If your ERP requirements are not carefully defined, and you do not use them as serious guidelines in software selection, you are likely to buy software that is unsuitable for you.
Most of us think that defining our requirements to ERP vendors is a fairly simple, straightforward exercise. That’s a seriously false premise which will lead to an ineffective ERP search process right from the start. This article explains why.
ERP requirements definition is not simply a description of the functions of the software required in order to screen vendors. It is a detailed description of the needs incorporated in the Request for Proposal (RFP). If you think this is a just a formality, then get a boiler plate RFP and start sending it out. In doing so, you will attract every software vendor in your market space who will claim to fit your needs with their proposed solution. Their sales people will be eager to meet with you to extol their proposed solution and, after demonstrations, you will probably select the software from the salesman you like the best. Of course, you will honestly believe it is the right software and can implement it using the vendor’s implementation plan. In reality you have just jeopardized your project, your company’s investment, and maybe even your career.
An effective requirements definition needs to take into account several keys areas which may or may not be stated in the traditional boiler plate RFP including:
- Management Support Issues - Beyond funding the project, the main issue here is how management is going to support the effort of installing a new ERP system. These systems have an enterprise scope and are not just an IT project. Grounding the software search as a technology project will mislead your organization and the vendor’s response to the RFP. Be sure management is ready to take on this project and is willing to commit the necessary resources to improve business processes.
- Business Process Improvement Issues - ERP software is an enabler and as such does not directly provide break-through savings that affect the bottom line. To accomplish that type of return, you must look at how the ERP software integrates into existing work related processes and how it will provide the framework for new and improved processes to deliver the expected results. All these requirements need not be included in the RFP, but significant ones must be included and carefully explained. Keep in mind that the solution you are looking for is the one that best supports how you would like to run your business in the future and not the current way you operate. This emphasizes how critically important it is to perform a process review and improvement exercise before you get to the detailed screening of vendors.
- Success Factors - No project, especially an ERP effort, should be undertaken without expressly detailing the benchmarks for success. Examples are an expected reduction in inventory or an expected reduction in manufacturing cycle time. While the project is being implemented and at its conclusion, your efforts will be measured against how well you achieved interim and final benchmarks. Define these benchmarks as you are developing the requirements definition and include the significant ones in the RFP. Ask the vendor how his proposed solution will help achieve these benchmarks.
- Education - Every ERP systems implementation requires both educating and training the people involved in delivering the solution. Educating is about training people in how to function in their new business roles. These can include such functions as Master Production Planner, Purchasing Agent or Cost Accountant. Be sure to ask the vendor what features, along with their role in enabling greater manufacturing performance, are provided in both areas.
- Vendors - Arriving at a qualified vendor shortlist can be as daunting as preparing the requirements definition and the RFP. Sending your RFP to all vendors in your market space will produce responses that will not address your specific needs. Their answers are filled with generalities and will tie up your selection in never ending clarification questions. To avoid this situation, only consider vendors who target your industry and who have customer installations with companies similar to yours by revenue size and mode of operation. When in doubt about a particular vendor’s qualifications, you may want to do a preliminary telephone screening and invite them in for a meeting prior to requesting them to propose a solution.
- Level of Detail - You can expect to receive responses roughly equivalent to the level of detail that was in your RFP. You need to detail only those unique activities performed in your facility, i.e. those activities that your company performs that are unique to their operation and will probably never change. An example might be a defense contractor.
Be sure to use subject matter experts from your enterprise when preparing the requirements definition and RFP for soliciting vendor proposals This exercise is about using the departmental operations experts and not technical IT staff in establishing requirements, setting the expectations, and signing up those experts to deliver expected benefits.
Once the RFP is developed, approved by all, and distributed to the vendors, the enterprise operational experts need to assist in the review process and select the vendor. Once the vendor is selected, the RFP should be considered a legal document with a copy of the selected vendor’s response attached to the contract.
Your company’s requirements carefully defined by operational experts is the foundation for ERP success. If shortcuts are taken you can expect a bumpy ride from start to finish.