Manufacturing – Part 2: Board Checklist for Successful ERP Projects
Manufacturing companies’ internal efficiency and effectiveness are highly reliant on sound ERP systems. But all too often we meet CEOs whose systems just tie them in knots, add cost and hamper customer service! These systems become a brake on expansion and growth.
Manufacturing companies embark on ERP projects, often expensive exercises, but the results are often disappointing and rarely meet their business objectives. How can you avoid this?
This Board Checklist provides some key pointers. It can be a useful review even if you’re half way through, or primer if you’re about to start.
1. Get the business objectives clear. Has there been an open workshop at Board level to agree the basic business objectives? The objective isn’t to implement a new ERP, it’s to deliver some specific business outcomes… what are these? Is everyone agreed? For example the objective might be to halve manufacturing cycle/throughput time; to remove 4 FTEs by avoiding any rekeying between the ERP and website; or to eliminate errors in labelling by automation of label production.
2. What are key requirements? Document in everyday business language the key things the systems must do, or must enable or must achieve. This might be a list of 40 or 50 statements, for example, “Telesales handling staff can see accurate stock info and pricing on any products within 30 secs.”. Often the emphasis is on how you go about things today but the focus should be on outcomes as there may be better ways to get there. All the heads of departments need to be involved, need to agree and sign off (yes, put ink on the paper!)
3. Who is involved and who is accountable? Who on the Board 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 on the business who will need to be assigned to the project team? Will they need to be backfilled? Everyone must be clear on their roles. Are you aiming to involve some of your own people in the details so they can become expert superusers?
4. Get clear on the cost/benefit model. Although you don’t know the detailed costs yet 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 you can afford to drop. The cost/benefit should be based on improvements in KPIs, for example, identify the target OTIF (On time in full) and compare to current measurements of the same KPIs.
5. Rational Product(s) selection. There are hundreds of systems available: IFS, Nav, AX, SAP, SAGE, Epicor, Oracle, Syspro to name a few! This is a minefield, but using the requirements already agreed you can create selection criteria, a scoring system and clear questions to ask, rather than just being seduced by great salesman. You need to weigh up the advantages of integrated ERP with multiple specialised systems, which might offer better features but greater complexity. For example it can make sense to select a standard ERP and a specialist warehousing product for better goods handling (picking, putaways etc). Make sure all the business stakeholders are part of the decision-making process so they all have a vested interest in success.
6. Rational Partner(s) selection. A partner will configure, customise and support your systems. As you will need to have a long-term relationship it is critical that there is a good cultural fit and trust. Take up references, and check everything! Are they experts in your sector, are they financially secure, have they got a stable team. Ensure you have time to negotiate a good price and contract rather than having to cave in due to pressing deadlines.
7. A credible & complete plan. The vendor or implementation partner needs to provide you with a credible plan and you need to extend this with 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 tech, and should span all the resources and commitments not just the supplier.
8. 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 bespoking and, if the implementation partner is charging for this, then their salesman will be delighted to help you make bad decisions!
9. Process and organisational changes. With new systems, come new ways of working. These need to be planned, documented and rolled out carefully with plentiful and personal communication to everyone affected. This will not happen by accident; without proper management many people will go to great lengths not to change how they work!
10. Data migration, cleansing & setup. Getting the data right can be make or break for a new system. This task can be the biggest part of the project and may be the most critical. Take the opportunity to clean data and improve its accuracy, after all one of the key benefits of an ERP is the information it can provide the business to help advise decision making. If the data is poor and inaccurate today that won’t change tomorrow unless effort is put in to improve it. Think about product codes and bills of material and how they can best be structured to deliver the information the business needs. Start cleaning today and don’t wait till the point of go live. Experience tells us that the point of go live all too often results in taking inaccurate and unclean data across to the new system!
11. Device integration. Where shopfloor, in-vehicle or other devices are to be integrated with the systems then this needs to be implemented and tested, probably in collaboration with device suppliers. For example, scales, environmental sensors, barcode scanners, or RFID trackers are increasingly key sources of efficiency so shouldn’t be an after-thought – device integration should be carefully planned, managed and tested. Are the devices suitable for the environment… think about temperature, humidity, vibration etc.
12. Testing and conference room pilot. By making the vendor run their product through your business processes you can check the system and business practices will fit together and the key staff are ready for change. 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!
13. Implementation/Cutover/Go-live. A ‘big bang’ go live can be complicated and risky; different parts of the new system may be ready at different times; and different phases will deliver different benefits. So there will normally be a progressive adoption of the new system(s) and decommissioning of the old ones. This needs to be thought through and carefully managed.
14. Training and monitoring. Staff will need training and coaching in how to work with new processes, systems and roles. There may be a period of de-snagging and minor amendments. This needs careful monitoring and policing to ensure that employees have clear ways of working and do not adopt bad habits. For many staff this change is daunting and where this means doing their jobs differently it can cause stress and resentment, and when they don’t yet fully understand the new way of working they may blame the system for mistakes or processes that are taking longer due to the unfamiliarity.
15. Review and ongoing ownership. The project owners need to ensure the original business objectives and cost benefits materialise. But this is the moment when the new system becomes “legacy” so it’s critical than ongoing ownership is clear. 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).
All too often we see lack of focus on these key points and, as a result, the projects can become bogged down and overrun both costs and timescales. Eventually there is a dash to finish… the original vision gets relegated and the aim becomes to “just get it done”!
But the benefits delivered by new ERP systems can be transformational when the project is conducted well. Many of our clients have achieved significant uplift in efficiency and service and find new confidence to grow because their business starts to feel like a platform for scaling up! When system issues are no longer on the agenda the Board have more time to talk about strategy and growth. And effective systems provide data and reports to feed into those strategy and growth conversations.
You may also like to read the additional content on our Manufacturing series:
Freeman Clarke is the UK’s largest and most experienced team of IT leaders and we frequently work with manufacturing clients to help them deliver transformational programs of improvement and system efficiency. We are entirely independent of any technology or suppliers.
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