When we started the search for an ERP solution, I knew it was going to be difficult. Where does a person start? It is a crazy, crazy ERP world out there. Don’t believe me? Try this: go to the google homepage, type ERP, and hit search. The results “about 142,000,000 results (0.38 seconds).”
This is an ongoing series on the selection process we used to make our ERP choice. My goal is to help others about to embark on this journey. It is not an easy decision.
To recap the previous article, this is how we began our journey into ERP.
- We documented our current processes.
- We created a list (high-level) of what we did well and where we needed to improve
- We created a list (high-level) of what our current collection of systems did well and where it lacked
- We got management’s approval to explore ERP
So like everything else in life I need to research, I started with a good friend, Google. I typed in ERP, hit enter, and was immediately overwhelmed. The list was daunting. The number of companies offering ERP products, ERP research, or ERP selection services is outstanding. Where does a person start?
What I noticed very quickly, is that the ERP market is very segmented. This segmentation is good because it significantly narrows the search. Finding the right piece of the ERP market pie, makes the selection process easier.
First question to ask: are you government? in the public sector? a non-profit organization? or in the medical field? looking for a Retail system or Wholesale Distribution?. Are you a solely professional services organization? If the answer is yes to any of the above there is special segment of the ERP pie just for you. You should be searching within just these fields, contacting the companies that focus on these industries.
If you don’t fall into one of the above sections, then you have a few more things to figure out. We fall solely in the manufacturing realm. The manufacturing piece of the ERP pie is significant and probably the biggest sector of ERP. To narrow this further, you need to determine:
- the size of your organization (small, medium, or large)
- the type of manufacturing you perform.
- do you want cloud, no cloud, or a self-hosted solution?
The description of size varies a bit depending on the ERP vendor, but the two common determinants are the number of people and the annual sales. As a company of 150ish employees all in one location, we easily fit into the “small” category. This knocks off the “big boys” from the list, the SAP’s, the Oracles, etc that are big-business, and do big-business well.
Type of Manufacturing
Now that size is determined, what about the type of manufacturing?
Are you a discrete, process, or mixed-mode manufacturer?
- Discrete is the assembly of products from distinct items, think building a bicycle with nuts, bolts, the tires, etc. This is very Bill of Material (BOM) centric.
- Process manufacturer blend liquids or formulas. Examples would be food manufacturers, chemicals, paints, etc.
- Mixed-mode is a combination of discrete and process.
Are you Engineered-to-order (ETO), Make-to-order (MTO), Make-to-stock, or are you a job shop?
- ETO is where the product is made based on very specific customer requirements. The products are typically complex and require the involvement of the customer from project start to finish. Lot size is very small as ETO is not well suited for mass production.
- Make-to-order (MTO) or Build-to-Order (BTO) differs from ETO in that it is production focused opposed to engineering focused. Most components are stocked and only the high-expensive or high-customized components are manufactured to order.
- Make-to-Stock or Assemble-to-order (ATO) is where all components and sub-assemblies are built, in stock and are assembled when the customer places the order. Customer involvement is limited, typically only at the start where they select the options or configuration they want from a predefined list. This is also referred to as light-assembly and / or kitting.
- Job Shops focus on many, custom products or jobs. Each job is typically unique requiring its own set-up and routing steps. Lot sizes are small.
Most ERP vendors will claim to do all of the above, but you need to be careful as they all have their strengths and weaknesses. Some excel in certain types where others perform equally average across all of them.
As a manufacturer of mining equipment, but with roots as a custom machine shop, we are definitely a discreet manufacturer but fit into both the ETO and Job Shop fields. So even though we straddle two types of manufacturing, we were able to weed out the outliners that didn’t address our types of manufacturing well.
To Cloud or Not To Cloud
Finally, to cloud or not to cloud, that is the question. Most ERP systems today are self-hosted with a web connecting type portal. However, the are some now (like Netsuite) that are 100% hosted in the cloud. Others are optionally hosted internally or in the cloud. You need to ask yourself if you need to access your ERP 24/7 | 365 from anywhere.
As a single manufacturing plant, with no other locations or offices, having a cloud-based solution was not desired.. Not that we were opposed, but it just made more sense to have a locally hosted system that could potentially be accessed from the outside world. The biggest reason was even if the internet went down we can continue working.
So before starting your search ask yourself if being “in the cloud” is an advantage for your organization. If it is, then focus initially on cloud-based solutions, if you do not want to be in the cloud then scratch these companies off the list.
Finding the right ERP partner is a daunting task. It is hard, there’s a lot of pressure, and potentially a lot riding on making the right choice. It’s kinda like being at the bakery trying to pick out that one piece of pie. But by asking the right questions and knowing who you are, you can narrow the field to a few, making the decision that much easier.