How NOT to Write an RFP for ERP Software: Death by RFP

October 31, 2011

Just in time for Halloween we have “Death by RFP”

[Guest post by David Michaelangelo Silva]

how-not-to-write-rfpRFPs can, and should be, an effective way to outline your requirements to potential vendors. Unfortunately, they can also get in the way of the process. Let’s take a look at some of the problems overly complicated RFPs can pose. (For the uninitiated, RFP = Request For Proposal.)

 Too Much Detail

 An RFP can be a great way for vendors to get a glimpse of your requirements and business processes. However, sometimes an RFP can get carried away in the details. Sending out a 14 page RFP, for example, may result in very few responses from vendors. Many vendors have policies around the size of the RFP they are willing to respond to, so if you want a good mix of interested vendors it is best to keep the size and details at a reasonably high level.

 Large organization with complex requirements and business processes may require a lengthy RFP; however, small to medium businesses would not require the same level of detail. For a small business, an RFP need only be a few pages in length.

 Too Specific

 Sometimes software seekers get carried away I what they include in an RFP. An RFP should be used to outline business requirements but frequently include specifics such as exactly how they would like a system to work. For example, instead of outlining how they deal with customer information, they might specify that the software needs to have a “customer review screen” that includes “past sales history, contact information and credit limits”. This is often too specific as each software system is different and may present the information in different ways. These specific requests are more appropriate at a later stage such as during a demo when the vendor can show you how the information is required.

To reiterate, it is important to write the RFP from a “business requirement” point of view, rather than a “software functionality” point of view. After all, it is only important to know that the vendor can provide you with the information you need. How they each do so is what will set them apart.

 Not Enough Detail

This is rarely a problem but still occurs. For example, you may be searching for software for a primarily distribution business, however, it has not been clearly stated that there are also manufacturing requirements as well. Software to meet manufacturing requirements is often magnitudes more expensive than distribution software so it is important to clearly identify these requirements. In this case, you may consider implementing distribution software to address the vast majority of needs excluding manufacturing, or include it understanding that there is a significant cost difference.

Making overall business processes crystal clear can help eliminate surprises while always remembering to minimize the level of specifics.

 Unrealistic Expectations

A common problem, often compounded by one of the others mentioned above, is the desire for significant functionality for very little cost. It is very useful to include budget figures in an RFP to indicate to vendors the range in which you are willing to spend. However, some preliminary research should be performed to ensure your budget is realistic for your expectations of the software. For example, you will not find an integrated inventory, accounting, customer relationship management and eCommerce system for $10,000. Often your budget will have to fall in-line with your requirements or, less optimally, your requirements must fall in-line with your budget.

RFPs with unrealistic expectations will often generate few responses and little engagement but if they do, be warned – you may find a vendor that says they can do what you ask for that price when they cannot. The project will far exceed your budget or their delivery will fall far outside your expectations.

 Soliciting Too Many Vendors

A common problem, that usually accompanies an overly detailed RFP, is that too many vendors are solicited. Depending on your requirements, if you send out RFPs to 30 vendors you may get a response from at least 15 which is too much to deal with. Looking at that many vendors may lead you to shop purely on price instead of overall fit. In order to avoid this, you might try to do some preliminary research and only send out the RFP to vendors who seem to be a good fit from some basic research. You might also try software comparison sites to help narrow down whom you speak with.

Aiming for a maximum of 5 or 6 vendors to be short-listed to 2 or 3 is ideal. More than 5 or 6 initially will make it more difficult to pick apart the differences.

 Due to the number of possible problems with the RFP process, it is often good practice for small businesses to skip it altogether. It is important to have a good understanding of your requirements but they do not necessarily have to be written down in a formal manner. They can then be taken to a select few vendors whom preliminary research has been accomplished to begin discussions allowing for a personal and dedicated approach which is beneficial.


e-commerce and Inventory Management

October 20, 2011

Following on from the discussion on e-commerce and ERP software not being islands, let’s consider a practical example that perplexes many business owners and software vendors alike.

Many online webstores are part of a business that processes wholesale orders. In fact, more and more wholesale / distribution companies are selling products online, direct to consumer. And this adds a new dimension to their inventory management: how to allocate products appropriately, even if your webstore is set up to electronically interface with your ERP Software.

Say that you have 2,110 widgets in inventory and available. A consumer who’s never purchased from you before buys 12 of them on your webstore, and pays by credit card. She’s already been “told” online that the product is available and her credit card has been charged. 30 minutes later, your biggest wholesale customer who spends half a million dollars a year with you places an order for 2,100 widgets – and it’s a “ship complete” order.

Now you have a dilemna: you can either fulfill the consumer order and hold up a much larger order for a very important customer because you’re just 2 units short, or you can “steal” 2 units from the consumer, breaking your online “promise” and having to then credit back the difference to her credit card. Neither of these is a good option.

So what’s the solution? Well, there are several ways of going about preventing this, but they all require tight integration between front and back-end software, and well thought out policies properly implemented. As an example, one approach may involve not actually processing the consumer order online, but rather doing a pre-authorization of the credit card (instead of actually processing payment) and providing an order confirmation number, setting the expectation that inventory appears to be available but will be confirmed later by email. Then, when we pick and pack orders, we allocate inventory based on our priorities, and the system automatically notifies our consumer (with apologies) that we only have 10 widgets available, but we’ve only charged her credit card for 10. Perhaps the system also applies a discount as compensation for the short-shipment, to keep the customer happy. And all this without manual intervention.

The reality is that almost every system in place in small and medium-sized companies could not do this today. Here’s one that can do so.


The Importance of Software Maintenance

October 13, 2011

The Institute of Electrical and Electronics Engineers (IEEE) defines software maintenance as follows:

“Software maintenance is the process of modifying a software system or component after delivery to correct faults, improve performance, or adapt to a changed environment”

This definition of maintenance is a succinct outline of the benefits of software maintenance. Much like your car, software requires periodic refreshes to ensure it continues to run smoothly, aclip_image002s well as preventative maintenance to reduce the occurrence of problems.

Correct Faults

Software maintenance packages provided by vendors offer peace-of-mind protection by keeping you covered for bugs and software problems. Like any other product, most software packages are under warranty for a specific period of time. Once these warranties expire, however, you may be required to pay out of pocket for fixes, much like you would for your vehicle. Maintenance programs allow your software to stay in warranty so you do not have to come up with cash should an error occur.

Improve Performance

Maintenance programs should include an upgrade component. Under a maintenance program, you will be entitled to free upgrades – usually onceper year. These upgrades often address issues reported by other software users and can greatly improve functionality or performance. Considering the overall cost of upgrades over time, this component of software maintenance is often all that is necessary to make the program worthwhile.

Adapt to a Changing Environment

Technology and the Business environment are the two of the fastest changing aspects of our world. It is increasingly important to make sure that your business is always taking advantage of the best that your software has to offer and that your software matches the business requirements of the time. Regular updates and maintenance will allow you to keep up with market trends and ensure your business is as efficient and effective as it can be.

Predictive Cash Flow

The last benefit, but one of the most significant from a financial perspective, is the ability to gain control over your software expenditure. If you are covered for software bugs and receive regular upgrades, your overall IT expenditures will be reduced to a single monthly (or yearly) fee – your maintenance fee. This eliminates the guessing game of IT expenditure and eliminates large unexpected upfront costs down the road.

Benefits of a maintenance program video


FDA / ISO Compliance – ERP Software to the rescue!

October 11, 2011

Compliance with FDA requirements can be a big burden on small / medium sized  medical distributors. Personnel limitations, and the need to be nimble, cause many such companies to cut corners, and get caught out when audited in inspected. Yet a well-chosen and properly implemented ERP Software system, providing appropriate Inventory Management and Lot Tracking capabilities, can go a long way in helping companies demonstrate compliance.

Michael Nealon, CFO of Southern Implants Inc. of Irvine, CA, has kindly shared his experience and learning in this blog post.

Product traceability is a huge issue with medical devices with both ISO (13485 for medical devices) and with the FDA. We need to know in very quick order where each unit of every device that either we purchased in a finished state or manufactured has been distributed.

In this regard an effective lot tracking system is essential. The lot information must follow the product through all activities – purchase receipt – manufacturing – sales – returns – consignment transfers –  physical count or other adjustments. Further, the lot information must be easily searchable.

While recalls are very rare, and we have never been in that situation, you must be able to demonstrate the ability to carry out a complete, effective recall using this information at all times.

Another important aspect of the Quality System that both ISO and the FDA assess is the company’s use of data analysis including trending as part of the management review processes. The ability of the ERP to readily produce information relevant to quality matters facilitates effective compliance in this regard. The use of fields in our order entry screens track product warranty shipments which is a very important metric that we follow and report on internally as part of our management reviews. Basic data such as trending sales of different products on a line by line basis and family groups (using category groupings) and within different markets using customer categories is frequently used.

Further, relevant to both the FDA and Health Canada we must have all products approved for sale.  We use fields within the product file of Blue Link Elite to track specifics of the approvals for each product in order to demonstrate that each product sold in either of these markets is approved.

All standard operating procedures (“SOP’s”) are developed with the requirements of both ISO and the FDA being paramount. The ability of the system to effectively control permissions is important to ensure that personnel activity is limited to those functions which they are assigned, based on the activities described in the SOP’s. Manager reviews are important and to the extent that we need to separate the rights of individuals creating transactions such as sales order and purchase orders from the individuals who approve these transactions and post them the ability to use the permissions is crucial.

Product Labeling is a very important matter for medical devices and this area is given a great deal of attention by the FDA in particular. The internal consistency of product label information in terms of product codes and product descriptions appearing on invoices and packing slips is important to ensure that there is no confusion on both our part and on the part of customers ordering, receiving and using our products. The ability to readily import, export and modify both product codes and descriptions in Blue Link Elite allows us to effectively and efficiently audit our product codes and descriptions to ensure the integrity and consistency of this information.

Our process validations, which are a key focus of our SOP’s and of the regulators review, are the product cleaning and sterilization processes. Our processes justify us assigning a particular expiry date on the products which we manufacture. We are required to have a method to track the expiry dates of both product that we manufacture and that we purchase to ensure that we do not sell products which have reached expiry or are nearing expiry. We use fields in Blue Link Elite to populate and track lot expiry dates and we easily developed reports to tell us what product lots are approaching expiry so that they can be removed from stock.

Also, in aid of minimizing the number of product items which approach lot expiry, order entry in Blue Link defaults to pick the earliest product layer (which will almost always have the earliest lot expiry) when choosing lots to fill orders.


e-commerce and ERP Software – not islands

October 6, 2011

In the chicken and egg post on this subject, we considered practical eCommerce questions like:

  • How can we grow sales rapidly?
  • How can we keep customers happy so they keep buying?
  • How can we fulfill sales quickly and efficiently, allowing for growth, while maximizing profitability?

So if I’m a customer, placing an order on an online consumer web site, here’s one way to ensure I never shop with you again: let me place my order, charge my credit card, set my expectations on delivery, and then 3 or 4 days later, call or email me to tell me that you cannot ship what I ordered, but you can ship some of my products, and some substitutes, but the total cost will be different from what was charged to my card. I’ll probably tell you to cancel the order and refund me, but even if I don’t, I probably won’t shop here again.

One way to avoid this is seamless and appropriate eCommerce integration with a back-end Inventory Management ERP software system. That pre-supposes that the ERP software is effective, and has been properly implemented. Then, the appropriate level of integration should prevent you from selling, and charging for, product that is not actually available to that customer. If I get real-time information that the products I want are not currently available, and am given some alternatives before my expectations have been set and my credit card charged, I’ll be fine with your customer service and likely will shop at your online store again.

I see many e-commerce solutions that allegedly integrate with various back-end inventory management and accounting systems. I’d estimate that at least 90% of the instances I’ve seen are not properly or appropriately integrated. And most of those businesses are losing online sales / customers / profits.

For some specifics on appropriate integration, check back next month.


What Does ERP Software Implementation Include?

October 3, 2011

When a business tales the step up from an entry-level accounting system like QuickBooks, into a more robust and scalable ERP Software system, proper software implementation is key to successful deployment. So what does “implementation” include?

For the small / medium-sized business, there are four distinct facets to an implementation, and ignoring or short-cutting any of them can lead to a very unhappy user when all is said and done:

  1. Data migration
  2. Business Consulting
  3. Configuration
  4. User Training

Data Migration

You don’t want to manually key in your customers and part numbers. You also want your new ERP system to have all your sales history in place. The good news is that, from a technology perspective, migrating this information is usually not a problem. The bad news is that it can usually be done quickly or correctly, but not both. To migrate data into a new system optimally, allowing you to use the new system to it’s potential, will usually entail some data cleansing (or “massaging”) activities by both the software vendor and the end user.

Data migration is not a single-stage activity. You’d want to migrate data ahead of time, to sanity check and for training purposes (see later), and then again at point of go-live.

Business Consulting

The business processes and procedures that you’ve developed while working with your entry-level system (and probably some Excel spreadsheets to supplement it) may work well for you at present – and of course you have a comfort level with familiar processes. But this may not be the best way to operate once you have a more powerful business software tool at your disposal. A good ERP Software Vendor will assist you in optimizing your processes to take maximum advantage of the system, and eliminate procedural bottlenecks and / or duplication.

Configuration

Your new ERP system will be much more configurable than perhaps you’re accustomed to. The same system can behave quite differently (and even look and feel different) depending on how it’s set up. Getting the initial setup right is crucial to a smooth implementation. While you should be guided by the vendor, you need to actively participate in this process to ensure that what you ant to get out of the system is taken into account during setup. While many configuration options can be changed / reversed even after you are live on the ERP system, by that time your hands will be full, and you may never get to making those changes. Do it right the first time.

User Training

No matter how user-friendly a system is, users need training. I believe that in the small / medium-sized business, there is no point training most end users until just a few days before go-live. Otherwise most of the training is forgotten / wasted. A “power user” or two should be trained ahead of time, but most users should experience training and go-live as a single, contiguous exercise. Users should only ever be trained on their actual (migrated) data, and should be trained on any changes to business processes at the same time.

Conclusion

You can do it cheap and quick, or you can do it right. If you want a successful ERP software implementation, do it right. Oh, and if your vendor’s cost estimate for implementation services looks too good to be true…..it is!


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