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When is Your Small Business Ready for an ERP System?

Friday, June 12th, 2009 by Alex Smith

A common question small business owners ask themselves is when their business is ready to implement an ERP software application that will replace their existing small business software. Fortunately for the small business owner, there are a number of small business ERP software solutions on the market today that serve as a viable replacement for QuickBooks, Peachtree, and other small business accounting software packages. In my experience, there are three telling signs of when a small business is ready to migrate from its existing small business software to a more sophisticated ERP system.

First, the small business is operating in a multitude of software packages based on a given department within the organization. Accounting personnel make journal entries in QuickBooks; warehouse managers enter data into Excel; sales representatives use ACT, Goldmine,, or some other customer relationship management software solution; and for production and scheduling, well, sometimes there are small businesses that abandon the concept of using software for production altogether and revert to more archaic methods – I recently visited a food processing company that had its production manager hand-write the week’s production schedule on a chalkboard! The problem with this lack of integration between software packages is that it leads to a lack of organizational and business process integration. Divisions and departments begin to operate independently of one another or develop into individual silos of activity and information. Access to information in a given department becomes highly dependent on the software package used to process transactions and the associated person entering the data. This level of independence between various departments poses a serious problem for the small business owner who needs to manage the overall success of all of his or her business’ operations and makes it substantially more difficult for the owner to identify what areas of his or her business need improvement.

A second sign that a small business is ready to move to an ERP system is that duplicate data entry and data processing has become a common practice within the organization. When operating a business in multiple software solutions, it is common to have employees enter the same data into two or more different software packages. This poses two problems to the business. First, duplicate data entry consumes workers’ time and leads to operational inefficiencies and added time costs to perform a given transaction. Secondly, duplicate data entry increases the chances of having data entered incorrectly or inaccurately, thus leading to more workers’ time spent trying to correct the problem and keep key business data up to date and accurate. A fully-integrated ERP software solution can help remedy these problems and provides immediate benefits to the organization. By having all employees enter data into a singular software package, there is no need to enter data more than once. This can reduce employee time spent on data entry and provide employees more time to perform their daily tasks, hopefully leading to an increase in worker productivity and overall business productivity and output. Small businesses can even see substantial reductions in time spent performing period and year-end processing with a fully-integrated software solution.

Lastly, one of the most common signs that a small business is ready to implement a sophisticated ERP system is that the business suffers from frequent inventory shortages for some items and dramatic inventory surpluses for other items. I frequently hear many small business owners offer the complaint that they are frequently out of stock on their most popular items. They even complain that they suffer from inventory shortages of the packing materials required for their most popular items. An ERP system with tight inventory control, a comprehensive warehouse management system, and sophisticated forecasting and planning capabilities can ensure that sufficient inventory of a given item is available to meet customer demand without excessive on-hand inventory levels; in fact, a true ERP software system can help the organization increase order fill rates and improve customer service while simultaneously reducing on-hand inventory levels. This leads to reduced inventory costs, improved customer service, and increased profitability, giving the small business a significant advantage over its competition.

Find a Proven ERP Software Selection Process and Execute It

Tuesday, May 26th, 2009 by Alex Smith

One of the keys to proper ERP selection is finding a proven ERP software selection process and then executing that process. Many times, manufacturing and distribution organizations start their search for a new ERP system with little understanding of what selection process elements will provide them with the best software solution for their respective businesses. Furthermore, even if the organization has committed to a specific selection process or methodology at the initiation of the selection project, the software selection process is frequently executed incorrectly as the organization gets further along in the project. Fortunately, TGI provides free software selection tools to aid manufacturers and distributors in selecting the best software for their individual business operations. TGI’s proven software selection process can be easily followed, and, more importantly, executed in a timely, efficient manner. TGI’s ERP software selection process consists of five key phases: (1) Project Preparation and Planning; (2) RFI and Introductory Demonstrations; (3) Requirements and Request for Proposal; (4) Scripted Software Demonstrations; and (5) Reference Calls, Site Visit, and Supplier Selection.

While I will not expand on these steps in detail, it is imperative that the organization searching for new ERP software adheres to these five phases and does not initiate the next phase of a selection process without first completing all activities of the prior phase. For example, an organization should not move into the RFP phase of the selection process without first completing the RFI and Introductory Demonstrations phase for all potential ERP software vendors. It is astonishing the number of times we see prospects send Request for Information (RFI) documents and conduct initial remote software demonstrations and move into the RFP phase only to have another software vendor enter the mix of potential software suppliers without conducting the same detailed software analysis for the new software supplier as it did for all other software suppliers in consideration. To provide the most comprehensive, quantitative analysis of each ERP software vendor and solution, the same standards and requirements must be applied to each software vendor at each phase of the selection process. This strategy will give the organization the best apples-to-apples comparison of each software vendor and will ultimately lead the organization to make the best software selection decision.

Again, find a proven software selection process, follow the process, and execute it in full at each step along the way. For more information on TGI’s proven software selection process, click here. You can also request TGI’s free software selection tool kit CD by visiting our online request form.

The Scripted Software Demonstration: Making an Enterprise Software Decision on More than Gut Feel

Tuesday, May 12th, 2009 by admin

The great majority of companies with whom we work perform their own software evaluations without the assistance of an independent consultant. While independent consultants bring a variety of benefits to the table during the ERP selection process, a key element that strong consultants offer which is commonly missing when companies perform their own enterprise software evaluations is an onsite scripted software demonstration.

So, what is meant by a “scripted” software demonstration? A scripted software demonstration is one in which the company has documented a series of its key business processes that it wants to see all potential ERP vendors demonstrate in a consistent manner. While the scripted demo would generally touch all functional areas of the business, the most important areas of focus would fall into three main areas:

  • Customer-facing (i.e., quote to cash, customer service, customer self-service)
  • Operational (i.e., demand to pay on the procurement side, inventory management and warehouse operations, manufacturing planning and execution)
  • Compliance and control (i.e., financial management and reporting, lot traceability, quality management, industry compliance)

In addition to the script which describes the specific processes, good scripted software demonstrations will also include select sample data and instructions that tie this data to specific processes reviewed during the demo. The sample data should be sufficient while not excessive – 2-3 customers, 2-3 suppliers, 2-3 purchased items, 2-3 manufactured items with associated bills of material or formulations and routings, and sample customer pricing scenarios.

Some companies with whom we’ve worked performing evaluations have merely dumped complete sets of data from their existing legacy database of products, customers, vendors, pricing, etc. In these cases, vendors will cherry pick the data yielding inconsistencies as to which processes show which data or even how much of the data is used, if any.

The script should also have an accompanying scorecard which will be used by company personnel to score each of the processes on two scales – one that defines whether or not the vendor showed the specific process performed by the software, and the second defining how easily the process accomplished the desired task. There should also be an explicit scoring scale (i.e., 1, 3, or 5), where exact wording is associated with each of the scores and communicated to all participants during the scripted demo process. That way, there is an attempt to make the scoring processes as homogeneous as possible, and allows for a true “apples to apples” comparison.

The facilitator of the demonstration needs to constantly nudge the participants to score the process. To use a sports analogy, there are a lot of people who keep score of the top of the first inning of a baseball game, become distracted or bored, and stop. There are very few who keep score of the entire game. Make sure your participants score each process of the demonstration as it occurs.

Once a given section of the demo is completed, the finalized scorecards should be collected immediately to help minimize the risk of a misplaced scorecard. When the demonstration as a whole is completed, the scores should be compiled for each software vendor and added to a summary for all of the demonstrations.

Without a scripted demo, many software evaluations become a “beauty contest” where people make decisions strictly on which solution looked the best. Don’t be fooled by glitz without substance. Dig under the covers and make software vendors show you real transactions being performed in their systems with your data rather than just showing you sample screens with pre-populated data which may or may not work in a production environment.

By following these practices, a scripted software demonstration should yield a quantitative measure as to which software solution would best align with the key business processes and would be easiest to use by a given company. This will help you narrow down the field to your preferred solution so you can move into a final due diligence process with that vendor.

For additional information about the overall ERP software evaluation process including more detail about scripted software demonstrations and a sample scripted software demonstration template, please review TGI’s free ERP Software Selection Tool Kit.

Justifying a Software Selection Project in Our Current Economic State

Thursday, February 19th, 2009 by Alex Smith

As 2009 arrives, companies of various sizes contemplate the year ahead and consider their options for remaining both profitable and viable in a world of relative economic uncertainty. As such, business leaders are adjusting to the new economic challenges and market conditions. While all of this uncertainty will eventually stabilize, organizations must question what is next for them as a company and for their upcoming projects and applicable expenditures.

As has occurred throughout history, human nature evolves and the strong survive. Businesses are no different. Virtually every industry or sector has evolved in some manner over the last few months. The world of information technology has experienced its own transformation. Technology-based purchases are still occurring and companies are initiating new projects. The difference is the nature of the project and the decision making process surrounding the acquisition of the products or services purchased.

ERP software is, without question, a major endeavor for any organization. While a significant amount of work goes into both the selection and implementation of a new business software system, it does so with the ultimate promise of providing significant tangible and intangible benefits to the organization. ERP software can help transform an organization by eliminating internal weaknesses and by producing a roadmap for leaner, more efficient, and more profitable operations. It can be the saving grace for a struggling company, and it can help provide a solid foundation for a profitable tomorrow.

To achieve the project success and the promises ERP software offers, the ERP selection process needs to be tightly managed and executed in a very systematic manner. Now more than ever, the purchase needs to be based on known pain points or organizational weaknesses. The purchase needs to help solidify the organization’s future. The resulting purchase needs to allow for tangible benefits and a measurable return on investment. The purchase needs to be justifiable for both the selection team and the organization’s leadership.

While this may seem like a pipe dream to some, concrete return on investment is completely feasible when the right ERP software is purchased and implemented. From inventory reductions and improved order fill rates to more efficient back-office processing, ERP software can significantly improve an organization’s bottom line and overall profitability. ERP software can provide a genuine return on investment through lower inventory carrying costs, reductions in overtime hours, and more efficient production lines.

While these are only a few areas of ROI, they are realistic expectations when implementing a solid ERP solution. These benefits can provide a relatively fast payback, and they represent the means to justify the purchase that brings along with it a number of additional intangible benefits such as visibility to data, improved customer service, and an increase in overall customer satisfaction. Intangible benefits aside, in uncertain times, any major expenditure needs to be backed by measurable results.

If 2009 brings the promise of change, an ERP software purchase can help provide the catalyst for that transformation. It can provide the backbone for an organization’s future by offering a path to a more efficient operational flow and a more productive workforce in the months and years to come. It can be a justifiable purchase with solid return and measurable payback.