Avoid these mistakes when choosing an ERP

Introduction

Choosing new Enterprise Resource Planning (ERP) software is a big decision for manufacturers, and one that comes with questions and concerns.

Imagine you are responsible for hiring a key employee who manages the integration of all business functions, improves collaboration between departments, centralises business data, and guarantees data accuracy.

This person must provide smart insights for better decision-making and innovate business processes to achieve maximum productivity and efficiency.

Choosing the right ERP system has the same impact as a key hire. It allows everyone to work smarter, more efficiently, and more productively, as well as giving you the tools for data-driven decision-making, which is essential in today’s competitive market. From procurement to production and from sales to service, the right ERP solution can transform your entire business operation.

If you go through the selection process carefully, you lay the foundation for short-term growth and long-term success. This process needs full attention and involvement of your key decision-makers.

Below, we discuss five common mistakes when selecting an ERP and how to avoid them:

1. Failing to set clear business objectives and failing to link them to the benefits of ERP systems.
2. Lack of insight into the specific requirements of your company.
3. Ignoring or underestimating the importance of user experience.
4. Drawing up an unrealistic budget.
5. Overlooking support from your vendor.

This guide offers practical tips and insights to choose an ERP solution that delivers maximum return. Not only during current economic challenges, but also in the future.

What’s happening in the manufacturing industry

The UK manufacturing industry is home to 5.5 million small and medium-sized enterprises (SMEs), according to figures compiled by The Manufacturer. Analysis of the top performing manufacturers by consultancy firm Grant Thornton reveals that nearly a third (32%) operate in the industrial products segment, while 17% are in metals processing and fabrication. A further 11% are in materials and chemicals, while 11% are in industrial equipment.

Here are a few more interesting facts to show you how an ERP could support your business:

Why goals are important when investing in an ERP software

Clear goals ensure that you make the best strategic investments for your business. Research shows that investing in an ERP system yields an average return on investment (ROI) of around 52% within two years. Around 66% of organisations have increased efficiency thanks to their ERP systems. This is only possible with defined and agreed goals.

Focus on broader business goals for your manufacturing organisation

In this first phase, start by assembling a team and discuss your business’ needs:

1. Automate routine tasks and get the most out of your staff. ERP systems can help reduce manual errors and inefficiencies.
2. Improve customer experience with better order management and faster delivery times
3. Easily monitor compliance activities and minimise risks and fines.
4. Bring products to market faster and stay one step ahead of the competition.

Top 5 benefits of a modern ERP software

The benefits of a well-chosen ERP solution are clear:

• Benefit #1: More than one in three companies cite increased efficiency as the main reason to implement an ERP solution.
• Benefit #2: A quarter of the companies who implement ERP, see improvements in timely deliveries.
• Benefit #3: Half of ERP users respond better to customer needs.
• Benefit #4: Three-quarters report improvements in processes throughout the organisation based on the ERP software.
• Benefit #5: Four out of five companies believe that an ERP system stimulates innovation.

Assessing your business needs and how to avoid mistakes

After you have established your objectives, the next step is a thorough analysis of what your business needs.

1. Industry-specific functionality is key

Determine which functions are specific to your industry. Consider the following:

• Personnel planning tools.
• Advanced inventory and delivery management.
• Features for managing recalls.

It is also useful to research your business competitors, if you can find the information online. Which systems do they use and why? This can help identify standard features in your industry.

Next, discuss with suppliers how they offer features that can give your company a competitive advantage. Draw up a priority list and categorise features as essential, desirable, or unimportant.

2. Adaptability and customisation

Some ERP systems offer modules and add-ons for specific requirements, while other solutions are fully customisable. Talk to vendors to discover how flexible their systems are and how well they meet your needs. Keep in mind you need a system that will scale with you as you grow and as the world of AI changes how we work.

3. Scalability and flexibility

Like we mentioned above, choose an ERP system that grows with your business and adapts to new technologies. This makes your organisation future-proof and able to take advantage of cutting edge features.

4. Mobility and Industry 4.0

Consider whether you need an ERP that supports remote employees or is compatible with mobile devices. Is this important, or will it be, for your operations?Additionally, you must assess whether you are ready for technologies such as artificial intelligence (AI) and the Internet of Things (IoT).

5. Cloud-based versus on-site

Cloud-based ERP systems are popular due to their scalability, security, and lower long-term costs. However, on-site solutions may be preferred if you want more control over your IT infrastructure. Knowing what is better for you is important during your ERP software search.

Top 5 selection criteria for ERP systems in the manufacturing industry

When choosing an ERP system, it is important to keep these criteria in mind:

1. Business needs: How well does the system align with your current processes and goals? Can the new ERP system help make your processes better?
2. Scalability: Can the system grow with your business? Can it help hold onto knowledge from today and leverage it for the growth of tomorrow?
3. Integration options: How well does the ERP system integrate with your other existing systems?
4. User experience: Is the ERP intuitive and easy to use?
5. Reputation and support of the supplier: Does the supplier offer the right expertise and support? How long is the implementation process? What is offered during onboarding to ensure your team is equipped with the tools and knowledge necessary to be successful?

The importance of user experience

Even a system with the best technical specifications can fail if users do not understand or use it. That’s why an intuitive interface and good functionality are essential.

A system that is difficult to use can lead to frustration and inefficiency. So make sure that employees are involved in the selection process from the start.

Practical tips

• Request proof versions: Test the system with key figures and ask for their feedback.
• Involve end users: Ensure that employees have a say in the final choice.
• Train thoroughly: Invest in training and manuals so that everyone understands the system well.

What happens when you set an unrealistic budget

Another common mistake is underestimating the costs of an ERP system. Although cloud systems often have lower initial costs, there are also costs for implementation, training, and maintenance.

How do you draw up a realistic budget?

1. Create a cost overview: Include everything, from licensing costs to consultancy.
2. Consider hidden costs: Consider data migration and modifications to existing systems.
3. Reserve a buffer: Take unexpected expenses into account.
4. Look at the long term: Many times the costs are front loaded and decrease with time. Be sure to know the real cost of ownership going in.

Choosing the right supplier

Choosing the right supplier / vendor can make or break an ERP implementation and organisation. A trusted partner will help to ensure a smooth implementation and long-term success both in technology upgrades as well as human support. Choose one who has experience in your industry, offers extensive support, and has references that can verify they deliver on their claims.

What should you expect from a supplier?

• Fast response times: Make sure you know how much support you can potentially receive and what their SLAs are. Do they have support levels and if so, what will yours be?
• Regular updates: How often does your ERP software get updated? Are there costs involved with update implementation? Is there downtime? Ensure that the system you choose remains future-proof.
• Good training: Choose a supplier that offers extensive training and manuals. Some people learn by reading, others need to be shown. Does your supplier offer online training, in person training, user conferences, etc. Know how your team and future hires will be supported.

Did you know?

• Manufacturers are the top users of ERP systems.
• 53% of organisations are currently upgrading their ERP solution to remain competitive.
• Companies that implement an ERP system often report a significant improvement in efficiency, with some reports showing a time savings of more than 30%.
• Innovation is stimulated by ERP: 79% of the organisations indicate that their ERP has helped them respond more quickly to changing market conditions.

Choosing a new ERP system is a strategic investment. By setting clear goals, analysing your business requirements, and paying attention to user friendliness, budget, and support, you can make the right choice.

With a careful selection process, you can implement an ERP solution that not only optimises your current processes but also lays a strong foundation for future growth.