Perhaps the most important, and often overlooked, step in an ERP implementation is actually building the business case to convince senior management that this is the way forward. Our years of ERP consulting experience have shown us that the decision to implement or upgrade a new ERP system is likely to be one of the more complicated initiatives a business can face.
To convince management to write a large cheque and invest in the new system is difficult, especially as it often involves getting them to accept changes to business processes that they have worked with for years and think are just fine. You can make this process a little easier on yourself though, by creating a thorough business case which determines an expected return on investment, anticipates what the total costs will be and basically documents the business reasons doe investing in an upgraded or new system.
So, what are the five most important areas to cover in the business case to justify an ERP system?
- Look at Existing Knowledge
The best place to start is to look at the knowledge and resources that are already in place within your company. It is important to find out whether within your existing employees there is the expertise to build the business case successfully, the time available to pull the business case together, and the experience and knowledge of the industry best practices. You will probably find that some employees may have gone through the ERP selection and implementation process in their career, but aren’t up to date with today’s modern ERP systems. In this case, you may be better pairing up with an ERP consultant like ourselves, as we have more knowledge and familiarity of what is possible with today’s ERP systems.
- Get an Overview of Current Processes
Taking a good look at the business processes in place within your company at the moment, and documenting any opportunities and challenges is a great place to start with justifying the case for investment in an ERP system. Having an overview of Inventory Management, Invoicing, Ordering, Production Scheduling, Quality Management, and Warehouse Management will help everyone to identify any gaps between where the business currently is and where you want to be. This deep dive also helps give the whole team a full understanding of business processes and how they are a key component of ERP system selection as the ideal system for your company will be one that closes the identified gaps.
- Look to The Future
Once you have a clear idea of where the business sits now, you can then start to look at where you would like the business to be in the future. This is the stage where the project team should identify which processes can be improved, and what efficiencies and savings this will impact on. Some of the areas you may want to look at including cycle time reduction, improved sales with enhanced CRM, inventory reduction, a reduction in the cost of labour and a reduction in material costs and waste. This process is also useful for identifying whether your existing technology will support these changes, or whether you need new technology to help support these goals.
- Investigate Total Costs
One of the most important parts of being able to justify the investment in a new ERP system is being able to give an accurate indication of the required costs and investment. As we said in a recent blog post, it can be challenging to get an exact figure beforehand as there are lots of things to include. The total cost of ownership figure needs to include buying the software and any associated hardware, the cost of tailoring the solution to fit your organisation, the implementation costs, and any training costs. It is also important to think about legacy costs such as administration, maintenance, and infrastructure. Look at our blog post ‘How Much Does an ERP System Cost?” for more information on this.
- Calculate Projected Return on Investment
This step is the stage where you can give quantifiable metrics as a justification for investing in an ERP system. Once you have looked at where the business is now and where you want it to be, you can show the process improvements that the new system will impact on, such as improved production quality, better scheduling, a more streamlined ordering process and a reduction of physical inventory costs. These are all hard costs, but you could also look at the benefits achieved from access to real-time information such as integrated databased and streamlined information reporting giving more accurate materials planning. You can also include enhanced supply chain communication, improved quality of decision making and improved customer satisfaction.
Building a solid foundation for your ERP project by creating a solid business case is essential. However, it is a complex process that can be quite challenging if you go it alone. Start off on the right foot by partnering with Greenbeam Consulting and drawing on our experience and knowledge from the start. Call us on 0843 523 5630 or send an email to [email protected] to discuss your project.