Chapter 3: Evaluating an ERP

After learning about why an ERP can benefit their troubled business, Saf and Mel decide to take the plunge. They also know that implementing an ERP is a meticulous process, given its immense scope. It is (understandably) intimidating and overwhelming. Where do they even begin? We’ve seen a fair share of ERP implementations, and not all of them have succeeded. There are a few critical (albeit intangible) factors for a successful implementation. Every business needs to mull over these before deciding if (and how!) to proceed.

Ask yourself these questions before getting an ERP…

Do you have the time for it?

Without exaggerating, remember that an ERP is an organization-wide change. That’s huge! Implementing an ERP is an extensive process. It will require time, effort, and dedicated human resources before all your business operations are up and running on an ERP (more on this in the next chapter, ‘How to Implement an ERP’). It is up to you and your team to evaluate whether or not now is a good time to commit to the implementation process. If yes, it is important to identify a Project Champion (or ‘PC’). The Project Champion is the one who leads the business into its implementation of an ERP. They’re responsible for ensuring everyone involved is on board, and ultimately the success (or failure) of an implementation. (We’ll discuss this in detail in the next chapter, Implementing An ERP)

How badly do you need it?

Urgency can be a catalyst or a detriment to any project. It comes down to the business to make sure it’s the former. We’ve already discussed the scope of an ERP, but each cog in a functional machine needs to be fitted individually. So ask yourself, how urgent is this project? What exactly is your business struggling to manage currently?

What do you hope to accomplish with it?

The team behind Spindl has an all-hands meeting and they list out the key reasons for their delays. They are:

  1. Missing supplies.
  2. Quality issues.
  3. Late product deliveries.
  4. Cash flow and quickly diminishing profit.

Based on this information, they plan out their goals:

  1. Organize and manage their purchases.
  2. Categorize and track their inventory and stock.
  3. Create a quality assurance management pipeline.
  4. Streamline their production for quicker deliveries.
  5. Focus on increasing their revenue and profit.

With these goals in mind, Spindl must now find the right software to build their system.

Setting tangible goals for your implementation is one of the biggest initial challenges. For you to get started, you must reflect on what exactly you want out of an ERP. Prioritize what problems need to be addressed first. Use that to derive which parts of your business need to be implemented first within your ERP. During this process, remember that a finished product doesn’t start as being good—it is built to be that way over time. Bob Ross doesn’t start his paintings by adding the trees, mountains, and birds. A positive attitude and acrylic gesso come first, and then the background, followed by the color-blocking. The finishing touch lies in the details.

Evaluating modules

ERP software is generally modular. What this means is, every process of a business is broken down and separated into modules. Each of these modules has its specific workflow that allows you to carry out that process in a streamlined fashion. Accounting, sales management, purchase management, manufacturing, customer relationship management (CRM), human resource management (HRM), etc. are all different processes that function under separate modules. Sales management, for example, comprises the entire process of sales operations. So, an ERP module for sales management would enable a user to follow a specific workflow to optimize their business' selling process. It might look something like this:

Quotation -> Sales Order -> Delivery Note -> Sales Invoice -> Delivery Trip -> Payment Entry

Based on their goals for their ERP implementation, Spindl has decided on the modules they would require.

  1. Organize and manage their purchases - Purchase Management
  2. Categorize and track their inventory and stock - Inventory Management
  3. Create a quality assurance management pipeline - Quality Assurance Management
  4. Streamline their production for quicker deliveries - Manufacturing Management
  5. Focus on increasing their revenue and profit - Accounting

At this stage, Saf and Mel have a much clearer picture of what they’re looking for. Next comes a new challenge—picking the ERP software that will become the backbone of their business. The modules you choose to implement becomes the largest deciding factor of what ERP software you should go with. Not all businesses need every type of module provided by an ERP, and not all ERP software provides the modules required by a business. There’s a diversity in the needs of businesses, and that requires different software.

Considering cost

With their preliminary research conducted, Noma begins the process of researching various ERP software providers out there. Having figured out what modules they require, Saf and Mel begin evaluating the costs of implementation for their 30 users in their short-listed systems.

Due to the sheer amount of options out there, they turn to resources like Capterra and G2 to achieve this without being overwhelmed. Capterra and G2 have a plethora of software reviews, buying guides, and aggregated lists based on user input that Sad and Mel find insightful during this process.

An ERP is a business-critical tool, and it should be accessible to everyone. But most cloud-based software is expensive. But here’s the thing. Not all software is built (and/or priced) equally. Plus, there’s a ton of options to choose from! Most ERP software providers have a pay-per-user, module-based pricing system. Along with these costs, businesses often turn to ‘partners’, who act as consultants and implementers for their chosen ERP software. But not everyone has thousands of dollars to spare, and we get it. Thanks to open-source alternatives[1], you can turn to free ERP systems that are just as good (if not better!). Microsoft Dynamics 365, for example, prices their proprietary (closed-source) ERP product based on the business area, business scope (professional or enterprise) at a per-user cost. Odoo, which has an “open-core” (i.e. its most basic modules are free and open-source), charges on a modular basis at a per-user cost as well, along with separate charges for hosting, support, etc. Then there’s ERPNext, an entirely free and open-source, community-driven ERP software.

At the end of the day, it comes down to your business’ individual needs and how you can best serve it. Expensive does not always mean better. It’s a matter of what will help you accomplish your business’ goals.

It can be a daunting process to find the right fit for you. This is why we recommend using resources such as Capterra and G2 to look at reviews and compare pricing while you’re doing your research.

[1] If you’re unfamiliar with open-source work, it’s simple: the source code (aka what makes the software work) is openly available to everyone to use and modify. Communities from across the world contribute to the code, which is how the product grows. Open-source is built on one single, incredible belief: information and resources should be freely available. Many companies use open-source software to develop and support their projects, including big guys like Netflix and Amazon.

Assessing your chosen ERP

_“It’s not about making the right choice. It’s about making a choice, and making it right.” _

- J.R. Rim (Author, Blogger)

After much deliberation and budgeting, Spindl has narrowed down to a few options of ERP software providers. Now, it’s a matter of picking one software that they’ll begin their trials with. This is a pivotal stage in our protagonists’ journey: which ERP will they finally go with? And how exactly will they decide that?

Picking the right ERP software is a meticulous process. It’s supposed to be the foundation of your business after all. It’s akin to making any other long-term investment! Like buying a house or picking the right school for your kids.

When evaluating an ERP, there are certain conditions it should meet for it to serve your purpose.

  1. Is it solving our problems? Revisit goals that you set out with. Does the ERP software help you meet all of them, or will you (once again) have to fall back on other services?
  2. Can it accommodate your foreseeable plans? As your business grows, so will its needs. You cannot foresee everything, yes, but evaluate if the ERP will be able to accommodate your future plans for your company. \ For example, the folks at Spindl know they will need a better system for their Human Resources department because of their growing company. They, therefore, make sure that the ERP they choose will have an HR Management Module they can implement later.
  3. Is the monetary investment worth it for your business? Chart out the budget of your ERP implementation and maintenance. Evaluate how much you are spending on it, and how much you will need to spend on it in the future (account for growth in the number of users, additional modules, support). Are you happy investing that money?
  4. Is customization required or does it work for you as-is? This is important to consider especially if you work in a specialized industry. Does the software allow you to do everything you need to the way it is designed, or does it need to be customized? Can you divert resources towards said customization? Is there an alternative (that meets the other requirements as well)?
  5. Does it accommodate localized nuances? Depending on where you live, there are different laws and conventions for taxes, payments, processes, legalities, etc. Does the software allow you to follow these localized conventions with ease?
  6. Does the User Experience positively affect work progress? The point of an ERP is to save time and not waste it. It may sound inconsequential, but even the number of clicks it takes to get a job done counts in the long run! Are things overcomplicated, or efficient? Will it help you do things faster?

  7. Does it support integration with any essential services you use? If not, is customization an option? Take stock of what services are essential to your business’ functioning, and if it can interact with your ERP. This way, you’ll be reducing clutter and redundancy in the work processes.

    Spindl sells on the Amazon Marketplace, so it’s important to them that their ERP system can integrate with Amazon’s MWS (Marketplace Web Service).

Conducting thorough trials

“Discovering the unexpected is more important than confirming the known.” - George E.P. Box (Statistician) _After evaluations, costs, and assessments of various ERP software providers, Saf and Mel know which one they’re leaning towards. But the only way to really know how something works is to, well, _use it. It’s going to be a bit of a challenge, Saf explains to the various teams, but a necessary one. For the next month, they must all document all their processes parallely with the ERP software. Every transaction—be it a sales order, or purchase order, or reimbursements for the company dinner bill—needs to be entered into the system along with their usual process. Trialing software is paramount—no matter how prepared a business is with their research. Before you start managing your operations in any ERP software, you must first familiarize yourself with the system and its many nuances. For this, a Test Phase is necessary.

While conducting trials for ERP software, we recommend a few things:

  1. Treat it as you would a live system. Use it alongside your existing system, but replicate_ every process_ in your ERP system. Be diligent in following the processes, because it’s the only way of knowing if your system will be foolproof once it’s live.
  2. Read the support documentation/manual. Boring, maybe, but incredibly useful in understanding the specific nature of the ERP you’re planning on implementing.
  3. Have your entire team on board. Whoever will be using the live ERP system, make sure they all are using the system.
  4. Use realistic data within the system. These records should be representative of your business’ day-to-day transactions.
  5. Take notes. Is there a process you’re used to doing a certain way that you can’t in your ERP system? Does anything break if you try to do something? What can be more efficient? Is this process actually making your job easier?
  6. Communicate constantly with your Project Champion (or ERP implementer). Talk about your notes, any difficulties or bugs that you encounter with them, or anything that you deem necessary. This will help them (and therefore, your business) have the possible system by the end of testing.
  7. Give it time. Do not try to rush through the Test Phase! This is the time to familiarize yourself with everything and make sure everything works the way your business needs it.

No system will be perfect from the get-go. And that is _precisely _why the Test Phase (or the “staging” phase) is important. It is where you’ll (inevitably) break the system, get frustrated, learn, and reiterate. By the time you’re in the Live Phase (or the “production” phase), you want to have a smooth and functional system.