A man in a neon green high-visibility vest leans over a table and looks at the screen of an open laptop. In one hand, he holds a piece of paper; he uses the other hand to both hold a pen and type on the laptop's keyboard. The man is in a large warehouse; behind him is a massive pile of wooden pallets. Another man with a hi-vis vest is walking past the pallets.
When searching for an ERP system, consider what systems your competitors and other businesses in your industry use. You can also seek advice from an ERP consultant. — Getty Images/Drazen Zigic

Enterprise resource planning (ERP) software centralizes financial and operating data, making them excellent solutions for growing businesses. However, they can be challenging to implement, and ERP requirements vary by industry and organization. Therefore, companies must analyze their needs and expectations when selecting an ERP system.

A purposeful ERP selection process helps your company find software that supports high-level goals while ensuring employees have every tool to accomplish their tasks. Explore best practices for choosing an ERP system.

Form an ERP selection team

An ERP system affects every part of your operations. Involving managers from accounting, human resources (HR), inventory, and sales helps leaders understand pain points and mission-critical tasks. Since each departmental head will oversee technology adoption, making them part of the ERP selection process can improve implementation and deployment.

Forrester Analyst Liz Herbert told CIO that organizations should schedule one or two software demos early in the selection process. Aside from showing staff what an ERP is and how it works, product demonstrations help them visualize the possibilities. From there, they can collaborate on documenting workflows and developing an ERP requirements checklist.

[Read more: Benefits of ERP Systems for Businesses]

Evaluate business processes, challenges, and strengths

The best way to discover your ERP requirements is by reviewing your current workflows. Department leaders and end-users can provide valuable feedback regarding what’s working and where problems arise. The review should identify processes that will run through the ERP entirely and those that will remain separate but need integration with the ERP software.

Some companies work with ERP consultants to conduct internal assessments and develop selection criteria. Depending on the complexity of your systems and processes, going this route may save time and provide more complete insights.

When considering your system’s strengths and weaknesses, ask the following questions:

  • Have we outgrown our accounting software or need financial reports that look at supplier and warehouse costs?
  • Do leaders feel confident in the accuracy of your data and analytics?
  • Have supply chain issues affected our organization? If so, could process changes or more visibility resolve these problems?
  • Do reports display the information needed to make informed decisions? If not, where is more visibility needed?
  • How many software programs do employees use to complete a process, and does app switching reduce productivity or lead to poor user experiences?
  • How much time does IT spend managing and integrating various software systems?
  • What does current process automation look like? Do employees feel the automated workflows are effective?
  • Are we meeting customer expectations and company sales goals? If not, which processes or tools would improve outcomes?
  • Do managers express concerns about complying with national or global regulations?
  • Can we accurately predict inventory needs and develop financial forecasts?

Along with pain points, your analysis should consider what future business processes should look like. The final needs analysis will highlight what your company does well and where it’s failing. It should also help you decide which ERP modules you require for initial implementation.

Identify ERP software requirements

Functional fit is essential to successful ERP implementation. It’s important to determine which modules your company needs now and in the future and if you require industry-specific features.

In addition to finance and accounting modules, ERP vendors may support the following areas:

  • Procurement.
  • Order management.
  • Manufacturing.
  • Inventory management.
  • Human resources (HR).
  • Customer relationship management (CRM).
  • Warehouse.
  • Supply chains.
  • Project management.
  • E-commerce.

Most ERP implementation plans include six phases, starting with discovery and planning.

David Luther, NetSuite

Create an ERP selection criteria checklist

Streamline vendor demos and comparisons with a detailed list of must-have functionalities. Consider everything from what tools need to integrate with your ERP to which manual processes require automation. Since many ERPs have similar capabilities, it’s crucial to do more than simply list features.

For instance, do you need EDI (electronic data interface) for data sharing, or will web services and XML files suffice? Which regions and territories must sales, e-commerce, and manufacturing modules accommodate? These granular details help you compare ERPs and understand each system’s functionality.

An ERP selection criteria checklist should address:

  • Data and analytics.
  • User experience.
  • Language and currency requirements.
  • Automation.
  • Upper management and user support.
  • Mobility.
  • Integrations.
  • Ease of customization.

ERP Focus provides a free ERP requirements template with over 200 evaluation items. It covers features across various modules, including accounts payable, transportation, and supply chains.

[Read more: 4 Ways to Make Your Small Business More Innovative]

Consider the total cost of ownership

An ERP is a big investment requiring short and long-term costs. Along with determining your budget, you should calculate the total cost of ownership (TCO). This varies by industry, company size, and installation method.

ERP Focus stressed the importance of understanding that "[y]our choice today will lock costs into future budgets.” To this end, NetSuite recommended, “To achieve an accurate picture of the return on investment (ROI) for an ERP system for your organization, it’s a good idea to look at the payback over a five- to seven-year time frame.”

Consider upfront and ongoing expenses, including:

  • Number and types of user licenses.
  • Module requirements.
  • Implementation costs.
  • Customization requirements.
  • Data migration.
  • Number of countries you do business in.
  • Hardware upgrades.
  • Software maintenance.
  • Project team resources.
  • Training and support services.

Outline your ERP implementation plan

ERP vendors will provide time estimates for implementation. But you can gather more details beforehand to get a more accurate idea of how long the process will take and how much it will cost. In TechRepublic, Eric Kimberling, Founder of Panorama Consulting Group, said, “This plan should be developed prior to your final software decision so you fully understand the cost and resource commitments required to make the project a success.”

According to NetSuite, “Most ERP implementation plans include six phases, starting with discovery and planning.” Begin stage one while assessing vendors, then move to the next five categories after selecting an ERP system.

Explore potential ERP solutions

Start your search by looking at what ERP systems competitors use. Research organizations online or work with an ERP consultant. Your industry contacts and colleagues may have recommendations as well. Review ERP vendor rankings and market research from industry analysts like Gartner and Forrester.

Also, check out software rating websites like Capterra and G2. You can filter results by company size and sector to view feedback from similar businesses. Once you develop a shortlist, research vendor reputations further by looking for adverse press reports, financial or investment issues, or complaints.

As Kimberling stated in TechRepublic, “There are at least 70 viable ERP software solutions in the market — all with varying degrees of functionality and strengths.” He suggested that companies focus on “options that are going to best meet their unique business requirements and sources of competitive advantage.”

[Read more: How to Create a Resilient Business]

Compare ERP vendors and systems

Use your ERP selection criteria and process requirement checklist when meeting with potential software vendors. The sales representatives should be able to explain how their system functions for your precise needs.

Questions to ask vendors during the ERP selection process include:

  • What’s the average support staff tenure and experience level?
  • Can you provide case studies for businesses like ours?
  • How often do they update the software?
  • What upcoming features are in their product development pipeline?
  • Can you explain the implementation roadmap?
  • Where is your customer service team located?
  • What training and support options do you offer?

ERP Focus emphasized, “Your ERP should make things easier — not harder — on all departments.” So remember to ask questions about usability for each step of the process, including integration, customization, and support for new technologies.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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