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Meaden & Moore. Shopping for a New ERP System How to Specify the Right System for your Application. Scott A. Holter, CPIM October 3-4, 2012. Meaden & Moore. ERP Software Brief History. ERP Industry Background. Pre-1990s Manufacturing Software

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Meaden moore

Meaden & Moore

Shopping for a New ERP System

How to Specify the Right System for your Application

Scott A. Holter, CPIM October 3-4, 2012


Meaden moore

Meaden & Moore

ERP Software Brief History


Meaden moore

ERP Industry Background

  • Pre-1990s Manufacturing Software

    • Accounting software packages for mainframes and minis

    • Separate MRP and Job Shop packages for operations

    • Heavily customized in most instances

    • Complimentary custom applications developed internally – hard-coded or using tools like dBase


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ERP Industry Background

  • Early 1990s through 2000s

    • ERP unites accounting, operations, and others

    • Thousands of custom developers attempt to brand/“package” their software for re-sale

    • Industry and software company consolidation accelerates but new ones emerge

    • Environment changes over time: mainframes, minis, fat client-server networks, thin-client and browser-based applications


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ERP Industry Background

  • Early 1990s through 2000s

    • Software management trend

      • Custom applications dwindle, remain

      • Modifying packages’ source code comes and (mostly) goes

      • Plain-vanilla implementation strategy

      • Customization and personalization strategy emerges


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ERP Industry Background

  • 21st Century – 2nd Decade

    • Dozens (100+) viable ERP software vendors remain

    • Most have carved out target markets based on size, scope, industry, or niche features

    • 5-25 competitors in a target market

    • Continuum of integration: fully-integrated ERP to core plus best-of-breed.

    • Vast differences in technology, sophistication, rigidity, and cost to own


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ERP Partner Selection

Importance of Choosing Your ERP Partner


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ERP Partner Selection

  • ERP Vendor/Partner is a strategic choice that:

    • Touches virtually every aspect of a manufacturing business

    • Is a marriage

      • With rocky relations, at times

      • Where divorces are painful and expensive

      • That requires a careful courtship

    • Requires executive leadership and mid-level management and staff support and input


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ERP Partner Selection

Decision Dimensions to Consider


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ERP Partner Selection

“He who knows others is wise; He who knows himself is enlightened.”

- Chan

As applied to ERP – know what you want from ERP before going shopping


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ERP Partner Selection

  • Strategic Factors – Company-based

  • Strategic Factors – Partner-based

  • Features / Functionality

  • Technology

  • Cost of Acquisition and Ownership

  • Initial Implementation and Long-Term Support Approach


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Strategic: Company-based

  • 1.1 Business and

  • departmental

  • 1.2Supply chain

  • 1.3 Manufacturing mode

  • 1.4Information technology


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Strategic: Company-based

  • Business / departmental

    • Size (revenue, employees)

    • Strategic Competitive Focus

    • Low-cost / low-price

    • Product differentiation

    • Customer service

    • Hybrid


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Strategic: Company-based

  • Supply Chain Model(s)

    • Engineer-to-order

    • Make-to-order

    • Configure-to-order

    • Assemble-to-order

    • Make-to-stock

    • Distribution

MaterialAcquisition

Manufacturing

Distribution


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Strategic: Company-based

  • Manufacturing Mode

    • Continuous flow process

    • Batch process

    • Repetitive / rate-based discrete

    • Intermittent / batch discrete

    • Project / one-off discrete


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Strategic: Company-based

  • Information Technology Continuums

    • Technology follower / early adopter

Middle of the Road

Follower

Innovator


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Strategic: Company-based

  • Other IT Continuums

    • IT Staff: Self-sufficiency to outsourced service

    • End-user autonomy / rigidity

    • Data-based / intuition-based decision-making

    • Customer and supplier collaboration and interchange intensity


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ERP Partner Selection

Partner (Vendor) Dimensions


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Strategic: Partner-based

  • Vendor Criteria Continuums

    • Vendor size and reach – large multi-national to boutique

    • Industry / niche specialization

    • Single source to best-of-breed approach

    • Availability of 3rd party resources

    • Local support – does it matter to you


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Strategic: Partner-based

  • Vendor Criteria Continuums

    • Vendor Viability

    • Strong financials and longevity are important but don’t prevent acquisition

    • Even acquirers become targets

    • Independents resist more than publics


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Strategic: Partner-based

  • Vendor Criteria Continuums

    • Product Viability

      • Strong, modern, and accepted technology increases odds of life after acquisition

      • Large installed base (500-1,000+) increases odds of on-going support post-acquisition


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ERP Partner Selection

Sample Client Strategic Profile


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Sample Client Profile

  • Strategic, company-based factors

    • $20MM annual revenue, 150 employees with plans to grow 2-3X next decade

    • Intermittent, discrete manufacturer with 75% MTO and 25% MTS

    • Compete based on low cost/price and don’t need a high-end ERP solution


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Sample Client Profile

  • Strategic, company-based factors

    • More of a technology follower – just want stable and reliable technology

    • 1-2 person IT staff forces them to rely on outsider expertise to manage our system

    • Extensive quote and order exchange with customers


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Sample Client Profile

  • Strategic, partner-based factors

    • Open to any sized software vendor but must have a 10-year history as a going concern

    • Open to reseller or direct-sale channel provided there’s strong local (100 miles) support


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Sample Client Profile

  • Strategic, partner-based factors

    • Prefer a vendor that specializes in or has numerous metal fabrication shops as customers

    • Core ERP functions must be owned and maintained by vendor, but open to interfaced products for reporting, analytics, asset management, and CRM


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Sample Client Profile

  • Using the strategic requirements

    • Enable a company to reduce the potential list of candidates to 20-30

    • Enable an experienced consultant to reduce the potential candidates to an even shorter list


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Sample Client Profile

  • Using the strategic requirements

    • Framework for functionality and technology requirements

    • Those become implementation vision or checklist, so don’t skip next step

    • Framework for implementation approach and on-going support preferences


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Strategic Evaluation

  • Research

    • Trade associations, magazines

    • Internet

    • Other companies

    • Consultants, industry observers

    • Software vendors / partners

    • See Samples


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Strategic Evaluation


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ERP Partner Selection

Functionality Requirements


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Functionality Topics

ERP Groups/Topics to Dig Into


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Functionality Requirements

  • Functionality requirements building

    • Typically 50-100 requirements per topic

    • Include master files and transactions

    • Should be weighted relatively (High, Medium, Low, etc.)

    • Require input mainly from users

    • Consider future needs, not just current, so executives must be involved

    • Use industry accepted terminology from GAAP, APICS, etc.


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Functionality Requirements

  • Approach

    • Do-it-Yourself

      • Online template or “clean sheet of paper”

      • Online knowledgebase

    • Consultant facilitator / architect

      • Online knowledgebase

      • Proprietary tools and knowledgebase


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Functionality Requirements

  • Approach

    • Review Your Business Processes Supported by

      • Current package(s)

      • Custom software

      • Reports

      • Excel spreadsheets and Access db’s

      • Manual systems – log books

      • Include the basics; focus on what’s unique


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Functionality Requirements

  • Requirement and Use/Application


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ERP Partner Selection

Technology Requirements


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Technology Topics

  • Tend to be features, not functions


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On-Paper Comparisons

  • Approaches to Getting Answers


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Many Ways to “Yes”


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Comparison Matrix


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Software Evaluation Model

Using Functional and Technology Requirements

20-30 Candidates

On-Paper Research and Analysis

Proof of Satisfaction to Highest Weighted Requirements

Proof of Concept Demonstration / Workshop

4-6 Candidates

2 Finalists

Winner


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ERP Partner Selection

Evaluating the Software


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Software Evaluation

  • Demonstrations provide

    • For evaluation of qualitative factors (user-friendliness, flow, and integration)

    • Quality test of “Yes” responses

    • Opportunity to assess acceptability of workarounds, tailoring, and customizations

    • Opportunity to gain employee buy-in for change that’s coming


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Software Evaluation

  • Software Demo Preparation

    • Define your own agenda, but assist vendors with preparation – minimize curve balls

    • Communicate agenda internally to all attendees

    • Allow vendors to visit your facility

    • Provide them with sample data

    • Give vendors 2-4 weeks to prepare

    • Ensure vendors are clear on contents


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Software Evaluation

  • Software Demo Conduct

    • Keep all internal attendees on script – questions need to be timed

    • Let the vendor present – seek first to understand, then to be understood

    • Document issues and fit mismatches quickly and move on

    • Observe, don’t pilot test or implement


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Software Evaluation

  • Software Demonstration Types

    • Vendors’ overview demo

    • Prequalification / Pre-screen

    • Scripted Day-in-the-Life

    • Proof-of-concept workshop


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Software Evaluation


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ERP Partner Selection

Cost Dimensions to ERP Purchase


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Cost Evaluation

  • Software Cost Components


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Software Evaluation

  • General Observations on ERP Costs

    • Software licenses are close within a market segment vendor-to-vendor

    • Different cost structures than manufacturers

    • Multiple demonstrations and antagonistic interactions and negotiations can increase buyer’s costs

    • Timing means a lot, but not everything

    • Niche leaders have pricing power

    • Large, stable vendors have pricing power

    • Conclusion – costs are more useful when picking semi-finalists, not finalists or winner


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ERP Partner Selection

Implementation and On-Going Support Dimensions


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Software Evaluation

  • ERP Implementation Observations

    • Companies are attempting to implement more features and capabilities than in the past

    • Business software has become more flexible – no longer “install, convert data, train, go-live”

    • Companies’ personnel are already taxed running the day-to-day

    • Consulting costs have gone up as software costs have come down

    • ERP is a buffet – be conscious and realistic of what you can digest over a reasonable timeframe


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Software Evaluation

  • Partner Source Considerations

    • Vendor – Local? Cost? Available?

    • VAR – Local? Quality?

    • Other 3rd parties – Quality?

    • Independents – Current? Local?

    • Combination model often win-win

    • Validate with customers


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Software Evaluation

  • Implementation Sequence

    • Conflict between time-to-benefit and time required per day/week

    • Implement what was purchased – “All In”

    • Phased approach to minimize disruption

      • By module or feature

      • By location or department

    • Companies need to compare software vendors’ approaches with preferred strategy and confirm with customers


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Software Evaluation

  • Internal Resource Considerations

    • Skills to retain in house or outsource – initial and on-going

    • Choose a vendor that fits with your strategic spot on the continuum

    • Validate your choice with other companies

Do It Yourself

Combination

Consultant Driven


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Software Evaluation

  • On-Going Support Options

    • Direct vendors typically include phone tech support in annual assurance fee

    • Phone support is not the same as consulting

    • Vendors that sell through resellers generally do not offer phone / tech support

    • Resellers typically offer phone support as an add-on service at additional cost


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ERP Partner Selection

Summary and Conclusion


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ERP Partner Selection

  • Decision Dimensions

    • Series of hurdles or filters

    • Quantitative and qualitative

    • Objective and subjective

    • Cannot put a weight on each dimension, compute scores, and let math pick the winner


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ERP Partner Selection

  • Decision Dimensions


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ERP Partner Selection

Questions


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