lack of planning or software curation. Maybe it’s not thinking ahead for future needs. It might also boil down to not having the right talent to make that integration sing.
For all that goes into ERP implementation — it is, after all, managing and streamlining all the most essential parts of a business — strategizing every step should be a nonnegotiable.
“ERP systems usually get replaced every seven to 10 years. I’ve been with some companies where they hadn’t replaced them for 25 years,” says Bruce Howard, an InterimExecs RED Team member and Interim CIO who has spent much of his career implementing ERP systems. “There’s a planning phase to bring all of the pieces together and make sure you’ve got a clear approach and clear people assigned. And then you need a methodology for the way you select systems and implement.”
To better understand the components of a successful ERP strategy and implementation, how an ERP can support business operations and better decision making, and how bringing in a veteran can elevate the process, we asked Howard along with interim executives Tony DeLima and Alonso Vargas to walk us through the essential elements.
Choosing the Right ERP System
DeLima, who has architected technology strategies at a range of companies such as CITCO, a large hedge fund administrator, says the days of viewing the large, monolithic options — say, SAP, Oracle, JD Edwards, and so on — as the end all-be all for all areas of the business are few and far between.
“Historically ERP systems were so tightly coupled with other systems that taking them apart became impossible,” he says. “The companies doing it successfully now typically implement integration services that marry the backend with a number of other platforms that have other business capabilities, like conversational AI that drives interaction with their customers and more advanced e-commerce platforms — and those don’t necessarily need to be part of this big ERP implementation project.”
While there are many factors to consider when choosing an ERP system, DeLima says organizations should define the transactional nature of the ERP and leave the rest of the stuff – at least the things that are customer facing from e-commerce to creating a unified customer view – to the rest of the systems. He says that when viewing an ERP system as a core transaction handler, a supply chain company, for example, will choose a system based on how they approach manufacturing execution, warehouse management, sales or inventory, and track and trade transportation management.
There have been different models over the years, but as Howard explains, the common mistake companies make with ERPs is not being rigorous enough in that selection process. Too many companies get stuck relying on a consultant who only knows one system, so they take that route even if it’s not exactly what was needed to run the business. The result is a system that may hold a company back from growth and expansion.
Especially if you’re getting into global implementation “you have many diverse cultures and often have unique requirements by location,” Howard says. “Those things play a part in the decision-making process.”
Doing the work upfront to outline an approach, clearly define a why, and set clear business outcomes that can be measured against is critical.
Drive Smart Decision Making
To determine the right path forward, it’s important for organizations to have discussions that involve members of multiple teams. “Data is often seen in light of the IT organization,” DeLima says. “But it’s really also a business conversation.”
He emphasizes having business-level discussions around your company’s data, governance, and ownership around that data, especially given that an ERP platform becomes a big component of an organization’s entire ecosystem.
A good implementation of an ERP system is one piece of the puzzle, but that core ERP should be surrounded with intelligent systems to allow better decisions to be made about how the business is run. DeLima says in today’s age organizations should have an analytics component that provides a unified customer view.
“I want to know what customers buy, when, and which SKUs,” he says. “I want to understand the return of my customers and be able to react to that as quickly as possible. And this is a critical one: I want to do proactive, demand-sensing, which drives things like sales and operations planning.”
That insight can have impacts across business. A good ERP strategy and implementation can improve business operations from better management of raw materials and outbound logistics to lower operating costs and faster revenue capture.
“You really need to invest in that infrastructure to gather information that you’re able to turn into KPIs and metrics that should be used for decision-making,” Vargas says. “Those who utilize data in analytics are those that continue to catapult forward and grow exponentially.”
Prepare for Now and the Future
Proper ERP implementation doesn’t come cheap, but it’s important to remember this is a long-term investment that should hold water for many years, which is why it’s important to talk about future strategy — not just your current needs.
Between on-premise implementation and a cloud-based option, both carry business performance indicators that might sway you one way or the other, but Vargas is a champion of the latter, primarily for the remote possibilities.
“You really need to spend the money, resources, and time to truly understand, given your type of organization, the best cloud ERP for your business,” he says. “And how can you utilize that to give yourself transparency not only from a financial perspective, but in operations and from a CRM perspective? You’re going to see a trend in people who were resistant and trying to limp along with their old-school software that they called an ERP. Now they’re going to realize that that’s not sustainable for this virtual work environment and they’re going to need to invest to ensure they can run their business from afar.”
ERP Strategy from an On Demand Executive
Implementing an ERP system can seem like a daunting challenge, especially when the team is already strapped for time. “No client I’ve ever worked with — even the biggest companies out there — has enough staff to support a project like this on their own because it requires a significant number of resources,” Howard says. “They’ve got the people doing the day job and participating in the project, but not all can participate in both full time.”
Interim executives step into a leadership role from CIO to CFO, or can drive forward an implementation in a project capacity. Drawing on years of experience and best practices, an interim will help the team clearly think through how an ERP system can advance the business, provide templates of basic requirements, but also steer them in terms of strategy and vision to ensure that the system doesn’t become obsolete within just a few years.
“Being able to put a group together and think through how you’re going to move things beginning to end through the distribution process, the manufacturing process, the sales process is really important,” Howard says. “They need the hands of people who’ve done this multiple times and have war stories to explain to them what would work.”