Digital Manufacturing 101: Choosing an Enterprise Resource Planning (ERP) Platform

Thursday, March 7, 2019

Automation. Artificial intelligence. Machine learning. These sound more like sci-fi than actual business tools, right? If you’re like many small-to-medium-sized businesses, you might be taking your first steps into the Digital Age.

And that’s OK—you don’t need robots to realize sizeable gains in productivity and cost efficiency through digital technology. So where do you begin?

If you’re serious about improving your business’s competitiveness through better use of operations data, an enterprise resource planning (ERP) platform is a sound initial investment.  It will give your business a solid digital foundation while also readying your firm for newer technologies down the road like process automation and robotics technology.

 

But first things first—what is ERP?

An acronym among many that are used in manufacturing, ERP is an umbrella term for a wide array of software solutions. Commercial ERP systems were first developed in the 1990s, laying the ground for many other types of productivity software that have entered the manufacturing and business market since then. The reason for this comes down to one thing—data.

An ERP platform allows you to organize everything your business does under a single roof. It makes gathering and comparing data across different business processes simple and reduces data duplication and inconsistency. Think order fulfillment, receiving, distribution, or production. If you don’t have an ERP system, these processes are probably operated and managed separately, which can lead to blind spots and inefficiencies. 

Imagine seamlessly linking customer orders with inventory and supply chain status, and then syncing with shop-floor operations in real time. A new sale triggers orders for raw material, arriving material triggers accounts payable and manufacturing, when the product is ready and shipped, an invoice is automatically sent. An ERP system can dramatically improve efficiency and productivity, saving time and money.

 

Finding the right ERP for your business

The ERP platform that you select needs to closely align with how your business works. Be sure to dedicate ample time and thought to thoroughly researching available ERP products so that the one you choose really is the best fit for your company.

There are many hundreds of different ERP software packages available on the market, each one tailored to a specific need and situation. Below are four online sources that we recommend as good places to start researching vendors. 

In addition to researching online, have a look at ads in trade magazines and ask around at trade group meetings for recommendations. Be sure to reach out to your own professional network to see who may have advice to lend.

 

Know your bare-minimum requirements

Once you have an initial list of ERP vendors and packages specific to your industry or market, you’ll need to whittle that down to a short list by considering your bare minimum requirements.

To do that, ask yourself the following:

  • What are your key processes?

Most ERP products are built for a specific industry and/or type of business. Some are geared for managing warehouse purchases and distribution, while others may have a special focus on supporting businesses with a point of sale (POS) system. Identify those capabilities that are most important to what your business does day to day.

  • What is your budget?  

The price tag for ERP systems varies widely. Typically, a license fee is calculated for each user, either on a monthly or an annual basis. There are budget options, including open-source frameworks with paid add-on features and support that might work for you. Or if you have in-house IT expertise, you could consider implementing an open-source platform—Odoo, Xtuple Postbooks, and ERPNext are just a few popular options. There is no cost to acquire these platforms, but they may require more effort on your part to get off the ground. Online community forums, like Quora can be excellent for detailed guidance, advice, and tips related to setting up or operating an open-source system. 

  • How sensitive is your data?

The first ERP options on the market predated widespread use of cloud computing (through the Internet), relying on locally hosted software. Today the digital environment has changed and so too have ERP products. Many offer cloud-based options with a variety of add-ons to choose from for a more custom build. However, since data is stored on servers maintained by a third party (usually the vendor), you need to make sure that information security policies are in place that match your business needs and risk tolerance. 

 

A few useful tips for finding the best ERP vendor

Speed-score a list of possible vendors using an assessment scoresheet.

An assessment scoresheet is a matrix that puts the vendors you are considering alongside your company’s bare-minimum requirements. Using a scoring matrix (“0” meaning “not at all” and “5” signifying “completely,” for example), this tool can quickly provide a clear overview to support your decision-making.

Do walkthroughs of your most important processes and write process scripts.

The more you know, the better. Performing a walkthrough of your key processes and documenting each step will make it easier when you talk with a potential vendor to see how well their product will work for you.

Build a list of core requirements.

Ahead of meeting with a prospective company, make sure you know exactly what you need from an ERP system to be successful. A simple list of core requirements can be useful for this purpose.

Pro tip: Dive deeper into your processes—have staff members perform individual walkthroughs and review process scripts, too.  

 

Questions for vendors

Once you’re ready to reach out to your short list of vendors, these questions are a good place to start:

Can our current database be imported into your system? 

Remember: data is at the core of ERP. If you currently have a database (or spreadsheets), even if it’s partial, you may want to integrate that information into the new system. Not all ERP platforms have this capability. Others offer data migration as an additional option.

What customization options are available, if any? 

Many ERP vendors offer packages that are designed to meet a company’s unique needs. It’s an ideal approach and can give you better results than a one-size-fits-all installation. Additionally, it may open cost-saving opportunities because you can choose just the features or modules you need and skip those you don’t. Customization also offers flexibility, freeing you from the constraints that can come with a contract.

Do you offer staff training?

An important service to consider is on-site training once the ERP platform is installed. Typically, a representative from the vendor will schedule time with your staff to ensure they understand how to use it and how to interpret the information it provides. If ERP is your firm’s first foray into the digital sphere, this could make for a smoother transition.

Do you work through a value added reseller (VAR)? If so, how will that impact cost? 

Some ERP providers contract out installation and support services to a VAR. This can impact cost, so it’s good to know from the get-go.

As you narrow down the options further, you will want to understand how much effort it is likely to take to get your system operational. Find out whether the ERP company will provide this service or if it will be something that you will have to do yourself.

 

Ready to experience the benefits of smart manufacturing?

After you have selected your ERP platform, you will need an implementation plan. You can develop it yourself, with the vendor, or with an independent contractor. It is important to involve your internal team in the planning process at all levels of the organization.  Even if you are engaging an external resource for implementation, make sure that you understand the demands on your internal team.

Once you get your new ERP platform in place, your enterprise will be ready to leverage data in wholly new ways to streamline operations and improve customer responsiveness, improve decision making, reduce cost, and maximize resource and operational efficiency. You will also be ready to implement other smart and digital manufacturing technologies to amplify these benefits in the future.

 

Questions about ERP software? We can help.

Contact the Center of Excellence in Advanced and Sustainable Manufacturing at the Golisano Institute for Sustainability at RIT by calling 585-475-2596 or by emailing us.