Choosing ERP Vendors And Consultants: It's All About The Right Fit
Looking to upgrade your company's ERP and IT systems? It's all about the right fit between your company and the vendor you select. You will be working with the people you choose for months or even years.
Nothing is quite as complex as modern information technology management. Developing and installing an ERP system is among the most daunting tasks in manufacturing today. The mountain of detail and the fast pace of change in the computer and software world leave even the most knowledgeable experts wondering about choices. Therefore, picking the right vendors and/or consultants is crucial.
Not only will there be differences in the detail level of the software used, but sometimes compatibility is an issue. A custom system might do some things that a shrink-wrapped product may not. This is true of all vendors and needs to be understood up front in the initial discussions. Before evaluating vendors, consultants and software options, you must understand, in detail, what your system needs are and what options you will need in the future.
Gather The Details
Begin by gathering up all the appropriate paperwork and reports—whatever is used to monitor how your company has operated in the past and is currently operating. This pile of data is what you will be trying to increasingly automate in your new system.
This assembled data should present a consultant with a picture of your company, particularly its problems and opportunities that you and your co-managers may miss. The vendor and/or consultant may be able, in those initial meetings, to see alternatives that could help improve the process. How might these same functions, represented by all of the data on hand, be handled more efficiently?
What you are really doing when you decide to move to a new and more efficient IT and ERP system is agreeing to re-engineer your management processes. When you move to a new system or upgrade your existing system, you may be changing the managerial procedures and techniques of your whole company. This is why it is so critical to choose the right vendors and consultants before work begins.
While knowledge of the technologies and systems available today and in the near future are essential in any vendor and consultant, there are other human and organizational factors that may be even more important.
Departments Or First Names
When dealing with vendors and consultants in terms of migrating to a new ERP system, everyone needs to keep in mind the differences between smaller shops and larger companies. An outfit with 200 employees will require a radically different level of coordination than a shop with only a few people.
The size of the plant in terms of employees will make a difference because above a certain number, the migration to a new system or a major upgrade will require someone in a coordinator role. Ideally, this should be someone appointed by top management for this often temporary job. Sometimes a shop needs more than one coordinator: one in operations, one in accounting and so on.
What if a company hires a consultant and/or vendor for a new ERP or modernized system and it doesn’t provide its own internal coordinators and does not care to? Then the vendor/consultant will have to assume that role as the project moves along. This may add to time, increase the likelihood of mistakes and significantly increase costs for the project. It is strongly advised that you appoint your own internal coordinator.
The major reason the size of a company makes such a difference is that a larger firm is far more decentralized than a small shop of a few folks managing the company. In a larger company, there are usually departments, which means the project will be more difficult and require more coordination since each of those departments will have its own detailed procedures and ideas of what is needed in a new system. This must be accommodated as well. Here again, you see the need for a point man, an additional person on the migration team who should be a big picture person and not necessarily a technical person.
The ideal person must see the “big picture” and have an overall understanding of the detailed operations of the company. If there is no such appropriate person in the company, the vendor/consultant can assist with this responsibility as he trains someone in the client company for that role.
When you are considering a migration to a new system or a major upgrade, size yourself up first. If you’re the owner, ask yourself how big your company is. How many of the employees are on a first-name basis? Do you use the word “department” to describe activities in the business? Do you have department heads? If you do, who in your company would be the best person to act as the liaison between different departments and the outside consultant and/or ERP vendor? Sometimes this person may be the owner himself, or possibly the general manager would be a good choice.
If you are a larger outfit rather than an extended team or group, it behooves you to appoint and train someone who will be able to come to an understanding of the different IT procedures in detail within all these departments and how they function in terms of the whole company. In other words, larger companies should develop an ERP manager-coordinator before they start looking at consultants and vendors. Keep in mind that in this particular job, coordinating the migrations effort is not a permanent job, but only runs through the life of the project.
A smaller shop is a different challenge and often significantly less complicated. A five-man company can be educated about everything in a short period of time and can iron out any differences in data processing needs and approaches in a few meetings with the vendor/consultant.
Getting Past The Jargon
Understanding a shop’s specific industry terminology is critical. Often, a company will have its own name for a work function or document that is called something else in many other firms. In reality, they are the same document, only titled differently. For example, I have seen shop travelers called jobs, work orders, routers or shop paper, to name a few. They are all the same functional document showing the material and operational requirements of a manufacturing order.
Understanding the terminology and the types of documents your organization uses and matching that to what the candidate ERP system offers in its product is a critical analytical step. Being flexible enough to change your naming convention for a document (e.g., from Move Order to Traveler) will ultimately save you money. Remember, packaged software often makes the user stay with the software’s naming conventions for key screens and documents, unless the software is customizable. The key is being flexible enough to change, if required, to adapt to a package’s conventions and vice versa.
Contingency Fees Inevitable
Keep in mind, however, that even with smaller shops, contingency fees for changes are almost inevitable, especially if you require changes or adaptations of the chosen product to your business-specific needs. This is because of the complexity of data processing systems and the frequent differences between custom systems and standard vendor products. Many vendors do absorb some of these extra costs in migration or simple customizations, but often the customizations are too large to be handled in that way, and many vendor/consultants incorporate disclaimer copy in their contracts to make their clients aware of these potential contingency fees.
It is also important to keep in mind what modern IT can and cannot do. It can greatly increase the efficiency of a company in almost all areas. It can reduce costs and increase speeds in terms of everything from production to sales efforts and customer service. IT cannot, however, replace sound and creative business management. People are always the most important factors in any business equations. IT systems cannot fix underlying business problems, but they can help streamline and coordinate information processing.
When choosing a vendor/consultant, make sure you understand where you are currently in terms of ERP. What do you do as a business? Begin by gathering up, in some way, all the data handling that goes on in your company. With all this data on hand, a vendor/consultant can often see what a business owner/manager cannot see—particularly in terms of how automating these business processes may be practical using the latest technologies in ERP.
Partners In Change
Your vendor/consultant in a new or modified ERP project needs to become a temporary partner in your business. They will need to become immersed in almost all the details of your accounting, operations and production systems to be truly effective. The magnitude of a new or upgraded ERP system includes a lot of detail and requires a lot of in-depth understanding of the functions of the departments, so some vendors might not be appropriate. It is sometimes not realistic or feasible for a company to perform its own ERP startup without the direct help of outside experts.
Other key factors that companies should reflect on are their willingness to change and by how much. This includes the client company and the vendor. How much change is each willing to accept and accommodate? Some vendors, for example, will not alter their products in a significant way and some client companies are not willing to change their own business procedures in a major way. All these issues must be discussed before any agreements are reached.
Many vendors, because of large user bases, refuse to modify their products. A vendor that will not change its core product should say so up front. Similarly, many customers/users will not adjust their business processes. This means, in effect, their upgrades or new systems tend to be magnifications of what they have been doing for many years and thus may require significant customizations to get the system they want.
For a shop to refuse to alter its business systems in any significant way and then to find a vendor/consultant who will join it in such conservatism is a recipe for implementation troubles or worse. In effect, the shop will not be going backward, but they will not be improving as much as it might with a more open approach.
People Are Paramount
Always consider, first and foremost, the human side to all ERP migration efforts. Again, you will be working with these people for perhaps a year or more in detail, on a daily basis and often into the night. This factor is the most overlooked of all and can lead to the most problems, if not thought out completely.
Remember, there will always be surprises. It’s in the nature of the technology and business in general. Inevitably, surprises will come up, so be prepared for one after another. No matter how knowledgeable the vendor or consultant and no matter how well prepared you are, the unexpected will happen. However, all of these surprises and other problems will be solved and worked out if you have chosen the best and most appropriate vendor/consultant for your company and you are willing to offer some level of flexibility so issues can be worked out as they arise.
Remember, too, that software does not solve underlying functional business problems. People have to be flexible. Upfront organizational evaluation is critical. The optimum working relationship you want with a vendor/consultant is one in which you both try to anticipate problems, accommodate changes and work towards the common goal of implementing the system and supporting the company’s business functions to the best of both of your abilities.
When you’ve done all this and chosen vendors/consultants that you and your colleagues have full and complete confidence in, don’t relax yet. Now, the real work begins.
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