Realizing the business benefits of an ERP system is difficult for any industry. As outlined in our 2014 ERP Report, most companies fail to realize the business benefits they expect from their new ERP software – regardless of which industry they are in. However, there are some unique pitfalls and opportunities for manufacturing and distribution companies looking to get more out of their existing and potential ERP systems.
Our team has many lessons learned from our experience with hundreds of manufacturing and distribution companies across the world – ranging from an auto-parts manufacturer in the Midwestern United States, a medical device manufacturer in New Zealand and just about everything in between. Here are just a few lessons and tips from some of our more recent ERP implementations for manufacturing and distribution clients:
1. Focus on manufacturing ERP priorities. It is easy to get overwhelmed with details that don’t really matter when selecting new ERP software. When engaging in the ERP software selection process, it is important to identify the things that are most important to your manufacturing and distribution organization, as well as those functions that differentiate leading ERP vendors in the market. For example, a consolidated general ledger may be a high priority for your company, but the reality is that most ERP systems provide that base functionality. On the other hand, not all ERP software can handle product lifecycle management, engineering change orders, advanced demand planning and other functionality that is not only unique to manufacturers but rare in many ERP systems. Identifying those priorities takes an objective and experienced team that understands both ERP software and manufacturing and distribution operations like yours.
2. Define a realistic implementation plan. Once you have selected the best software for your company, it is important to define a realistic implementation plan. Unfortunately, this is where most manufacturing and distribution companies and their ERP consultants fall short. When companies base their implementation plans and expectations on unrealistic or overly optimistic assumptions, they are bound to be disappointed. Worse yet, these are the projects most likely to cut critical implementation activities from scope when the project team realizes they don’t have the time, budget or resources to complete the project as expected. An unbiased and experienced team needs to be involved in defining a realistic ERP implementation plan that avoids these pitfalls.
3. Don’t overlook organizational change management. Many manufacturing and distribution executives we work with on a daily basis take the “they’ll change because we will tell them they have to” approach to managing organizational change. Unfortunately, organizational change management requires much more effort (and finesse) than this, even for hard-charging, no-nonsense manufacturing and distribution companies. Unless you are a relatively new company or have employees that haven’t been around for long, the “people side” of the change will most likely be the most difficult aspect of your ERP implementation. And this isn’t just our opinion – our recent study of 200 recently completed implementations revealed that most manufacturing companies identified organizational change management as the most challenging part of their implementation. Incorporating a complete organizational change management methodology and team into your project will deliver more than its share of ROI.
4. Define a risk management plan. Not all projects go as planned, so it is critical to have a Plan B identified in case things don’t go well. Surprisingly, the research outlined in our 2014 ERP Report reveals that roughly half of ERP implementations encounter some sort of material operational disruption at the time of go-live, such as not being able to ship product or close the books. While we hope you plan your project in a way that mitigates that risk, you still want to be prepared for “what if?” scenarios. Whether this involves stockpiling inventory in the short-term or having fallback manual processes in the event of an ERP failure, your implementation team should have a backup plan in place in case things don’t go as planned. This will typically be much more cost effective than the potential lost revenue and headaches associated with a go-live disruption to your business.
There are of course hundreds of additional things that every manufacturing and distribution executive should do to ensure ERP success. However, the four tips above should ensure your project is headed down the right track.
Learn more by downloading our 2014 Manufacturing ERP Report.