Bottom Line: Any successful ERP implementation starts with a clear definition of business value followed by a compelling vision of greater collaboration and connectedness between workers that get results.
Any given ERP implementation has more to do with helping workers and teams become smarter and better at their jobs than it does with technology alone. In 2021 and beyond, the most successful ERP implementations will be those that prioritize the connected worker and focus on how smart manufacturing supports and strengthens them.
Asked what integrating smart manufacturing into their ERP system means to their business in 2021, the founder and CEO of a plastics manufacturer said, “smart manufacturing starts with smart people – and I’ve learned that training and development is core to everything – starting with getting more from our ERP system and knowing when it’s time to change.” The most common attribute of successful ERP implementations is a solid business case that balances upside revenue and cost reduction. But what drives a manufacturer to implement an ERP system now? Wanting to find the answer to that question, over 30 manufacturers were interviewed over the last few months.
Why Manufacturers Implement ERP Systems
Here are the results of those interviews on why manufacturers are starting new ERP implementations today:
- 50% say growing and improving their business is the primary factor motivating them to implement a new ERP system.
- 21% say they need to replace legacy ERP and end-of-life systems that match their business model.
- 18% say that there’s been a change in the senior management team or control of their manufacturing operations, making a new ERP system essential.
- 5% say they are implementing a new ERP system in response to new regulatory requirements.
- 2% are startups implementing an ERP system for the first time in medical device manufacturing.
Asked which systems they are replacing during the new ERP implementation, their responses included the following:
- 30% said they are replacing low-end accounting systems that provide no manufacturing visibility and control
- 23% are upgrading their ERP system with the incumbent ERP provider
- 19% are replacing a legacy ERP system
- 14% are upgrading from a low-end ERP system or replacing their own home-grown or custom system
Knowing Why a New System Is Needed Drives a Successful ERP Implementation
Building a compelling business case and vision of how an ERP implementation can better connect workers needs to start by answering why now – what’s driving the urgency to take action? As the short survey results above show, one in two manufacturers want to find new ways to grow by better connecting their workers and creating stronger collaboration and communication. Keeping remote workers connected, ensuring safety guidelines are met across the shop floor, ensuring real-time communication – in short, doubling down on worker productivity is the strategy for growth today.
To transition from being transaction-centric to focusing first on making sure workers have the tools and training they need to excel, the following are the 12 steps to a successful ERP implementation:
- Begin with a business case that considers tangible and intangible costs and benefits, clearly stating the business problems it is going to solve first. To excel at creating a business case for ERP, balance the tangible or easily measured benefits with the intangible ones. We’re in an era of the Connected Worker today. A new ERP system will help drive additional revenue by improving order cycle times and accurate delivery dates (leading to customer loyalty). However, it’s the intangible benefits that materialize as workers take extreme ownership of getting an order out the door within minutes to spare. The label printing is perfect – or the worker who takes ownership of quality to make sure the products delight customers. Those intangible benefits that aren’t quantified but are created to allow workers to have exceptional, extreme ownership of outcomes matter more than ever. Also, when it comes to cost, no one cost-reduced their way to market leadership. It takes a balance of benefits and costs to make an ERP system pay.
- Develop an integration roadmap with a realistic timetable of combining legacy and stand-alone databases and systems to the new ERP system over time. With 30% of the manufacturers spoken with replacing low-end accounting systems that provide no manufacturing visibility and control with an ERP system that resides on a single database, getting integration right is essential for a new system’s success. Your ERP vendor can help you create the roadmap and sequence integration points based on their technical capabilities.
- There needs to be a senior management member who owns the implementation, takes accountability for its progress, and provides leadership. It’s impressive to see how quickly teams work to make an ERP implementation succeed when they have a senior management team member giving them support. The difference is that support, encouragement, and a willingness to remove roadblocks from a senior management member keep implementations on track.
- Create a stakeholder team that’s lead by business managers who keep the implementation on track from a customer benefits standpoint, adding IT superusers and workers from across manufacturing. The stakeholder team brings the momentum for getting an ERP implementation done while staying focused on customer needs while giving superusers and users a voice in its direction. Together they act as change agents for getting the implementation done while supporting the project manager and the many tasks they have to balance.
- When it comes to ERP implementations, resource planning and project management isn’t a part-time job. Dedicate a project manager full-time to an ERP implementation, preferably someone who knows the manufacturing processes and their exceptions at an expert level. Too many implementations fail because ERP project management often gets handed to the busiest – and most talented – members of IT and manufacturing teams.
- Training and development are the foundation to build from first, not the tech stack. Too many ERP implementations get started with complex trade-offs and decisions on the tech stack first. The tech stack needs to follow workers’ needs first and how they’re going to need more adaptability in their roles. Roles across production facilities are changing fast now and will accelerate in 2022. The tech stack can’t be a constraint; it needs to be the enabler, which is why training and development need to come first, along with role definition.
- Define a testing plan that encompasses all ERP system supports’ roles, including customizing them, combined with stress-testing transactions and integrations for scale and security. The testing plan needs to provide enough time for every role’s options to be tested and coordinated in the most common process workflows. Providing workers the opportunity to customize roles needs to be part of the usability testing and overall evaluation. As integration points come online, stress test them to see if they can scale when production is at capacity.
- Know early on what success looks like for the ERP implementation and communicate progress to that goal early and often using metrics everyone knows and owns. When workers can see the impact of their efforts and contributions often in the metrics and KPIs measuring manufacturing performance, ownership and commitment go up fast. During the implementation phase of designing dashboards translate company objectives into milestones, everyone can help achieve.
- Allow workers and staff to help create and own the vision of a more connected workforce as you are building the business case. Allowing everyone to own the implementation reduces fear, increases ownership and trust. After all, it’s an ERP implementation to make their jobs easier and serve them – which is why they need to be deeply involved with how the business case, the direction of implementation, and down to the screen definitions are done.
- Be transparent with workers on why the ERP system is being implemented, including the impact on their jobs – and have a weekly brown-bag university to share progress updates for anyone interested over a virtual lunch. One of the best approaches to keeping workers involved in implementation is to host a weekly brown-bag university over lunch. In virtual meetings like we’re all dealing with today, one manufacturer gives their workers a GrubHub coupon to order whatever lunch they want. So far, attendance is at 100% over three months. Of the manufacturers spoken with everyone is looking for more help on the shop floor, no one is letting people go. The labor shortage is real in manufacturing. And are robotics taking jobs? It’s more like robotics creating jobs for getting employees trained on the latest Fanuc robotics equipment to save on maintenance costs and get more value from the robotic machinery.
- Getting go–live right has a direct impact on a new ERP systems’ level of adoption for the long-term. The stakeholder team and project manager often begin every status update for power users, regular users, and the entire company by announcing the go-live date to give everyone a chance to own the success of it happening. As successful go-live, the key components are testing access right permissions and limitations thoroughly, making sure there is accurate data migration by testing each application and its process workflows. The best go-live plans also test with real case studies and actual production data and run for a month or more, testing business reports and checking them for accuracy.
- Select an ERP vendor who understands your business completely because that knowledge will pay off over the long term with a more consistent roadmap and potentially lower support costs. ERP vendors with experience in your specific manufacturing area are more likely to be anticipating your needs in the future already. Ask to see their product roadmaps and ask how they’re helping manufacturers in your area save on support and maintenance costs. The more expertise a given ERP vendor has in your field, the more likely support and maintenance costs can be reduced.