Episode 2: Someone really meant ERP renewal – what now?

Ok, now it seems that someone inside your company is pushing for an ERP. If the idea came from a person who does not have too much influence inside the company, it might still go away. But what usually happens is that in the next couple of months, there is more and more discussion about ERPs. 

Erkki Mikkola

2.11.2022

The CxO level will eventually get involved, the current supplier will get a hint of the discussion and then, before you know it, you are getting calls from vendors. They want to have a chat, show off their references and tell you how much they can help you in your project-to-be.

It is not the time for that yet. You should politely tell them to get their sales bonuses from other customers as you need to do some groundwork before such talks can begin to get a better idea of what you will be needing. 

Now, you need to figure out what processes we are talking about and look at what systems are currently being used in these process areas. To make this more complex, a large company usually has more than just one ERP and you need to sketch out which parts of the business are going to be included. It is a good idea to have an outside observer (not an ERP vendor) look at your initial plan and draft out a high level architecture that will be used as the base for discussion during this period.

Usually, the base of the ERP is finance. At this point, you do not need to go too deep. The following type of a list may be enough:

1. The project will comprehend Business A and B, Business C will continue to use the old systems. 

2. Items

a. What items you will have in the system. Physical items or also service items?

3.     Purchase orders, receivals, packing and shipment

a. MRP is done outside the system that will create the purchase order

4.     Accounts payable

a. For electronic invoice approval, outside software is used

5.     Accounts receivable

a. We will continue with invoice operator X

6.     General ledger and fixed assets 

Now, once you have these things written down, you need to check if you have a defined process in place for the listed functional areas and those areas used in real life. It is quite common to see companies have defined processes on paper but the real life looking completely different and having more variables than what has been defined. At this point, you need to update these processes where needed in order to be ready for the next phase.

“We will use the system processes” is a phrase I hear often. It is sort of meaningless, however, because if you do not use the system processes, you will end up a train wreck. When you have the process defined, you also have a clear goal as to what the system needs to do to fit your needs.