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ERP Optimization Best Practices in ERP Optimization

 

Continuous Improvement Begins Day 1

Whether you realize it or not, you began your ERP system optimization some time ago.

"In reality, Enterprise Resource Planning optimization begins well before clients concern themselves with continuous improvement after an implementation," says Ben Trowbridge, chief executive officer of Alsbridge Inc. "The foundations for successful ERP optimization are laid during the sourcing process when searching for the right ERP system and integration partner."

Especially with the system integration partner, the contract you signed at purchase details the roles, risks, and rewards of the parties concerned. This agreement is the foundation for your ERP effort’s sustainable success. "During the contract negotiation process, software agility and service level agreements should be established to allocate risks and define performance expectations," says Trowbridge. "Ultimately, the governance and relationship management structure, which is best established during and not after the sourcing process, will guide the ERP optimization program along a roadmap."

Now would be a really good time to review that contract and make your optimization plans accordingly.

Forecast Your Objectives

The value of ERP software is where you say it is. In other words, ERP systems only create value if they achieve forecasted goals defined solely by your organization’s needs. Anything short of these objectives will result in disappointment and a waste of time and money.

“While the technology certainly matters, the real key to a successful ERP strategy is building the implementation around the business needs and goals, both in the short term and in the future,” says Angela Carter, principal and National ERP Advisory Leader at KPMG.

The strategic focus of an ERP implementation, consolidation or upgrade must always be clearly defined with a measurable result at each end-stage. Objective results trump subjective results.

“It is important to recognize that creating value from ERP projects extends far beyond the actual IT implementation phase and requires a commitment to the long-term business strategy,” she says. “Organizational alignment, improvement of business processes, and driving performance are critical objectives following the initial IT implementation phase, and they need to be reassessed over time.”

Here are best practices in identifying your ERP optimization targets:

  1. Assess your objectives — Identify your current business and operational objectives. Then name future objectives supported with measurable outcomes.
  2. Evaluate your current ERP system — Document precisely what modules you have in place. Then evaluate each module separately, feature by feature, noting which features you actually use and which fall short of expectations. Recognize that most companies use less than 35 percent of the available system functionality. Also note the features that are most useful to your current objectives.
  3. Evaluate add-ons — Consider adding features to supplement your current application but only in ways that meet your current objectives. Do not try to buy add-ons for long-term future needs as your needs may change before you get to use the feature. Over purchasing software (and shelfware) is a common budget killer.
  4. Identify a baseline — Resist the urge to hurry the optimization effort along. Identify precisely how your business is functioning today. Collect the proper metrics for a reliable comparison later. Without a baseline to compare too, future measurements mean little. Take the time to get this information now.

“When creating a baseline, it is particularly important to identify which business processes are unique and core to the business,” advises ACS’ Rudolph. "Governance, organization, and detailed process issues are essential to have as well. Without this information, how else will you know when you have achieved success?"

Goal Setting is a Team Sport

The common impulse is to form a committee or take direction from a C-level executive to establish the top optimization objectives. This can be a common mistake as it subjects the entire scope of the organization to the narrow perspective of a select few individuals. It is far more productive to open communications with people from all aspects of the business.

"Conduct regularly scheduled meetings with responsible department heads to stay on the conversation of automation," advises Christine Satariano, business development consultant at Socius. "And the department heads should encourage feedback from the individuals within their groups. It is the persons actually in the field that often provide the most valuable insight into process and information improvements."

Satariano advises several types of questions for these meetings:

  1. What is taking you a lot of time to enter, compile, etc.? (Often people are in a habit of doing things that cause them to not recognize there are easier ways to accomplish the same task - or more automated ways.)
  2. Where do you feel you still need to use external software or third party applications which may be related, but not integrated to your ERP system? Most companies have many 'shadow systems' that have evolved because ERP systems were missing particular features or automation.
  3. What information would be invaluable to have, forgetting about the software at hand? Or similarly, what information is difficult to access or time-consuming to assemble in reports?

Satariano also recommends asking business partners to present new technologies at regular intervals. "Often times it is a matter of getting staff people to think outside the box," she says. A software demonstration or discussion of new capabilities may jiggle some creative thinking. "Seeing new technology gives users the foundation for being able to identify and articulate new ways to improve their business processes."

Prioritize Objectives

Once you have identified your goals, you need to prioritize them. Immediately after that, rank the ERP features according to their value in meeting these high-priority targets. Next, rank the features in this list in a cost-benefit analysis.

Specifically, rank each feature by the following criteria: 1) Time to implement/optimize, 2) cost, 3) organizational readiness, 4) and, expected benefits.

Use this, or a similar scoring method, to objectively determine your continuous improvement course.

More ERP Software Optimization Best Practices >>

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ERP systems only create value if they achieve forecasted goals defined solely by your organization’s needs.

 

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