What Distributors Want Out of Their ERP Software

February 29, 2012

Each industry has specific requirements that sets it apart and, of course, distribution is no exception. Neil Gillespie and Allen Ray recently wrote about “What Distributors Want” in a recent issue of Industrial Supply, where they gathered data from a study by Growth Wizards to determine what distributors are really looking to get out of their ERP systems.

As it turns out, many distributors are very dissatisfied with their current systems for a number of reasons, and are looking for change. According to the study, 50% of distributors do not currently trust the support and development of their existing system, and are considering a move to a new system in 3 years or sooner. Many vendors are not currently delivering on key requirements and it is beginning to show. Let’s take a look at the areas they have identified for improvement & their strategic objectives.


Attention & Education

Many distributors do not feel that they are receiving the level of attention they deserve from a development standpoint. Large software vendors may offer solutions across a variety of industries, and distributors feel that their distribution needs are being put on the back-burner. This stresses the importance of finding a vendor that is specific to your industry (e.g. distribution ERP software) or finding a vendor that is focused on constant development within your industry.

There is also a general distaste for the lack of education being provided. Distributors want solutions to their business processes, and not just the technology itself. They want vendors to work with them to streamline and automate their business so they can compete to the best of their abilities. Therefore, it is important to find a vendor that helps you improve your business processes.

eCommerce & Data

The medium-term strategic goals outlined by the survey respondents were eCommerce websites and better customer and vendor data/analytics. Distributors are pursuing opportunities to implement eCommerce integrated with their ERP software systems. They recognize the strategic benefit that an eCommerce webstore offers – a low-cost salesperson that is available for selling 24/7. Customers are demanding easier ways to order, and online systems are certainly the way to go. With customer-specific logins, distributors can maintain tiered-pricing for different customers while allowing them to enter in their own orders.

The second piece to this puzzle is customer analytics. Distributors want better information to help them compete. They are looking for more robust reporting, analytics and data-mining abilities from their ERP systems. Proper ERP systems should be able to provide an abundance of data and offer many options for getting that data out of the system. This data can provide extremely valuable insight for making strategic decisions on top of everyday tasks like purchasing. This does not have to be either costly or complicated, although many vendors seem to make it so.

The bottom line: many distributors are looking for better solutions for their business to increase their competitiveness in the market – are you?

The Importance of Phase 2 ERP Software Implementation

February 27, 2012

phase-2-erp-software-implementationIt goes without saying but I’m saying it anyway: ERP software implementations are far more involved than installing software like QuickBooks or consumer software like Microsoft Office.  You would be amazed at how many business owners believe it realistic to have a new ERP system in place in just a week or two. The robust functionality of a true ERP system requires a proper implementation (planning, installation, configuration, data migration and employee training) that will take at least several weeks if not months in total. This initial planning, installation, and training is what we refer to as “Phase 1” software implementation. Unfortunately, many businesses never see past Phase 1 – but they should.

Phase 2 implementation is the notion of improving upon the bare essentials and fully utilizing the functionality available in the system you have selected. Phase 1 focuses on getting the software up and running and on the essentials required to run your business on the software. However, the most important, but more complex, features are often left to a future date when employees are more comfortable with the software. This is a recommended strategy, but unfortunately these next steps are often forgotten, leaving some of the most powerful features out of employee reach. Chances are you selected your software because of several powerful time-saving features – make sure you get everything you are paying for!

The important of Phase 2 implementation cannot be overstated. Below are some of the benefits gained:

Benefits of Phase 2 Implementation

Further Reduce Manual Processes Phase 2 allows for a closer look at the details necessary to squeeze out as much efficiency as possible. Employees who know the software’s best tricks will be far more productive.
Increase Business Transparency Advanced reporting and analysis can be addressed in Phase 2 to ensure that you have access to all data important for measuring business success.
Address System Limitations Software is always evolving so there is always room for improvement. Robust software can easily accommodate changes and eliminate limitations where they once existed.
Integrate/Eliminate Other Systems A robust ERP system should accommodate the vast majority of your business processes. However, sometimes other systems are still required. Phase 2 can focus on finding ways to eliminate the work around systems that are still in place.

Once you and your employees have become comfortable with your ERP system, it is time to revisit the software and ensure you are getting everything out of it that you can. Sure, you may incur some additional consulting or training costs but the amount of time these advanced features and nuances can save is often substantial.

The hidden ERP Software problem

February 22, 2012

erp-software-problemUp next in the series on problems with ERP software: the problem that you don’t know about.

I’ve read various studies that suggest the average company uses between 40% and 60% of the relevant functionality of their ERP software – “relevant functionality” being the functionality that, if used, would provide measurable benefits to the company. My anecdotal experience in the small and medium-sized enterprise (“SME”) arena over 25+ years tends to support these stats. If you stop and think about it, this is a staggering thought: most companies, even if they have selected and implemented the appropriate inventory accounting software, are still only realizing around half the measurable benefits! It’s like buying 8 tickets to the Superbowl, then only taking 3 friends with you, and dumping the other 4 tickets.

The reason for this is one simple missing ingredient: follow-on training. When you implement a new ERP system, the initial focus is on addressing key / existing business processes, and managing the key logistical daily functions of the business. This is also the period during which you’re most heavily engaged with the ERP vendor. During this time, any training or advice you receive regarding more advanced automation and data analysis, for example, tends to largely go in one ear and out the other, because it does not relate to the most pressing issues you’re faced with during those very stressful first few weeks.

The ideal time to really capitalize on the advanced benefits that the ERP software offers is some time after go-live, when you’ve mastered to routine daily and weekly functions, and ironed out your logistical business processes with the new system. So perhaps 2 or 3 months after go-live (in the SME environment), you really should be re-engaging with your provider and initiating a “phase 2” implementation – based on measurable and beneficial “extras” and advanced options. But in the real world, most SMEs are not willing to do so. I’m never 100% certain to what degree this is an attempt at cost saving, versus a defense mechanism against information overload. But either way, it is most certainly a missed opportunity – because if you leave it too long after go-live, the organization becomes entrenched in the current way of doing things, and even if that’s in efficient, it becomes increasing,y difficult to effect change.

Real life example: a company went “live” on our ERP Software around 9 months ago, on the understanding that after 2 – 3 months, we’d show them how to completely automate an Excel analysis tool that they currently spend around 2 days per month manually updating – re-keying data that is already in the software. Well, 9 months later we’re still trying to get this customer to spend around 2 – 3 hours with us, after which that 2 days of manual updating per month will be completely replaced with a single mouse click. And yet they remain “too busy” to schedule that session.

At least the good news (from my perspective) is that this is an exception amongst my customer base.

Problems in the Search for ERP Software: Lack of Time

February 14, 2012

problem-search-erp-software-lack-of-timeLast week we wrote a post about some problems finding the right ERP software. This week we are going to focus on common problems inherent in the search itself. Let’s begin with a story.

You, the CEO/President/VP of Operations/CFO, are extremely busy. You work for, or own, a small business and chances are you are involved in many aspects of daily operations. You understand the importance of keeping the business running smoothly but at times you are too busy fighting fires to make changes necessary to maintain efficiency. So it is a Saturday afternoon and you have found an hour of spare time between helping your children with their homework and finishing up work for a client meeting on Monday, so your turn your mind towards to finding new software. You jot down a couple of vendors, fill out forms on their sites and eventually have a brief conversation with them on the phone. Then your head starts spinning and you figure you cannot continue the process because you are too busy, so you drop all communication. You continue with the status quo, knowing all-too-well that your current software is compounding the daily problems that keep you pre-occupied.

Does this story sound familiar? It is certainly very common from our perspective.

The good news is that, as a small business, there is a way to get around how busy you are – implementing new software! The first step to making the software the search process easier is by understanding how important it really is. Think of it like this: how much help would it be to have another efficient employee at your beck-and-call? A proper software system can be at least that effective – reducing strain on current resources by eliminating manual work, fixing errors, duplicate data entry etc. Thinking of a new software system as a full-time employee can be a very motivating mindset and can help with budget setting. You can spend $35,000/year on a new employee or $30,000 once on a new system. No-brainer decision, right?

It may seem impossible to add another item to your ever-expanding list of things to do, but avoiding “I’m too busy” is crucial to eventually implementing a system (that will save you a great deal of headaches and free up a lot of time in the future). Think of it as an investment in your mental well-being as well as your business.

The 4 steps to avoiding “I’m too busy” are to:

The Problem with ERP Software

February 10, 2012

Anyone who’s used any ERP Software or accounting package for more than a few minutes has experienced some level of what we’ll generically label “ERP Software Problems”. Over the next few months, I’ll sporadically explore some of the more common categories of ERP problems that you may have encountered (or that may be in your future), with a view to providing some insider insight into why these problems arise, and how best to deal with them.

In this first look, we’ll examine what’s probably the largest and most costly ERP Software problem: namely, a poor fit. In this unfortunately common situation, a company has implemented a system that is just not a good fit for their business. This may be due to the software itself being inappropriate, but could also be because the ERP Software vendor was not the right choice.

ERP Software Problem: poor fit

 Why do so many companies end up implementing software that is not a good fit for their business? There are many reasons, but the three that I’ve most frequently seen, and that keep recurring, are:

  • Buying based on price, or with a pre-conceived budget – if you make cost your number 1 (or even 2) decision point, you will choose the wrong solution at least 50% of the time, if not more
  • Lack of understanding of your own business needs and processes. If you have a clear picture going into the decision process, of how your business should look after the implementation, you’ll likely choose appropriate software. If not, you won’t.
  • Sweating the small stuff – a corollary of the above point is that it’s the big things that count in this decision, but if you focus on the small stuff you may miss the big stuff. The more detailed features you focus on, without evaluating how important they really are, the more prone you’ll be to either indecision, or the wrong decision.

ERP Software Problem: wrong vendor

Even if you have chosen ERP Software that is potentially a good fit, if the vendor is not appropriate you’re going to have problems. If you work with a vendor that has no experience in your industry, or one that’s accustomed to implementations at companies that are much larger (or much smaller) than you, then the software problems you’ll encounter may well be related to setup, implementation and training rather than the package itself.

Additionally, I firmly believe that there should be a “meeting of the minds” between you and the ERP Software vendor – a similarity in corporate culture and values – as this will result in a truly positive business partnership.

From the perspective of an ERP Software vendor, I can tell you from many years of experience that the fit between ERP vendor and customer is crucial, and works both ways. As a vendor, I don’t want a customer if we are not a good fit for them, at either the software or corporate culture level – in such situations, everyone loses.

In summary, the starting point to avoiding ERP Software problems is to avoid the wrong software, and avoid working with the wrong vendor.

6 Factors for Evaluating ERP Vendors

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