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  1. 1. White Paper The ROI of ERP: Proven Implementation Methodology Is the Determining Factor Successful implementation of an extended ERP system is the result of knowledgeable and dedicated people working together. It entails company-wide commitment, openness to change, good planning and experienced guidance. Three primary criteria determine the probability of recognizing significant return on investment (ROI) from an ERP system. Using these criteria as guidelines during the system selection process and subsequent implementation can ensure that the chosen system will support and enable the business improvements envisioned. That’s ROI.
  2. 2. Introduction 1. Objective-oriented Sales Approach Choosing an ERP system without paying careful Successful implementation of an ERP system depends attention to the implementation methodology is on partnering with a trusted and competent software somewhat akin to choosing a hospital for cardiac provider. From the outset, and throughout the surgery based on its architecture but ignoring the relationship, the provider should offer process experience of the surgeon. No one selects surgery improvement suggestions based on its knowledge of based solely on the hospital, yet countless companies the client’s business and objectives. With the right choose an ERP system based exclusively on partner, the system is maximized, the strengths of each architecture and functionality. partner are leveraged, and significant benefits ensue. The results are predictable. The new ERP system is A number of criteria should top a list of ERP provider installed, orders get placed, product is shipped, and requirements. invoices get paid. Yet no one is really happy with the • An implementation plan prior to selection results. Customer satisfaction is unchanged. Profits don’t increase. Quality of life at work declines while A successful implementation should begin almost as employees climb the learning curve. Finally, the soon as the selection team begins communicating company continues to struggle against competition. with a prospective software provider. Not only are What happened? A vendor was selected that provided challenges, needs and goals articulated at the very a sound product but lacked a solid team of beginning, specifics about the organization’s implementers and a proven implementation structure and culture are communicated. methodology. The software provider worthy of selection should Installation and implementation are not the same. The already be thinking about the easiest and most goal of an installation is move from one software efficient way to implement the system and deliver the product to another, with a minimum of disruption. The capabilities needed. The vendor should be able to goal of an implementation is to enable a company to provide a preliminary implementation plan even achieve significant business goals as the result of a before the contract is signed. carefully planned transformation of its business • A clear understanding of your business processes, supported by software and technologies appropriate to the job. As the selection team reviews systems, their objectives for the system need to be clearly Implementation success does not begin with vendor communicated. Then they should observe how selection. It begins with a defined set of business involved the ERP provider is in helping to identify and objectives. Once having identified these objectives, a learn about the business processes and challenges plan for achieving the objectives must be developed. If that are the basis for the selection process. this plan identifies a need for applications and technology not already deployed, it is then appropriate As the short-term and long-term goals are described, to seek help from a vendor. a qualified provider is able to show how their people and the software can accomplish those goals, step by Vendors must be evaluated both on the functionality of step. The vendor should be able to detail the value to their applications as well as their ability to help be derived from the system and the relationship – transform business processes in order to achieve the details about how the system will scale as users are company’s objectives. How does one appraise a added, how it will support day-to-day operations, how vendor’s ability to assist in executing a business affordable it is, and how it will get installed. The level transformation? There are three keys. First, evaluate to which the provider demonstrates and explains their sales approach and their interest in helping to specific solutions is a good indicator of their ability to achieve the defined objectives. Second, check their help a company achieve return on its technology references carefully. Finally, completely understand investment. their implementation methodology. Page 2 of 10
  3. 3. • A change agent that over 90% of ERP projects are not completed within the planned timeframe. Other studies rate consulting The success of the implementation depends on a expertise, by a large margin, as the weakest link in an company’s openness to change. Change is not IT implementation. Cost overruns are frequently cited always embraced by all individuals, so the first step is as reasons for dissatisfaction. To learn from the to ensure that the CEO supports the team’s vision, experiences of many companies, where over 50% of the vendor selection and the implementation project ERP implementations fall short of expectations, means from commencement to completion. looking for evidence of successfully implemented When an ERP software provider is selected, they solutions. should display the qualities and be prepared to act as One poll of ERP users rated which factors are most a “change agent”, one who has the ability to lead the important to consider when choosing an ERP system. company confidently and rapidly through the change Reputation (i.e., customer references) was rated 7th out process. One who can explain near-term and long- of 8 factors, the second least important factor on the term benefits of the proposed changes, while being list. Many software evaluation ‘experts’ often neglect to sensitive to each employee’s level of change mention the need to understand a vendor’s acceptance. implementation success rate in their recommendations on how to check references. This is a gross oversight. 2. Checking References – The Moment of Checking the references of a prospective ERP partner Truth must involve looking well below the level of the Checking an ERP vendor’s customer references is a standard, traditional list of questions. Function-to- counterintuitive topic to address in a discussion of the function comparisons identify few differences. Great importance of implementation – at least initially. Be testimonials about the usability and quality of a software assured, it is not unrelated. It is the first opportunity to system’s capabilities are not enough. Questions asked ensure whether the vendor’s claims are substantiated in the evaluation stage must be implementation- and not just brochure-ware. oriented if the vendors’ track record and true capabilities are to be effectively rated. No standard list Selecting a new ERP solution is one of the largest exists for this line of questions, but it should include decisions a manufacturing company makes. It has one questions such as: of the greatest potentials to improve business performance. Risk analysis is appropriate at this stage • At what stage in the relationship was the and reference checking is part of a thorough risk implementation process started? Was it begun during analysis. Making a software selection decision based the software evaluation and selection process to on insufficient knowledge of a vendor’s implementation ensure compatibility? track record may result in a high-risk outcome. For this • How well did the vendor understand, document and reason alone, require full disclosure from potential ERP suggest improvements to the company’s current partners. complexities and business processes? Furthermore, since implementation is so important to a • How well did the vendor develop, document, monitor, successful ERP investment, reference checking should communicate and manage the scope of the project not be considered merely an exercise in due diligence. plan? Every vendor evaluated will be able to produce a list of • What was the level of professionalism, quality, good references. What separates the good from the experience and knowledge of consultants and project bad is the degree to which their implementation claims managers? have been tested and proven. A well designed and • What, if any, problems were there with getting the executed implementation methodology is one of the right amount and type of skills assigned to the major elements that will make the project a success. project? Implementation timeframe, cost and effectiveness are • What industry specialization did the vendor’s the areas of most concern. Some estimates suggest consultants bring to the implementation? Page 3 of 10
  4. 4. • Did the implementation project meet its cost company?” Ask for reasons why or why not. Test the estimates and goals for meeting deadlines and veracity of their claims by asking for a site visit or to milestones within the planned timeframe? speak with others in the company who use the system. • How effective and timely was the vendor’s response To fulfill such high expectations of bringing positive to problems and issues encountered during the change and performance improvement to the business, implementation? make sure the selection team is fully satisfied and confident with a potential partner’s implementation • How were users of the new system prepared for change and provided with knowledge of the new capabilities and match with the company and project. system, tools and processes? References are the ‘credentials’ of an ERP software provider. Check them carefully before making this • Did the conversion go smoothly and uneventfully, or critical decision. were there painful, unanticipated issues? In addition to this formal process, begin networking, join 3. Understand the Implementation on-line discussion groups, talk to analysts, and find Methodology other creative ways to identify users of the system in addition to the ones provided by the vendor. It’s worth Knowing what to expect during and after implemen- the time and cost. As difficult as it is, don’t rely solely on tation can circumvent many problems. The software well-groomed vendor reference sites. As an example, provider selected must be able to articulate and the following is a question asked in an on-line ERP document the specifics of the implementation process. selection discussion group from a person representing The process should be thorough, but not cumbersome. a company involved in the final stages of evaluating But don’t confuse detail with complexity. Often a alternative packages: detailed implementation plan, when executed by a dedicated team, is the shortest distance to returning “Any comments from users of either system real benefits to the business. regarding ease of implementation? Was your The search team needs to have a sound grasp of the implementation plan held at or close to budget? steps, expectations, roles and responsibilities. They The teams from both software packages seem should be able to reach a consensus with the provider very capable both from a software standpoint about the measurable and anticipated outcomes, and and general manufacturing knowledge.” then have the provider play this information back These types of forums are quickly gaining popularity accurately. and it’s easy to see why. They provide information that In a well-constructed methodology, the provider should is not available directly from a vendor. Questions conduct a formal survey of the organization to gain a regarding implementation are, unfortunately, not as comprehensive understanding of the business frequently asked, but they receive volumes of quick environment and goals. The provider must be able to replies. clearly delineate them in a report or profile. As a check Query references about what results they have for both the provider and the organization, the written achieved and in what timeframe. It’s difficult to get profile should be referred to throughout the results without a successful implementation. This is the implementation process and should be used as a road bottom-line. Getting references to be specific about map in setting expectations, guidelines and direction. what results they have achieved is a signal of how well The amount of time dedicated to this front-end phase of their implementation was executed. Look for clues such the project will be well worth it, offering an important as long implementation timeframes, incomplete measure of protection against problems later in the projects, and cost overruns as well as positive implementation. comments about quickly experiencing business Implementation focused on process improvements benefits. The extended ERP system selected should provide In all cases, the final question should be, “If you had it powerful capabilities to consolidate and shortcut proc- to do all over again, would you still choose the same esses. To recognize significant ROI from the ERP Page 4 of 10
  5. 5. system, existing processes must be objectively transition plan or “vision” tailored to the known examined to determine where non-value-added activi- requirements is developed and agreed upon before the ties reside. Identify processes that directly and indirectly implementation process actually begins. impact the company’s bottom-line. Look for labor- intensive processes that result in excess payroll, Factors Influencing Implementation disconnected communications, cumbersome reporting, Success in the Twenty-first Century and long service times. Measure and record current levels, and together with the new software provider, Experience establish targets for improvement with the new system. Experience is a valuable commodity and a vital An implementation that reaps ROI will focus on those ingredient for guaranteeing the success of any major targets. From the system parameter settings to educa- project. More than consultants who know their product, tion that addresses those specific issues, the defined implementation consultants should have extensive goals should drive the implementation and ultimately actual experience in addressing the day-to-day issues deliver measurable ROI. with which manufacturers are confronted. The implementation methodology model A software provider who has been in business for many An effective ERP implementation methodology has years likely employs a nationwide staff of experienced been developed based on industry experiences gained and highly trained ERP implementation consultants. over many years in business. It is a model that has Vendors who have implementation consultants on staff proven to deliver return on investment, quickly and have a significantly higher rate of success than those effectively. To help clients achieve the desired results, who use third party consultants. This is because in- the vendor’s team of industry experts provides guidance house consultants generally are more knowledgeable through each of seven implementation stages: about the software and how it can be applied most 1. Discovery effectively. They also help develop the methodology through refinements and application of best practices, 2. Strategy and can use it with greater expertise to implement more 3. Business analysis rapidly and smoothly than an independent integrator. 4. Education 5. Application configuration Because these implementation consultants must be 6. Readiness assessment able to advise, instruct, apply creative solutions, resolve 7. Deployment process issues and leverage the organization’s resources, the selection team should look for a provider Implementation planning from the outset with on staff, experienced consultants. In the end, their In this model, implementation planning begins even job, and that of the entire company, is to insure that before the prospect becomes a client. How else can the maximum ROI is received. selection team acquire a level of certainty that the Talk with the provider’s clients, listen to their system they ultimately choose can be implemented to experiences and interactions with the provider’s achieve the desired results? Implementation planning is implementation consultants. an important element of the selling approach, and planners are involved during the evaluation period. Peer Bearing Company, an Illinois-based leading With the early involvement of an implementation manufacturer and distributor of roller element bearings, attests to the importance of experienced, on-staff manager, a smooth transition from sales into consultants: implementation can be expected. This resource provides an understanding of the typical implementation "The third party relationship with the software vendor was life cycle, milestone events, methodology, terminology killing us," said Jay Roberts, Peer's vice president of and all other details of the project, with focus on business systems. "We'd ask our consultant a question implementation issues that are unique to the and he wouldn't know the answer. Then he'd go off and prospective client. Ideally, an initial implementation double check and come back with an answer a week later." Page 5 of 10
  6. 6. "It was too complicated, to burdensome, too expensive, Business Process Reengineering too difficult to work with the consultants," said Roberts. Business Process Reengineering (BPR) is the analysis "And after some investment of time, energy and money, and design of workflows and processes within and we withdrew." between organizations. It seeks radical improvement of So Peer headed back to the selection "drawing board." processes rather than a focus on incremental change One of the top four finalists that Peer identified during its and gradual improvement. BPR designs processes first selection process was Minneapolis-based ROI around desired outcomes rather than desired tasks. It Systems, an ERP vendor that has specialized in manufac- integrates information processing work into the real turing for more than 25 years. Peer decided it was time to work that produces the information. Information reconnect with ROI. technology becomes the enabler of process "In making contact with ROI, I was amazed to find that the reengineering. people that I had talked to two years earlier were still in the local office," said Roberts. "Having seen the light of BPR is a natural and inherent part of every new how important it was to work directly with a company, it software implementation or upgrade project. Many was a great and refreshing thing to know the same people companies change specific operating methods to take were there. You need to work with good people who can advantage of new features and functionality provided by give you straight answers and solve your problems." the new software. Though this activity may provide added value, the real improvements come from a Project Management collaborative effort to rethink and simplify the entire process rather than making subtle changes to specific Next to selecting the right ERP solution, the planning tasks within it. and overall administration of an implementation project may be the most important part of the business systems The selected provider should offer a BPR service, initiative. For many companies, a software implementa- which can be fully integrated with the initial systems tion project occurs once, maybe twice, in the tenure of implementation, subsequent major release upgrade its employees. Companies often have staffing con- projects, or as a separate phase entirely. A model BPR straints and/or limited experience in implementing inte- methodology employs six steps: grated software systems and are not prepared to lead 1. Develop and define the business vision and their own implementation efforts. operating objectives 2. Identification of high-impact processes to be Resource coordination, project planning, team redesigned organization and leadership, process re-engineering, 3. Detailed documentation of existing processes and problem resolution, communications, and more, all are performance metrics essential to the success of your implementation project. 4. Identify information technologies that will influence Effective project management is the key to completing process design the project on time and on budget. It can eliminate 5. Design and prototype the new processes surprises at go-live versus a project that costs 6. Implement the new processes substantially more than original estimates and doesn’t ® satisfy the needs of your company. This BPR model employs standard Microsoft tools to effectively document, analyze and review business The selected provider’s implementation methodology processes. A structured diagram of all steps and should be highly tailorable to the manufacturer’s needs functions that are performed within a company is and expertise. The provider should be able to offer as provided. Each piece of information, formal and/or much project management as desired, from complete informal, the path that the information takes within the responsibility for managing the project to providing organization, the source documents that are used, how guidance to the company’s designated project they are used, and who processes them are included in manager. flowchart documents. Page 6 of 10
  7. 7. Customer-focused support With education, users learn to use the system beyond As questions and needs arise, whether during or after order-taking or inventory tracking. They gain implementation, the provider needs to have qualified, understanding in how to use the system to shorten in-house, client-centric specialists ready to provide response cycles, improve cash flows, initiate e- answers. A knowledgeable and fully staffed call center, commerce and increase productivity and profits. The plus educators, consultants, installation technicians, system is employed to focus on solving important and customizing department, should be on staff to lend business-critical goals and to create an environment for solutions and assistance when needed. continuous business improvement. Evaluate how the prospective provider’s implementation Database Conversion methodology addresses training and education issues. The migration of data from one or more legacy systems Some considerations include: into the new database is an integral part of every • Are education and training planned for appropriate implementation project. Whether straight-forward or levels within the organization? For instance, training complex, the software provider should be prepared to needs typically increase from summary level training work with your technical personnel to develop a solid for executives to detailed training for departmental strategy for converting your data for use with the new level users. system. Ask for samples of data conversion process • Will users gain the knowledge and skills they need to flowcharts, data mapping spreadsheets and sample successfully use the system to improve their job conversion inlay models. These tools help identify performance and productivity? critical elements of the conversion process and ensure • Are there appropriate safety checks built into the plan a smooth conversion. to measure knowledge and skills before the go-live Fast Track to E-commerce date? • What courses and step-by-step instructions are built E-commerce is having a significant impact on the way into the system for the self-learner and point-of-need manufacturers conduct business. It can boost sales and training? secure a competitive advantage, while improving supplier and vendor relationships. ERP providers today should be instrumental in helping their clients initiate e- ERP Success Factors commerce reasonably and effectively for their Implementing an ERP system is a large undertaking. It businesses. is much more than just installing new software. Consid- The new ERP software should include Web-ready erations include: forms for order entry and self-service tracking of orders, • Resource commitment. Plan to assemble a cross- as well as secure portals where reports and authorized functional team to assess processes, recommend data can be easily accessed. The provider needs to improvements and guide the implementation. Very possess the expertise to help its clients quickly deploy likely these people already have significant the system’s e-commerce capabilities. responsibilities, but allocating resources to plan and control the implementation at the company level Education and training that empowers keeps it focused and moving forward. This team often The key element missing in many “template-driven” or serves to “rally the troops” so that everyone from the “fast-track” implementations is education. This is the stockroom to the executive level understands and driving force in moving an organization beyond marginal carries out their role in the implementation and the benefits to a significant return on investment. Education subsequent use of the new system. arms companies with the knowledge needed to leverage the ERP system to take the business to a • New technology. The new technology infrastructure higher level. may be very different from your existing system, and the IT manager or system administrator will likely need education to make the transition. Users across Page 7 of 10
  8. 8. the company may be less efficient as they adjust to Conclusion new entry displays and functionality. During this time, ERP is an investment in more than just technology. It is employees may need reminders of the benefits the an investment in the business and its people. It is not new technology will bring within a short time as they difficult to place a system within an organization and let use it. them try to use it with training “how-tos.” What is more • Adhering to the implementation methodology. challenging is implementing the system into a This structured, detailed plan should be focused on company’s culture where it becomes an integral part of the defined processes and strategies as well as on developing a business and fulfilling a vision. The latter the users. Follow it scrupulously for the shortest path takes an investment in time and resources. to payoff and the fewest risks. Do not be fooled by providers who promise skimpy • Expecting the unexpected. With a well-structured implementation timeframes. Carefully evaluate their methodology and experienced consultants guiding plans to see if they are really just installing or actually the project, unexpected events can be implementing. Ask the providers what they can do to accommodated without significantly impacting the ensure that substantial ROI will be recognized. momentum. While it is difficult to plan for them, keep Partnering with a software provider who is committed to in mind that most projects of this scope will encounter its clients’ success and has the experience and something unexpected. Choosing a provider with methodology to help achieve that success, ensures that many years of experience is the best insurance that maximum return will be realized on the technology the project will get right back on plan without major investment. interruptions. “A rapid implementation not only saves considerably on the overall cost of the system, but also provides a faster time-to-benefit. A proven process also lowers the risk. As indicated by the company’s name, ROI [Systems Group of Epicor Software] historically provides its customers with a significant return-on-investment.” - Bill McSpadden, CEO, Plant-Wide Research Page 8 of 10
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  10. 10. EPICOR’S MANUFACTURING SOLUTIONS GROUP is a global provider of real-time collaborative manufacturing solutions that meet the needs of discrete manufacturing companies. Epicor offers a suite of solutions specifically targeted to the manufacturing industry. Years of industry experience enable us to design highly tuned software solutions that offer ease of use, smooth integration and long-term scalability. Whether it is back office automation or the addition of front-end customer, vendor and employee communications via the Internet, Epicor delivers scalable software solutions that can grow with the success of your firm. Vantage by Epicor is an integrated, comprehensive enterprise resource planning (ERP) software solution using by more than 1,000 growth minded make to order and mixed-mode manufacturers. Vantage enables you to achieve operational efficiency throughout your company. It combines advanced technology with robust functionality to provide an end-to-end enterprise-wide solution. It includes Epicor Software Corporation comprehensive scheduling capabilities, fully integrated supplier and 600 South Highway 169 customer relationship management solutions, extensive business 2000 Interchange Tower intelligence tools, integrated and customizable eBusiness solutions Minneapolis, MN 55426-1205 and advanced material management capabilities. Phone: 1-800-449-6772 Fax: 1-952-595-9450 To learn more go to http://msg.epicor.com/vantage. www.epicor.com Epicor and Vantage are registered trademarks of Epicor Software Corporation. All other trademarks referenced are the property of their respective owners. The product and service offerings depicted in this document are produced by Epicor Software Corporation. This document is for informational purposes only. Epicor makes no warranties, express or implied in this document. The contents of this document are believed to be current and accurate as of its date of publication. For a complete description of the product features, please refer to the product’s user guides, reference manuals and release notes. © Copyright 2003 by Epicor Software Corporation. All rights reserved. Page 10 of 10