Six Key Criteria for Selecting a Manufacturing ERP Solution

By Al Bredenberg
09/27/2013

Choosing and implementing an ERP (enterprise resource planning) software package is a major, costly, and time-consuming venture for many manufacturing organizations. Whether successful or not, the decision is likely to have long-lasting effects on the company’s operational and financial performance.

Here are some of the most important considerations in choosing an ERP system for a manufacturing business.

1. Choose a vendor and product with proven expertise in your industry.

Jeff Carr, principal at Ultra Consultants of Chicago and a specialist in business improvement and ERP software for manufacturing, told Tech Trends Journal that manufacturers need to look for a solution that fits their business processes. “It makes no business sense to force-fit an ERP solution to fit a specific industry,” he said. “Instead, take the time to assess what ERP systems have the features and functions that address those industry challenges faced by the manufacturer.” The vendor should be able to demonstrate success in your company’s industry and should be able to address key requirements such as regulatory mandates. Carr suggested shortlisting “the ERP software systems that most easily accommodate a company’s distinctive processes” and flexible solutions that fit with existing systems.

2. Select a solution closely aligned with your company’s technology strategy.

Your company IT department needs to be brought into the planning and selection process early on, Carr said. Do the ERP systems under consideration fit with the overall technology strategy of the company? Are current IT resources sufficient to handle the proposed systems, “including servers, database management, and security and safety protocols?”

3. Address functionality requirements.

ERP specialists Panorama Consulting Solutions said that, while there are stand-alone manufacturing software packages available on the market, they believe that “the best manufacturing solutions are tightly integrated into a centralized ERP system.” The functionality a manufacturer will need depends on its industry focus and its production processes, according to the firm. Panorama places manufacturing ERP solutions in three categories, depending on the company’s production environment:

●      Process manufacturing software

●      Discrete manufacturing software

●      Mixed-mode manufacturing software

The selection decision should focus on whether the production environment would be considered continuous process, contract manufacturing, job shop, batch processing, repair and maintenance, repetitive, or work-order based. Panorama’s extensive list of functional requirements for manufacturing ERP includes job cost accounting, capacity scheduling, material requirements, product sourcing, inventory management, shop floor reporting and scheduling, product configuration, workflow management, quality control, manufacturing process and flow, product lifecycle management, and requirements around customers, tariffs, and regulations.

The list grows longer for contract manufacturing because of the complexities of managing multiple customer requirements and scheduling. Panorama says that a good ERP system for contract manufacturers will offer “detailed costing information, robust demand planning and production control, integrated financial management, and a strong inventory control for raw materials and finished good inventories.”

4. Carefully weigh the cloud-versus-premises decision.

Should a manufacturer consider a cloud-based or software as a service (SaaS) ERP solution? Some IT professionals are leery of such systems and have concerns around such issues as security, latency, and whether such a system can be sufficiently customized -- or simply over the fact that the company is giving up control by depending on software that is off-premises.

Writing for Quality magazine, Mark Symonds, CEO of manufacturing ERP cloud provider Plex Systems, points out that SaaS customers benefit from the cost efficiencies associated with cloud systems’ multi-tenant architecture. To work for a manufacturing operation, Symonds says, a cloud solution should offer such functionality as production and scrap tracking and overall equipment effectiveness (OEE) reporting, process and work instructions supported by video and images, support for part numbers and bill of materials, synchronization of engineering changes with work instructions, product and part traceability, and support for industry-specific quality and safety procedures. All of this is indeed possible with SaaS solutions, Symonds insists, along with support for plant-level PLC data inputs, bar codes and labeling.

“It is important to take a step back from all the cloud hype, dissect your manufacturing needs, and then assess if the Cloud is a fit,” Symonds advised. These days, robust solutions are available in both SaaS and on-premises forms, he says: “The bottom line is that the software has to work for each operation regardless of how it is delivered.”

5. Be proactive and assertive about vendor references.

Caution is called for when investigating a vendor’s references, Carr warned. Rather than just accept the vendor’s carefully crafted list of favorite references, he told Tech Trends Journal, “ask for a list of specific, relevant customers that have been using the system for a year or more in the same industry and facing similar requirements.” Ask for references from manufacturers of a size similar to your company. Make on-site visits, and take along a team of knowledgeable people from your company who will be affected by the ERP decision.

6. In evaluating costs, don’t forget TCO and ROI.

Carr told us that the ERP project budget needs to take into account both initial implementation and total cost of ownership (TCO). Make sure you have a clear understanding of deployment costs, he cautioned. “A solution quote typically includes software, first-year support, and implementation consulting.” Initial costs usually involve “a complete ERP system for a single site,” but “additional sites and modules will increase the cost.” Be aware whether the contract excludes such necessary tasks as training.

TCO needs to look at such factors as “per user license costs, training, maintenance, customizations, upgrades, internal costs, and other fees.” If a solution is cloud-based, Carr said, “Take a hard look at the service level agreement for any hidden costs, such as system enhancements and upgrades.”

Beyond implementation costs and TCO, though, manufacturers should analyze ROI, return-on-investment. A more costly system might pay dividends in important ways, Carr said: “The anticipated return must consider process improvements, including a more streamlined ordering process, reduction of physical inventory counts, improved production quality, better scheduling, and more.” The company can realize savings and benefits in important areas such as “access to real-time information for more accurate materials planning, integrated databases, streamlined information reporting, dashboard reporting, and other uses of real-time data,” he said.

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