‘We are expanding our business and planning to implement SAP
and need your help in implementation’ my customer requested. ‘But why do you
think that SAP will address your business challenge? Are you ready for SAP?
Have you checked other ERPs?’ I asked him. ‘Because our competitor has bought
it and as I understand SAP is the most popular product’.
Dear friends, I am often involved in such kind of discussion.
The important point is not whether SAP is good or bad but do I really need it
or whether we can implement it successfully?
There are hundreds of ERP products available in the market
and particularly SMEs (Small and medium enterprises) are always confused about
choice of the product. In this process they either buy expensive ERP product,
which is not at all suitable for them or end up in the ERP which never sees end
of the tunnel i.e. never gets implemented after spending lot of money and
efforts.
Following are 5 most important factors which are essential
for SMEs while selecting ERP,
- Volume of transaction – If
your organization is involved in high number of transactions e.g. per week
if hundreds of goods receipt, hundreds of despatches are involved or if
type of raw materials, semi finish or finished goods are in multiple of thousands
or if you have multiple plant or storage locations, large number of
material transfer between plants, distributors and sub-contractor then you
need robust proven ERP systems such as SAP or Oracle. Typically FMCG or
Auto companies falls in this category
- Type of industry –
Most of the international ERP product are originally designed for
manufacturing companies and hence may not be suitable for certain
industries such as Real Estate, Infrastructure or IT industry which are
project based industries and not manufacturing based industries. Real
Estate or construction companies have some specific business needs e.g.
project tracking is more important for such organizations. Few specialized
industry specific ERP systems are recommended for them. SAP has built
industry specific applications on the top of standard ERP but it’s very
expensive and some time difficult to manage.
- Highly specialized business
needs – Finance, Purchase, Inventory management are
considered as core business functionalities and are common for almost all
industries. However few industries has very specialized business needs other
than the core business functionalities. E.g. Production planning is a
functionality which varies from industry to industry. Production planning
requirements of industries such as auto part manufacturing and that of
chemical plants are completely different. For some industries such as
FMCG, Pharma, Paint etc. supply chain is extremely complex and for
industries such as auto ancillary, plastic, etc material flows through
multiple work stations before final product is produced where same machine
is shared by multiple products. In such cases Planning modules of most of
the standard ERP are inadequate and need additional products to support
planning e.g. SAP has APO as a separate product only for planning or i2 is
another well know product only for planning. Such products can be integrated
with standard ERP. Similarly customer interaction is critical for few
customers such as industries operating in retail segment. Depending on the
severity of need organization can decide whether to use built in
functionalities of standard ERP or to use another specialized packages
such as SAP’s CRM or Oracle’s Siebel. Then there are few separate products
to manage B2B business such as SAP’s SRM product suite.
- Maturity of the users –
This is the most important point while selecting an ERP. Branded international products such as
SAP are often failed not due to bugs or lack of features but it is due to
improper usage. In my long career in SAP I haven’t seen a single incidence
where product has failed due to bug or improper functioning. Lack of
understanding about the product is a major reason of ERP failure. Usually Finance and Purchase department
are familiar using some kind of IT system. But for users, of departments
such as Production, Quality, Stores etc., finds it difficult in handling
sophisticated ERP systems. Hence if users are not matured enough either
hire manpower who can understand sophisticated ERP system or adopt a
simple, small but proven ERP.
- Budget – An
important factor in selection of any ERP is budget. There is range of ERP
products in the market. However one should not consider ERP product only
because of low price. Price along with all the above factors should be
considered. E.g. If an organization in the manufacturing sector, has
complex specialized business requirements, high volume of transactions
then they should think about branded, reputed and robust product such as
SAP or Oracle Business Suite. If they do not have matured manpower, think
about hiring it. If they have constraints of large investment then there
are options of phased out implementation by which they can do investment
in different phases. Financial institutions such as bank are offering loan
against ERP project implementation. ERP cost includes license cost,
hardware cost, software cost, network cost and implementation cost. If
organization has a low budget with standard business requirements and of
they are not willing to take risk of ERP failure then they can consider
option of cloud computing with products such as iON or Ramco Cloud
computing etc.
