Meaden & Moore

1. Meaden & Moore Shopping for a New ERP System How to Specify the Right System for your Application Scott A. Holter, CPIM October 3-4, 2012

2. Meaden & Moore ERP Software Brief History

3. ERP Industry Background • Pre-1990s Manufacturing Software • Accounting software packages for mainframes and minis • Separate MRP and Job Shop packages for operations • Heavily customized in most instances • Complimentary custom applications developed internally – hard-coded or using tools like dBase

4. ERP Industry Background • Early 1990s through 2000s • ERP unites accounting, operations, and others • Thousands of custom developers attempt to brand/“package” their software for re-sale • Industry and software company consolidation accelerates but new ones emerge • Environment changes over time: mainframes, minis, fat client-server networks, thin-client and browser-based applications

5. ERP Industry Background • Early 1990s through 2000s • Software management trend • Custom applications dwindle, remain • Modifying packages’ source code comes and (mostly) goes • Plain-vanilla implementation strategy • Customization and personalization strategy emerges

6. ERP Industry Background • 21st Century – 2nd Decade • Dozens (100+) viable ERP software vendors remain • Most have carved out target markets based on size, scope, industry, or niche features • 5-25 competitors in a target market • Continuum of integration: fully-integrated ERP to core plus best-of-breed. • Vast differences in technology, sophistication, rigidity, and cost to own

7. ERP Partner Selection Importance of Choosing Your ERP Partner

8. ERP Partner Selection • ERP Vendor/Partner is a strategic choice that: • Touches virtually every aspect of a manufacturing business • Is a marriage • With rocky relations, at times • Where divorces are painful and expensive • That requires a careful courtship • Requires executive leadership and mid-level management and staff support and input

9. ERP Partner Selection Decision Dimensions to Consider

10. ERP Partner Selection “He who knows others is wise; He who knows himself is enlightened.” - Chan As applied to ERP – know what you want from ERP before going shopping

11. ERP Partner Selection • Strategic Factors – Company-based • Strategic Factors – Partner-based • Features / Functionality • Technology • Cost of Acquisition and Ownership • Initial Implementation and Long-Term Support Approach

12. Strategic: Company-based • 1.1 Business and • departmental • 1.2 Supply chain • 1.3 Manufacturing mode • 1.4 Information technology

13. Strategic: Company-based • Business / departmental • Size (revenue, employees) • Strategic Competitive Focus • Low-cost / low-price • Product differentiation • Customer service • Hybrid

14. Strategic: Company-based • Supply Chain Model(s) • Engineer-to-order • Make-to-order • Configure-to-order • Assemble-to-order • Make-to-stock • Distribution MaterialAcquisition Manufacturing Distribution

15. Strategic: Company-based • Manufacturing Mode • Continuous flow process • Batch process • Repetitive / rate-based discrete • Intermittent / batch discrete • Project / one-off discrete

16. Strategic: Company-based • Information Technology Continuums • Technology follower / early adopter Middle of the Road Follower Innovator

17. Strategic: Company-based • Other IT Continuums • IT Staff: Self-sufficiency to outsourced service • End-user autonomy / rigidity • Data-based / intuition-based decision-making • Customer and supplier collaboration and interchange intensity

18. ERP Partner Selection Partner (Vendor) Dimensions

19. Strategic: Partner-based • Vendor Criteria Continuums • Vendor size and reach – large multi-national to boutique • Industry / niche specialization • Single source to best-of-breed approach • Availability of 3rd party resources • Local support – does it matter to you

20. Strategic: Partner-based • Vendor Criteria Continuums • Vendor Viability • Strong financials and longevity are important but don’t prevent acquisition • Even acquirers become targets • Independents resist more than publics

21. Strategic: Partner-based • Vendor Criteria Continuums • Product Viability • Strong, modern, and accepted technology increases odds of life after acquisition • Large installed base (500-1,000+) increases odds of on-going support post-acquisition

22. ERP Partner Selection Sample Client Strategic Profile

23. Sample Client Profile • Strategic, company-based factors • $20MM annual revenue, 150 employees with plans to grow 2-3X next decade • Intermittent, discrete manufacturer with 75% MTO and 25% MTS • Compete based on low cost/price and don’t need a high-end ERP solution

24. Sample Client Profile • Strategic, company-based factors • More of a technology follower – just want stable and reliable technology • 1-2 person IT staff forces them to rely on outsider expertise to manage our system • Extensive quote and order exchange with customers

25. Sample Client Profile • Strategic, partner-based factors • Open to any sized software vendor but must have a 10-year history as a going concern • Open to reseller or direct-sale channel provided there’s strong local (100 miles) support

26. Sample Client Profile • Strategic, partner-based factors • Prefer a vendor that specializes in or has numerous metal fabrication shops as customers • Core ERP functions must be owned and maintained by vendor, but open to interfaced products for reporting, analytics, asset management, and CRM

27. Sample Client Profile • Using the strategic requirements • Enable a company to reduce the potential list of candidates to 20-30 • Enable an experienced consultant to reduce the potential candidates to an even shorter list

28. Sample Client Profile • Using the strategic requirements • Framework for functionality and technology requirements • Those become implementation vision or checklist, so don’t skip next step • Framework for implementation approach and on-going support preferences

29. Strategic Evaluation • Research • Trade associations, magazines • Internet • Other companies • Consultants, industry observers • Software vendors / partners • See Samples

30. Strategic Evaluation

31. ERP Partner Selection Functionality Requirements

32. Functionality Topics ERP Groups/Topics to Dig Into

33. Functionality Requirements • Functionality requirements building • Typically 50-100 requirements per topic • Include master files and transactions • Should be weighted relatively (High, Medium, Low, etc.) • Require input mainly from users • Consider future needs, not just current, so executives must be involved • Use industry accepted terminology from GAAP, APICS, etc.

34. Functionality Requirements • Approach • Do-it-Yourself • Online template or “clean sheet of paper” • Online knowledgebase • Consultant facilitator / architect • Online knowledgebase • Proprietary tools and knowledgebase

35. Functionality Requirements • Approach • Review Your Business Processes Supported by • Current package(s) • Custom software • Reports • Excel spreadsheets and Access db’s • Manual systems – log books • Include the basics; focus on what’s unique

36. Functionality Requirements • Requirement and Use/Application

37. ERP Partner Selection Technology Requirements

38. Technology Topics • Tend to be features, not functions

39. On-Paper Comparisons • Approaches to Getting Answers

40. Many Ways to “Yes”

41. Comparison Matrix

42. Software Evaluation Model Using Functional and Technology Requirements 20-30 Candidates On-Paper Research and Analysis Proof of Satisfaction to Highest Weighted Requirements Proof of Concept Demonstration / Workshop 4-6 Candidates 2 Finalists Winner

43. ERP Partner Selection Evaluating the Software

44. Software Evaluation • Demonstrations provide • For evaluation of qualitative factors (user-friendliness, flow, and integration) • Quality test of “Yes” responses • Opportunity to assess acceptability of workarounds, tailoring, and customizations • Opportunity to gain employee buy-in for change that’s coming

45. Software Evaluation • Software Demo Preparation • Define your own agenda, but assist vendors with preparation – minimize curve balls • Communicate agenda internally to all attendees • Allow vendors to visit your facility • Provide them with sample data • Give vendors 2-4 weeks to prepare • Ensure vendors are clear on contents

46. Software Evaluation • Software Demo Conduct • Keep all internal attendees on script – questions need to be timed • Let the vendor present – seek first to understand, then to be understood • Document issues and fit mismatches quickly and move on • Observe, don’t pilot test or implement

47. Software Evaluation • Software Demonstration Types • Vendors’ overview demo • Prequalification / Pre-screen • Scripted Day-in-the-Life • Proof-of-concept workshop

48. Software Evaluation

49. ERP Partner Selection Cost Dimensions to ERP Purchase

50. Cost Evaluation • Software Cost Components