ERP - Un-Mistified - Rev 06Benefits for a Small Business 1.Transparency/Shared information, all relevant data can be shared and accessed by a number of individuals across multiple

DEMYSTIFYING ERP PREPARING YOUR PEOPLE AND PROCESSES

WHAT IS ERP?

“Enterprise Resource Planning (ERP) is

business process management software that allows an organization to use a system of

integrated applications to manage the business and automate many back office

functions related to technology, services and human resources.

“ERP software typically integrates all facets of an operation — including

product planning, development, manufacturing, sales and marketing — in a single database, application

and user interface.

ERPModules

o General ledger

o Accounts receivableso Accounts payables

o Payroll

o Tax prep

o Sales Data Reports and Dashboards

o Sales Analyticso Data miningo Sales Performance

Managemento Reporting

○ Contact Management○ Product Level Quotes○ Customer Opportunity

Management○ Email Client Integration○ Sales Forecasting○ Sales Force Automation○ Email Marketing Integration○ Social Media Management

Integration○ Warranty Case Management

o Personal tracking

o Employee master data information

o Employee benefit reporting

o Employee expense

o Performance reviews

o Recruiting management

o Training activities

o Current inventory positiono Inventory logisticso Inventory obsolesceo Inventory receivableso Shippingo Warehouse transfer controlo Purchasing and subcontractingo Vendor quality control

o Bill of Material Managemento Routing/Work Order managemento Job costingo Materials Requirement Planningo Production planningo Project managemento Plant maintenanceo Quality management

o Supply chain planning and execution

o Supply chain visibilityo Inventory managemento Demand planningo Value chaino Transportation and logisticso Distribution center controlo Proof of delivery

How Expansive is ERP?

ERP Market Place Overview

ERP software - worldwide - $83 billion for 2016

ERP for manufacturing was $22 billion for 2016

The top ten make up 55% of sales

Over 165 ERP software products

Why Do Companies Implement an ERP System?

2016 study by Panorama Consulting Solutions, LLC

To replace out-of-date ERP software

49%

To replace homegrown systems16%

To replace accounting software

15%

To replace other non-ERP systems / had no system

20%

Why Do Companies Need ERP?

○ Reduces operating and overhead costs

○ Reduces paper work

○ Helps business process automation; order entry, quoting, shipping documents, shipment tracking, etc.

○ Managing important tasks on a daily basis

o Replaces error-prone, awkward, manual processes, etc.

o Better communication, higher productivity, (remote considerations)

o Improve interaction between customers and suppliers.

o Better Performance Measurement

o Consolidates a variety of internal data bases

o Automatically processes transactions

o The availability of real-time communication

o Data security enhancement

Anticipated ERP Benefits

Benefits for a Small Business

1. Transparency/Shared information, all relevant data can be shared and accessed by a number of individuals across multiple departments, looking at the same data.

2. Quick Decision making, real-time data provided by the ERP system can be beneficial for management, marketing, accounting and enables your organization to make vital decisions on time.

3. Boost in Productivity, increased transparency by smooth business processes, employees can shift their focus on managing enlarged volumes of business.

4. Streamlined Data Flow, with an ERP software, everything is in one place and all official data is available to each department.

5. Exceeding Collaboration, when all employees have access to data across all the departments, collaboration is better facilitated.

6. Delivery of Business Insights, all data is in a single data base, accessible in real time, and is key to making smarter business decisions.

Top Reasons Companies Change ERP Systems

○ QuickBooks and spreadsheets can no longer handle their business

○ Their customized solution has become unmanageable

o Their legacy software is no longer being supported

o Regulatory compliance requires lot tracking and quality control

○ Their system lacks manufacturing process and industry-specific functionality

○ They need to grow capacity without additional resources

○ Their hardware is failing or is no longer supported by the vendor

Symptoms Indicating Your Company May Need an ERP System

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Missing deadlines

Inability to forecast profitability

Lots of expediting

You are struggling to

maintain control

Symptoms Indicating Your Company May Need an ERP System

21

o You are immersed in Excel spreadsheet chaoso You don’t know your individual product costo You can’t tell which products make more profit (not revenue).o Production planning takes days or weeks (vs. hours).o Limited production visibility (difficult to make promise dates)o You are using a cash (vs.) accrual accounting baseso The company’s financial “closing” takes weeks vs. two days. o You have concerns about meeting security requirements

(42% of small companies have been hacked)

○ Do all companies need an ERP system?

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Indicators That A Full ERP System is Not Necessary For Your Company

○ You are a very small company (less than $500,000 in Revenue) and you only have a few employees

○ Your product line has only one or two SKU’s

○ You are a cash basis type manufacturing entity

○ Your customers are not very demanding with delivery dates

○ Your product lime has a very shallow BOM structure

○ Your manufacturing cycle is hours or days and not weeks

○ Your company only works on one two two projects at a time

IMPLEMENTING ERP

How to make it work

What are the steps to implementing an ERP system?

1. Strategic Planning

2. Procedure Review

3. Data Collection and Clean-Up

4. Training and Testing

5. Go Live and Evaluation

ERP implementation – Step 1Strategic Planning

Is there a strong business case for a new / replacement ERP System?

Set objectivesWhat do you want to get out of the new system?

Access the business readiness to undertake an implementation

PersonallyDo you have the patience and discipline?

100%Do you have the employee horsepower and technical expertise?

$ $ $Do you have the money to see the project through

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ERP implementation – Step 2Procedure Review

○ Develop standard operating

procedures

○ Review software

capabilities

○ Develop a project plan

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Develop a Project Plan

Project Plano Who is leading/coordinating all ERP activities?

o What are the key goals?

o What is the time line?

o Who can make decisions?

o What “type” of implementation will the company choose?

Examine Current Processes and Information Flow

Product Demand

to Supply Flow

Procurement to Payment

Flow

Order to cash flow

Finance to Management

Flow


Product Demand

to Supply Flow

Procurement to Payment

Flow

Order to cash flow

Finance to Management

Flow

ID Manual Processes


Order to cash flow

a) Order to Cash Flow1. Show logical movement and transition of order information.2. Who needs to approve what?3. Who need to “see” the information?4. Who need to “edit” the information?5. Where are the decision points?6. Where are the trigger points?7. Who needs to know where the order is in the process step?8. What information needs to be stored where?9. What documents need to be “stored” or “linked” together? 10.What reports need to be generated, when & how often?


○ Product Demand to Supply Flow

Demand MasterScheduling

Supplier Demand

Production Planning

Shop Floor Control

Inventory Management Delivery

CustomerOrders

Demand Planning

Rough Capacity

Promise Dates

Sub-contractParts

Sub-contactorAvailability

Detailed Capacity Plan Status WIP

FG Control

Available to Pick Order Prepare

Shop Docs.

Arrange Transport.

Sales &Marketing

MaterialAvailable


○ Procurement to Payment Flow

Purchase Requisition

VendorSelection

Purchase Order

Goods Receipt

InvoiceVerification

Vendor Payment

BOM Demand

Factory Supplies

VendorQuotes

Vendor Contracts

IssueP.O.‘s

Material Q.C.

Issue Payment

ManagePayables

Engineeringmaterials

MaterialReceipt Trans.

Vendor Performance


○ Finance to Management FlowIdentify Metrics

Set-up Financial Structure

Establish Procedures

Produce Reports

Review Analytics

Financial Reports

Company KPI’s

EstablishChart of Acct.

Establish Naming

Conventions

Monthly Closings

P&L & Balance Sht.

Operational Variances

OperationalVariances

Format Reports

Monthly Report Gen.

Cash Flow

Margin Analysis

ERP implementation – Step 3Data Collection & Clean-up

○ Convert data

○ Collect new data

○ Update to new naming convention

○ Review BOM’s for accuracy

○ Decide on “Unit of Measures” and conversations

○ Clean up old data

○ Insure proper linking (for accurate reporting)

ERP implementation – Step 4Training & Testing

• Pre-test the database• Run data through system to insure data accuracy• Run real-life scenarios

• Verify testing• Insure the actual test mirrors the Standard Operating Procedures as outlined

earlier.

• Train the trainer• Most cost effective method • Generate procedures, cheat sheets, etc.

• Perform final testing• With through testing, running parallel systems is usually not necessary.

ERP implementation – Step 5Go Live and Evaluation

1. Develop a final “Go-Live” checklist.

2. Take a physical inventory.

3. Update ending balances from old system.

4. Have managers repeatedly access data results to determine if they make sense.

5. Have the software vendor ready in a “stand-by” mode.

6. Develop a structured plan which ties back to the goals and objectives that were set in the planning stage.

How do I chose an ERP system?

Business/Industryspecific considerations

Food industry (process flow oriented)

Metal fabrication (process by

function requirements)

Warehouse/distribution –

Input/output, kitting, sorting

Make to order

Engineer to order

Complexity considerations

Standard, off-the shelf (fits 95% of users)

Need highly customized

programs

Platform specific considerations

On premise servers

Cloud based

Your program, your data

Common software, your data

Which ERP system?

Over 165 ERP systems available in the market today

How much does ERP cost?Small businesses: $10,000 - $50,000 (software)

Mid-size businesses: $50,000 - $500,000 (software)

Depends:• Number of users

• Hardware purchases for infrastructure

• Purchasing the software or licensing on a monthly basis

• In-house expertise of outside consulting

• How much outside support for training the trainers

• How much customization of the software is required

• Upgrades & maintenance costs

How much does ERP cost?

Depends:Small businesses: $10,000 - $50,000 (software)Mid-size businesses: $50,000 - $500,000 (software)

Strategies for ERP implementation?

BIG BANG The new system goes live instantly and all users switch to it;

Sink or swim method

Saves time and money -suitable for smaller enterprises, or where time is crucial

PARALLEL Both new and old system are functioning at the same time, while users gradually switch to a new ERP.

A less riskier strategy as it suggests implementing a new system while still running a legacy system

Strategies for ERP implementation?

PHASED ROLLOUTTransition happens in phases, users move step-by-step;

Provides time to find solutions if anything goes wrong

Offers the possibility to begin with modules that are most vital

AGILEAlso happens in phases, but under continuous design, testing and deployment of elements until moving to another one;

Divides a project into short periods called sprints. Each sprint has a phase of testing and adjustments

Longest and safest method

Reasons for ERP Implementation Failures

Reasons for ERP implementation failures

No business rational for implementing a formal system.

No clear goals, destination or expectations.

Failure to assess management readiness.

A good plan or just a plan?

Under-estimating resources required.

Over-reliance on the consultants.

Over customization.

On the job training, lack of pre-training.

Insufficient testing.

“An ERP system can be your most powerful business tool that provides you with the

navigation tools to guild your business. It streamlines your processes, provides real-time data for dad-to-day decision making

and gives you insight into making long term decisions that generates more profits to

your company.

Summary

• A little bit of company pain as you implement –years of gratification when its fully implemented.

• Take your time to find the right system.

• Insure your business and your team is ready for the task.

• Get your manual systems tuned to work for you.

• Ask for outside help when you need it.

Real World ERP Experiences

CHRIS THOM OWNER/PRESIDENT

Finish Line Industries, Inc.Newberg, OR

QuickBooks to Exact ERP

PETER WOODS OWNER/PRESIDENT

McTavish Shortbread, Inc.Portland, OR

QuickBooks to Bizowie ERP

Thank You

www.omep.org

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Documents

ERP - Un-Mistified - Rev 06Benefits for a Small Business 1.Transparency/Shared information, all relevant data can be shared and accessed by a number of individuals across multiple