The Complete Guide to ERP

Everything a Manufacturing
Professional Needs to Know About
Enterprise Resource Planning
www.max4erp.com
THE COMPLETE
GUIDE TO ERP

INTRODUCTION
The topic of ERP can sometimes seem
complicated and overwhelming, but
the ERP experts at MAX are here to
help. This eBook covers all the bases,
helping manufacturing professionals
understand the ins-and-outs of ERP
and how they apply to your business.
Read on to learn the basics of ERP,
what type of companies benefit
most and how, the fundamentals of
implementation, how to select the
right software, and more.

LOREM IPSUM DOLOR SIT AMER 3
TABLE OF CONTENTS
ESSENTIAL ERP BACKGROUND KNOWLEDGE 5
What is ERP? 6
Brief History of ERP 7
ERP Definitons 8
UNDERSTANDING THE BENEFITS OF ERP 9
Top 11 Benefits Of Using ERP 10
WHO SHOULD USE ERP? 13
What size company benefits the most from ERP? 14
Which Industries And Manufacturing Models
Benefit Most From ERP? 15
ACHIEVING SUCCESSFUL IMPLEMENTATION 17
Assembling Your Implementation Team 18
Developing A Written Implementation Plan 19
Training Your Team 20
SELECTING THE RIGHT ERP SOFTWARE 21
Clearly Defining Your Objectives 22
Support For Your Differentations In The Marketplace 23
Vendor Selection 24
BUILDING A BUISNESS CASE FOR ERP 25
Why It’s Important To Educate First 26
How To Develop A Definitive Set Of Case Justifications 27
How To Present Your Cost/ Benefit Analysis 28

ESSENTIAL ERP
BACKGROUND
KNOWLEDGE
An overview, brief history, and list of ERP
terms and definitions.
As one of the longest standing ERP vendors,
the fundamentals of ERP seem second nature
to us at MAX. It isn’t until we’re posed with
questions like, “what actually is ERP?” or,
“how do I know if my manufacturing company
would benefit from ERP?” that we’re reminded
of how complex (and even intimidating) the
topic of ERP can be. So we put together this
guide to take the mystery out of ERP.

WHAT IS ERP?
ERP is an industry acronym for Enterprise Resource
Planning, but even the full name doesn’t give a great
explanation of what ERP does. Broadly, ERP refers to
a system that automates and integrates a company’s
core business elements to increase efficiency and
simplify operations. It is a comprehensive system that
includes all the software pieces you might need to run
your manufacturing operation.
For a deeper understanding of what ERP does, it’s
helpful to take a step back and think about all of the
processes that are essential to running a manufacturing
business, including production planning, materials
management, financials, customer relationship
management (CRM), quality and compliance programs,
customer service, and beyond. The purpose of ERP
software is to have one complete system that supports
and integrates all of these functions, in order to
streamline processes and information across an entire
organization. By creating a smooth flow of information
that is always in sync, employees across all divisions
(for example, accounting and sales) have access to the
same, consistent information.
Most commercial ERP systems also offer synchronized
reporting and automation tools. Instead of relying on
separate databases and spreadsheets that employees
need to consistently update, and then putting someone
in charge of manually merging them all to generate
reports, some ERP solutions give you the ability to pull
reports from one central system. For example, with
sales orders automatically flowing into the financial
system without the need for the additional step of
manually entering and sending new orders to the order
management department, the order management
department can process new orders more quickly and
accurately, and the finance department can close the
books faster.
Other common ERP features include a portal or
dashboard to enable external stakeholders to securely
access relevant information regarding the business’s
performance on key metrics. Most ERP systems can be
deployed on-premises or in the cloud.
6 THE COMPLETE GUIDE TO ERP

BRIEF HISTORY OF ERP
While the term ERP was coined in 1990, its roots
date back to the sixties, when a researcher at IBM
published research on the concept he dubbed
material requirements planning, or “MRP.” His concept
provided manufacturers with a method for planning
the quantities of materials and components necessary
to complete a production plan and the timing needed
for phasing them so that the materials arrived very
close to the time when they would be required to keep
production running.
During next decade, material requirements planning
morphed into manufacturing resource planning or
“MRP II.” MRP II provided techniques for smoothing the
production plan by adding capacity planning, scheduling,
and forecasting to material requirements planning.
In the 1990’s, ERP Systems began to include operational
processes, graphical user interfaces and back-office
functions like human resources and accounting. ERP
has continued to expand to encompass business
intelligence and incorporate “front-office” functions.
Efficiency of all work centers is the main goal of ERP.
With these advancements, companies of varying
sizes and from a broad range of industries are now
rapidly adopting ERP systems. This diversity can
also be attributed to new ways of minimizing IT and
infrastructure cost such as the availability of private
cloud ERP solutions, which has made ERP more
affordable, easier to implement, and more widely
available. Although ERP is now used across industries,
the heart of ERP software for manufacturers is still MRP.
THE COMPLETE GUIDE TO ERP 7

ERP DEFINITONS
Definitions of Common Terms Related to ERP
• Enterprise Resource Planning (often called ERP, ERP
system, or ERP software): A system that automates
and integrates a company’s core business elements
to increase effectiveness and simplify operations.
It is a comprehensive system that includes all
the software pieces you might need to run your
manufacturing operation.
• Lean Manufacturing: A systematic method for the
elimination of waste within a manufacturing system.
Lean also takes into account waste created through
overburden and waste created through unevenness
in workloads.
• Business Activity Monitoring (often called BAM):
A collection of tools that allow you to manage
aggregations, alerts, and profiles to monitor
relevant business metrics.
• Materials Requirement Planning (often called
MRP): System that is primarily material oriented.
Many ERP systems have grown from an MRP
system. Finding an ERP system with strong MRP
functionality is essential for manufacturers.
• Manufacturing Resource Planning (often
called MRP): Acronym changed from Materials
Requirements Planning to Materials Resource
Planning during the decade of the seventies,
which was known as the era of MRP II, and added
scheduling, capacity planning, and simulation
capabilities.
• Front-Office: A front office application is any
software that has a direct relation to customers. It
provides functionality and data necessary to take
orders, configure complex products and provide
effective service and support to customers. It
includes customer relationship management (CRM),
customer support, service management, document
management, workflow process management, field
service, etc.
• BOM: A bill of materials or product structure
(sometimes bill of material, BOM or associated
list) is a list of the raw materials, sub-assemblies,
intermediate assemblies, sub-components, parts
and the quantities of each needed to manufacture
an end product. A BOM may be used for
communication between manufacturing partners,
or confined to a single manufacturing plant. A bill of
materials is often tied to a production order whose
issuance may generate reservations for components
in the bill of materials that are in stock and
requisitions for components that are not in stock.
• WYSIWYG: Acronym for “What you see is what
you get;” Refers to a feature of a software tool that
allows you to edit or input information and see it
exactly as the data will appear and be displayed
within the system, as compared to using codes or
spreadsheet-style data entry that will be translated
by the software and appear differently than it did
during the data entry process.
• BPM: Business Process Management
• Cloud Deployment: A Private Cloud deployment
lowers IT infrastructure overhead and ensures
your data is protected around-the-clock within
a managed data center. Private Cloud allows
companies with remote sites to share the same
ERP installation and data, enabling multi-site ERP
software access
• On-Premise Deployment: A traditional ERP
deployment that means installing the system onto
servers in your facility. Companies that have an
established IT infrastructure or are willing to invest
in creating and maintaining their own servers
are usually interested in implementing ERP on-
premises.
• MCS: MCS stands for Manufacturing Control System.
MCS is the generic model taught by APICS, the
Society for Operations Management, on which ERP
is built on. It visually expresses the design of any
ERP system.
In conclusion, ERP software helps to eliminate
redundant processes and systems, dramatically
lowering the cost of doing business overall. ERP
implementation is where planning and profitability
intersect, allowing you to streamline your
manufacturing processes with software that helps you
achieve a more controlled, paperless shop floor. With
ERP, you can rid yourself of duplicate data entries in
disparate databases, unpredictable cost, quality and
accuracy, and employee redtime, all of which cost
you time and money, and hinder your manufacturing
company’s potential for growth.

UNDERSTANDING
THE BENEFITS
OF ERP
Why a Manufacturing Company
Should Implement ERP.
It’s getting tougher to stay
competitive in the manufacturing
industry. Companies are striving
to become more efficient, ensure
regulatory compliance, improve
customer service, and more
effectively utilize resources in order
to stay competitive. Luckily, there’s
a solution to help accomplish all of
these objectives.

It’s getting tougher to stay competitive in the manufacturing
industry. Companies are striving to become more efficient,
ensure regulatory compliance, improve customer service,
and more effectively utilize resources in order to stay
competitive. Luckily, there’s a solution to help accomplish all
of these objectives.
You may have read about the ways in which ERP helps you
achieve tighter shop floor control, or heard about the time
and material cost savings ERP brings— and you may be
concerned that the stories sound too good to be true. You
wonder, can ERP really work for my business and deliver on all
that the vendors promise? The fact is, ERP can do all this and
more. We have seen it happen time after time, and witnessed
manufacturing companies reach their goals by implementing
an ERP solution firsthand. And if you’re thinking you can’t
afford an ERP system, that’s simply not the case. If you choose
the right vendor, ERP is affordable, even for a small business.
Some of the main benefits of ERP software are:
ERP enables growth
Many companies feel that they can make do using
spreadsheets or manual lists to manage their business, but
this decision may make growth a slower and more painful
process than it needs to be. By putting an ERP system in
place, your company will not only be able to better manage
your inventory and resources, but you’ll also have access
to more reliable information upon which to base important
business decisions which will fuel growth.
ERP creates efficiencies
If you’re running things manually, you might find it hard
to enforce common processes across your organization.
Consistency is the key to efficiency in manufacturing, and
ERP creates the consistency needed to streamline your
manufacturing processes and improve deliverability. ERP
helps you automate tasks so you and your employees can
shift focus to value-added activities and spend less time on
administrative tasks.
Consolidate disparate databases
If there is a lot of paper moving around your company, but
very little real communication occurring, an ERP solution can
help. ERP provides a single source of truth and enables you
to improve communication between departments. Instead of
storing important documents and spreadsheets on personal
computers, you can house all your important documentation
in a centralized database that eliminates redundancies.
Once a piece of information is entered in your ERP system,
it automatically flows to every area that may need or use
that piece of information. This increases data accuracy
because there is no need for duplicate entry of any piece of
information. When every employee can access the specific
information they need quickly, all from the same integrated
system, your entire business runs more smoothly and you
waste less time hunting down information and verifying its
accuracy. With all this data at your fingertips you can analyze
and adjust production issues as they arise, instead of waiting
weeks or months to react to issues and make modifications.
Manage compliance and regulatory requirements
Do you operate in a regulated industry such as electronics,
medical device or food processing? If so, you know that failing
to meet quality and compliance standards can lead to large
fines as well as unhappy customers. ERP helps you avoid such
situations because it helps you define processes to manage
regulatory requirements and maintain compliance. An ERP
system also makes it easier for you to keep detailed records
of all activities for audits and other historical purposes,
without the fuss of manual tracking and processing. ERP can
help ensure that your team adheres to proper procedures, so
that you can rest easy.
Conduct accurate material planning and control inventory
Perhaps you have trouble maintaining accurate inventory
counts and your physical counts seldom match your perpetual
inventory records. This wreaks havoc with your production
efficiency, since parts are not available when you need them.
Now you’re dealing with delivery delays that upset your
customers who will eventually find a vendor that has a better
handle on their business. ERP helps you address all these
issues. With ERP in place, you can improve your on-hand
inventory visibility, increase accuracy and reduce overhead.
As a result, in only a short period of time, you’ll start to see
planning, scheduling and customer service improvements.
Accurately cost your product
An ERP solution will help you quantify the cost of labor, time,
and equipment, and know exactly how much material and
labor every order, part and operation consumes. Use ERP
to track cost variances for material costs, labor costs and
TOP 11 BENEFITS OF USING ERP
11 Reasons Why a Manufacturing Company Should Implement ERP

purchase costs. Your accountants and auditors will be able
to see a full range of reports and inquiries that will help them
analyze cost performance and easily compare actual costs
with planned costs.
Deliver product on time
Your customers expect to be given reliable shipment and
delivery dates when they place an order. Most likely, they do
not want to wait for a call back, and they won’t accept bad
dates for too long before they move on to another supplier.
Well, ERP can help in this situation. ERP gives you available-to-
promise capabilities so your sales and customer support teams
can better manage opportunities and provide accurate delivery
information from the start. MRP and production scheduling
capabilities provide the information your teams need to make
decisions on expediting, overtime and other factors.
Create meaningful reports with ease & efficiency
Manual systems are error prone. Without an ERP system in
place, you may find that your business information is not
reliable. You (or others at your company) may also be relying
too heavily on guesswork or “rules of thumb,” which can lead
to ineffective decision-making. An ERP system will help you
combat these challenges by collecting a robust amount of
data that can be used to build meaningful reports. With those
reports, you can achieve the level of transparency you need
in order to make sound business decisions.
Improve customer service
Companies that treat customer service as a top priority
fortify the intimacy of their customer relationships and
in turn retain a high level of customer satisfaction. The
most efficient ERP software packages allow you to access
every detail about a client from one screen, including order
inquiries, billing information, invoices, and both past and
current orders. This keeps all members of a sales team
informed, eliminating time needed to hunt down the right
person to answer a customer’s question.
Improve decision-making ability for management
Without ERP, management has to either wait until the numbers
come in at the end of the month or quarter to make decisions,
or make decisions based on data that is weeks or months
old. Because ERP puts timely and accurate information at
management’s fingertips, numbers can be analyzed in real
time. This allows management to make present-day decisions
based on current data at any given time of the year, and also to
make better decisions for the long term.
Level the technology playing field across all departments
Rather than having different programs and technologies used
in different departments, an ERP system puts everyone in the
organization on a level playing field when it comes to data
and technology. This allows for increased visibility across
departments, a better understanding of how each facet of the
organization operates and ultimately enhanced teamwork.
Less frustration and improved collaboration can improve
morale and strengthen company loyalty.

WHO SHOULD
USE ERP?
Industries, manufacturing models, and
company sizes that benefit most from
using ERP Software.
ERP software will offer a high rate of return for
any company that implements it, regardless
of their manufacturing model or industry.
Have you noticed companies in your industry
that seem to have noticeably streamlined
processes, are able to get orders out faster,
consistently satisfy their customers, and
generally excel against the competition? Their
secret is likely their ERP implementation.
The right ERP software will scale to fit different
manufacturing models and different size
companies, enabling you to grow and succeed
as your needs change over time.

For those of you still thinking, “but my
manufacturing company is too small to use
ERP. We don’t need it yet...”
Larger, more complex operations certainly
have the most to gain from (and probably
can not function without) having an ERP
system in place. But it’s not just about the
size or complexity of your organization
right now, it’s where you want/expect
your organization to be in the future that
determines your need for ERP and the
benefits you stand to gain by implementing
ERP.
A lot of smaller manufacturing companies
don’t think ERP is a reasonable option
based on their size, but if your company
plans to grow, ERP is a necessity. Your
manufacturing company might be fine
without ERP now… but don’t expect to grow
without proactively adjusting your business
processes to scale. Companies that are
used to managing production and material
planning manually can’t realistically
expect to continue to operate that way
as they expand their product line or build
their customer base. Any manufacturing
company expecting demand to increase will
need to ramp up their processes for much
larger scale production, and thus serve to
benefit the most by being proactive and
implementing ERP before they are “hurting
for it.”
WHAT SIZE COMPANY
BENEFITS MOST FROM ERP?

WHICH INDUSTRIES AND
MANUFACTURING MODELS
BENEFIT MOST FROM ERP?
The ability to customize the components of an ERP solution
based on an organization’s specific needs is what enables
a wide range of industries and manufacturing models to
benefit from ERP. The more complex your operation, the
more benefits you serve to gain through the implementation
of an ERP solution. But regardless of whether you operate in
a low volume/high complexity environment, or high volume/
low complexity environment, the right ERP software will
give you the visibility you need to create leaner operations,
manage complex supply chains, and streamline your business
processes to get products to market faster.
In addition to the need for visibility, SCM and lean operations,
many manufacturers across different industries must also
maintain compliance.
For example, the medical device manufacturing industry,
electronics manufacturing industry, and food and beverage
manufacturing industries all face different issues when
it comes to compliance but all of these industries can
manage compliance with ERP. Regardless of whether your
manufacturing company is trying to achieve ISO 9000
certification, FDA compliance or simply meet Current Good
Manufacturing Practices (CGMPs), or the depth and extent of
your product line is driving the need for better quality control
and more efficient systems to track records on quality issues
-- the need to remain compliant exists. Whether quality and
compliance management is required by your industry or
is just a strategy implemented by your company to ensure
customer satisfaction and continuous improvement, you need
the right compliance management software to get the most
out of your quality control program. ERP offers benefits to the
full range of industries and manufacturing environments.
Specific examples of industries that stand to benefit
largely by implementing ERP:
Aerospace
ERP software designed to facilitate government contract
forms and reporting is making the aerospace industry more
efficient. Integration with CAD software and real-time
sharing of information from engineering with the shop
floor and cost accounting keeps projects moving forward
according to schedule.
ERP’s central data source integrates information from
every piece of the process to reduce administrative labor
costs, tighten inventory control and improve cost
accounting accuracy.
Electrical Device
Flexibility and quality control are high on the top of priorities
for electrical device manufacturers. The high-tech world of
electrical devices operates in a state of continual evolution
and change. There is no time for searching for information or
the latest schematic; it needs to be immediately available to
everyone connected with the project. ERP software fulfills the
needs of this fast-paced industry. All processes are trimmed
lean, so that both production and administration can operate
at maximum efficiency.
General Manufacturing
Regardless of your place in the manufacturing industry,
accurate capacity forecasting and tight controls from the
shop floor to the front office are what make a manufacturer
profitable. ERP software provides all levels of management
with the tools they need to improve their piece of the
process. From sales representatives to the worker on the line,
everyone in the organization experiences the benefits of ERP
efficiency. It doesn’t just improve the bottom line; it improves
the whole work environment, providing a positive attitude
that expects and generates success.

Medical
Certificate of compliance and “cradle to grave” tracking
of parts are just two of administrative complexities that
are a part of manufacturing for the medical industry.
Having these details automatically updated throughout
your system with one entry is one of the benefits of
employing comprehensive ERP software in this industry.
Medical manufacturers using ERP software demonstrate
their commitment to the high standard of control
expected in this tightly regulated industry.
Machine Building
Time can be wasted simply directing workers to their
appropriate tasks in the machine building industry.
With the detailed scheduling system available through
comprehensive ERP software systems, everyone knows
where each project is on the schedule and where they
fit into the sequence. The automated time tracking
records labor hours for each individual and each part
of the process they are involved in. ERP software is
trimming labor hours and increasing profits for the
machine building industry.
How do regulated industries benefit from ERP?
Compliance with government regulations requires
specific and detailed reporting. ERP software reduces
the administrative aspect of government contracting.
No special spreadsheets for tracking and reporting
government required data. Superior ERP software
eliminates the need for redundant entries and outside
tracking and reporting for government jobs. ERP
software makes it easier to:
• Meet DCAA compliance requirements for
Aerospace, Department of Defense and other
agencies
• Manage all CSCSC categories for the organization
• Maintain multiple level budgets, original and current
• Generate government required reports
Bottom line, any manufacturer that would like to
improve efficiency can benefit from ERP’s ability to
help streamline and manage processes. And if you’re
thinking your company is too small to benefit from ERP
or you can’t afford an ERP system, that’s simply not the
case. If you choose the right vendor, ERP is an affordable
solution with a lot to offer, even for a small business.

ACHIEVING
SUCCESSFUL
IMPLEMENTATION
Preparing for the implementation
process and training your team.
Few projects have as much potential
for improving operations as
implementing a new ERP system.
Implementation requires change
and any change can be disruptive
and overwhelming if not managed
properly, so it’s important to make
sure that you don’t overlook the
topic of implementation during the
research phase of your ERP initiative.
The implementation phase is the
crucial transition period that takes
you from the initial purchase of your
ERP software to the point where you
fully incorporate it throughout all
departments and utilize it across your
organization.
To maximize benefits and minimize
disruption, your ERP implementation
needs to be thoroughly planned with
a great deal of care, and commitment
to the project needs to be consistent
across the entire organization.

It’s tempting to assume that members of your
organization can add implementation tasks on top of
their regular work, but that isn’t realistic in most cases.
Select smart and experienced people from a variety
of departments to manage the implementation,
and allow them enough time to devote to the
implementation project. It’s important not to delegate
the implementation tasks solely to the IT function
within your organization. Many companies make this
mistake and forget that while ERP software is a new
piece of technology, and new technology is usually
managed by the IT department, this new ERP initiative
will touch all aspects of your business and should
be handled by members of management across all
appropriate departments.
Who, specifically, should be a part of the team?
Your team should be a group of leaders capable of
setting the right goals and implementing a significant
change across your organization. Your IT person will be
heavily involved in the process, and will be responsible
for any technical, connectivity, or hardware-related
issues. The rest of the team should consist of members
of management across departments representing
accounting, scheduling, purchasing, operations,
training, and any other essential business processes
that will be impacted by ERP. In addition, it’s a good
idea to identify one specific person to be accountable
for overall project management.
The responsibilities of the ERP team are to:
• Research available ERP software options
• Agree on a list of features and functionality that
whichever software you choose must have
• Set goals and objectives for the ERP initiative,
including specific standards to which processes are
expected to meet/improve, ROI expectations, etc.
• These goals should be very specific and measurable.
Ex: instead of “improve audit score,” set a goal of
“improve the score of audit on [specific audit date]
by [X] points.”
• Develop a written implementation plan
• Hold other ERP team members accountable to
make sure deadlines are met and the project moves
forward at the expected pace
• Relay exciting news to the organization to keep
everyone up to speed on the status of the ERP
initiative and highlight important milestones and
progress
• Gather feedback from employees across the
organization to make sure everyone is receiving
proper training and is comfortable using the new
software
• Analyze metrics to assess the success of the
implementation and report on ROI (this is why it’s
important to set specific goals).
By creating this ERP team, you’ll be able to treat your
company’s ERP implementation as you would any other
major development or customer project and make sure
everyone pulls their weight so that important deadlines
and milestones are met. Nothing ruins the enthusiasm
for a new system like continued delays in the go-live
date. Managing the project in a way that prevents
unpleasant surprises will pay off.
ASSEMBLING YOUR
IMPLEMENTATION TEAM

The ERP Team should develop a written implementation
plan. This should define objectives, establish important
milestones, set deadlines for each milestone and a firm
date for going live with the software, include specific
goals and metrics for measuring success, and serve
as a guide to keep everyone on track. It should also
include a list of all ERP team members and outline
specific responsibilities of each person and the
corresponding tasks.
The written implementation plan should also plan for
audits at specific points throughout the process. This
will serve as a way for the ERP team to assess the
progress and readjust any aspects of the plan going
forward to ensure success. Be prepared to adjust the
timeline to accommodate circumstances that may arise
during the process. Even if the project ends up getting a
bit off track, if you stick to the components of the plan
as much as possible, you’ll set your team up for success.
DEVELOPING A WRITTEN
IMPLEMENTATION PLAN

TRAINING YOUR TEAM
If you’re going to spend the time and money to
launch an ERP initiative, it’s important to make sure
that your technology not only functions properly,
but is well-understood by your employees so they
can focus more on improving high-value business
processes and procedures and less on executing
daily tasks. Training all employees to prepare them
for the implementation of your organization’s new
ERP software is an excellent way to make sure all
departments are using the ERP system as intended.
Doing this well in advance of the go-live date and
then offering continued training will help prevent
issues and delays due to a lack of understanding,
and will ensure your company gets the best possible
return on investment.
You’re certainly aware by now that ERP software is
a big investment, and some of the biggest reasons
ERP projects fail have to do with implementation, not
technology. By dedicating the right resources, sticking
to a written implementation plan, and making sure your
entire organization is on board and receiving the proper
training, your success will start long before your software
is out of the box.

SELECTING
THE RIGHT ERP
SOFTWARE
In this section you’ll find a
preview of our ERP Selection and
Implementation Toolkit.
You already know that manufacturers
can benefit significantly from using
ERP software. However, not all ERP
solutions were created equally and
an ERP solution that’s a perfect
match for one manufacturing
company may not be a good fit
for another. It is important to give
careful consideration to both the
selection of the software itself, and
to the vendor as well.
Implementing an ERP system is no
small matter, and it can be a dizzying
exercise. Figuring out the details of
what you need and what a vendor
can provide before implementation
will ensure that you get ERP right the
first time — or figure out where you
went wrong.

In general terms, most companies envision improved
performance and reduced costs. If you’re moving from a
spreadsheet environment, you probably want to reduce
redundant data entry and possibly reduce manpower.
If you already have a system, it may not scale to your
company’s growth. Or you may have focused solely on
inventory when it was implemented, whereas now you
need integration with engineering change orders (ECOs)
and/or customer relationship management (CRM) and
supply chain management (SCM). You may even need
more sophisticated functionality altogether. Whatever
your specific reasons, the basic expectation is that by
pulling all your business functions into one system, you’ll
achieve greater accuracy and streamlined process flows.
And with a single database to mine for all reports and
analyses, changes in processes, market information,
and so forth, your decision-making process will be
streamlined as well.
Differentiating process problems from
software problems
Knowing the difference between process and software
problems might seem simple, but consider the
following real-life examples:
Process Problem: A food manufacturer needed 500
lbs. of flour to make one of its products. The flour
came in 550-lb bags. When the workers had poured
500 lbs. of flour into the vat, they tossed the bag with
the remaining 50 lbs. off to the side, where it landed
in among the spices… a place no one ever thought to
look for it. This process problem, of course, resulted in
apparent shortages and cost overages that seemed to
stem from software problems.
Software Problem: This same company had all its
recipes programmed into Excel. Somehow or other, the
measurement for spices was changed from ounces to
grams. No need to describe the catastrophic results.
The moral of this story: Be sure you know what’s broken
before you try to fix it.
CLEARLY DEFINING
YOUR OBJECTIVES

This is incredibly important and often overlooked. Here
are a few examples of what to think about.
If you’re known for:
• Shipping faster than your competitors
• Low prices
• Responding effectively to customization or unique
systems
Then the ERP system you select should support:
• Short lead times
• Controlled lead times
• Configuring product lines
Losing your competitive edge shouldn’t be a trade-off.
Modularity, scalability and integration
Many systems offer hundreds, if not thousands, of
features… most of which you won’t need. This is
especially true if you’re embarking on your first ERP
implementation.
Don’t be dazzled. The key issues are whether a system:
• Does what you need it to do now, without your
having to implement any more than the necessary
functionality.
• Has the capability to grow and change as your needs
do. This should include APIs for writing integrations
for, say, a current or proposed CRM or SCM system.
With that in mind, there is a key factor not to be
overlooked: No system will be a perfect match for what
you’re looking for. For example, you may have found one
that does everything you need it to but doesn’t work
with your current financial package. Could you have it
customized? Of course. But the implementation would
be much more expensive and, down the road, you could
potentially run into problems with both support and
upgrades. So what makes more sense? Customizing or
simply migrating to a compatible financial package?
These are issues you have to weigh for yourself.
SUPPORT FOR YOUR
DIFFERENTATIONS IN
THE MARKETPLACE

ERP MADE EASY
To help you select and implement
the right ERP system, we created
an entire toolkit full of resources.
Download your free toolkit for
access to the Top Factors for
Implementation Success, Vendor
Selection Tools and more!
VENDOR SELECTION
In the context of change management,
it was mentioned that one of the biggest
reasons ERP projects fail has to do with
people, not technology. This is especially
true when it comes to selecting a vendor.
A little-known secret is that many
companies that are desperate to replace
their current system are actually having
vendor, not software, problems. Perhaps
with a few simple customizations or
upgrades—or even just training on features
they already paid for but have never used—
their system may, in fact, be adequate to
meet their needs. But lacking continued
guidance and support from the vendor, they
haven’t a clue. So what should you look for
in a vendor?
Experience with Manufacturing
First, does the vendor know manufacturing?
You might think, Well, of course they do.
”Ain’t necessarily so,” as the song goes.
How can this be? Over the past decade
or so, there’s been a tremendous push to
integrate ERP with financial systems. At this
point, most ERPs you’ll find out there have
been developed by financial companies
with no real understanding of or experience
with manufacturing or production. The
developers can build a system that runs
properly but not necessarily do what’s
needed, since they can’t differentiate
between what’s important and what’s not
important in a manufacturing environment.
Here are some ways to separate the
manufacturing pros from the pretenders:
Ask them if they’ve ever worked in
manufacturing (not just selling MRP or
ERP software) and for how long? Do they
want to walk the grid with you? As you
move from area to area on the shop floor,
do they understand what they’re looking
at? Do they ask meaningful and relevant
questions? Or do they sit in the conference
room with you, talking features and
benefits from a PowerPoint presentation
and filling in forms?
Experience with Your Specific
Product(s) and Manufacturing Methods
The fact that a vendor has been around
forever doesn’t mean they offer what you
need or that they can intelligently partner
with you. What kind(s) of manufacturing
do they specialize in? Who are their
customers? Does the number or percentage
of customers with products and methods
similar to yours equate to “experience?”
Support
The overriding question is: Will they be
there when you need them? Not just
during implementation, but afterward.
How accessible are they once the project
is “finished?” And when is the project
finished? When the software is installed?
When it goes live? When all your staff
is trained? When you know it’s working
properly? In general, do they offer the
customer care you need and want?
Besides asking the vendor specific
questions about what their ongoing
responsibility is to you, ask to speak with
current customers whose business is
similar to yours. The vendor will, of course,
give you only the names of those who are
satisfied, but canny questioning can reveal
a lot more than you may at first think. Even
asking the simple question, “Do you feel as
if they had (or have) your best interests at
heart?” can be very telling. (Of course, if a
vendor won’t give you specific people to
call, just move on to the next name on your
list of partners.)

BUILDING
A BUISNESS
CASE FOR ERP
How to justify cost and demonstrate
the ROI of an ERP Initiative.
One of the most difficult (and most
important) steps involved in an
ERP initiative is building a business
case. It’s not easy to convince the
people with the authority to write
the checks that they should invest in
a new system, especially when this
often involves changes to business
processes that may have worked just
fine for many years without failure.
There are a few key steps that will
help you establish a convincing case
for investing in a new system and
put your company on the path to
realizing greater profits and a return
on investment (ROI) that is worth the
risk involved.

One of most important ERP project critical success
factors is executive buy-in and support. Key people
need to learn about ERP before they can do a proper
job of evaluating costs, risks, and benefits. Otherwise,
it’s like trying to build a house on top of sand. They
need to learn five crucial elements:
• What is ERP, Anyway?
• Benefits of Using ERP Software
• Who Should Use ERP?
• How is ERP Implemented?
• How to Select the Right ERP Software
Many companies make the mistake of presenting a
business case before they take the time to educate the
decision makers without realizing that they can’t justify
the cost of ERP if they don’t really understand what it’s
all about. Without the proper background knowledge,
your job of presenting a convincing business case will
be much more challenging. Decision makers will likely
underestimate importance of the initiative and have it
in their heads that ERP is just part of a computer system
and that this is just a software project, which will result
in misconstrued perception of the costs, benefits, and
risks involved. On top of that, they’ll almost always
underestimate the benefits. If they think ERP is a
computer system, it then becomes very difficult to
establish ERP implementation as a high priority across
the company.
Who needs this education? Any decision makers
you’ll be presenting the business case to, including
top management and operating management. Don’t
include more people than necessary, but make
sure that anyone who will be held accountable for
costs, benefits, and overall success or failure of the
ERP initiative is involved. It can be difficult to get
participation across the board on this education
process, but it’s key to your success as an organization,
so don’t hesitate to lead and present educational
materials yourself and frame it as part of the business
case presentation.
WHY IT’S IMPORTANT TO
EDUCATE FIRST

Once you’ve educated your decision makers, the next
step is to present your case. The easiest way to do this
is to put together some fact sheets to present on the
following:
• Alignment - Create a list of ways the ERP
solution you’re recommending aligns with your
organization’s goals, business process, and daily
operations and why they’re a good fit
• Benefits (both tangible and intangible) - a list
of benefits, what goals they align with, and how
success will be measured.
• Risks - Create a list of investment risk factors and
the corresponding concerns/implications
The next step is to present a cost/benefit analysis.
Instead of just throwing a massive price tag on your
ERP initiative, your decision makers will be much more
receptive if you present a carefully outlined list of the
anticipated costs (expenses) and benefits (income).
You should present each item in a way that tells your
project expenses as more of a complete story, leading
up to and preparing your decision makers for the final
price tag and anticipated ROI.
HOW TO DEVELOP A
DEFINITIVE SET OF CASE
JUSTIFICATIONS

Here’s an example that we found in an excerpt from ERP: Making It Happen: The Implementers’ Guide to Success with Enterprise
Resource Planning by Thomas F. Wallace and Michael H. Kremzar. To illustrate the process, they created a hypothetical company with
the following characteristics:
Annual sales: $500 million
Employees: 1000
Number of plants: 2
Distribution centers: 3
Manufacturing process: Fabrication and assembly
Product: A complex assembled make-to-order product, with many options
Pretax net profit: 10 percent of sales
Annual direct labor cost: $25 million
Annual purchase volume (production materials): $150 million
Annual cost of goods sold: $300 million
Current inventories: $50 million
HOW TO PRESENT YOUR COST/
BENEFIT ANALYSIS

Here’s how this hypothetical company would present their cost/benefit analysis:
COSTS
ITEM ONE TIME RECURRING COMMENTS
COMPUTER
Hardware $400,000 Costs primarily for workstations.
Software 500,000 $75,000 Can vary widely, based on package
Systems and Programming 2,500,000 200,000 Adapting the software to your company and training in its use. These
costs are pegged here at 5 times the software purchase cost.
DATA
Inventory record accuracy 700,000 100,000 Includes new equipment and added cycle counters.
Bill of material accuracy and
structure
200,000 Bills will need to berestructured into the modular format. Experienced
engineers will be needed for this step.
Routing accuracy 100,000
Forecasting 200,000 100,000 Full time person for Sales forecasting. Needs to come on board early.
PEOPLE
Project Team 1,200,000 Six full-time equivalent people for two years.
Education 800,000 100,000 Includes costs for education time and teaching the new ES interactions
to the organization.
Professional guidance 400,000 50,000 4 days per month during installation.
SUB-TOTAL $7,000,000 $725,000
Contingency $8,050,000 $834,000
+15% 1,050,000 109,000 A conservative precaution against surprises.
TOTAL $9,100,000 $943,000

BENEFITS
ITEM CURRENT % IMPROVEMENT ANNUAL BENEFITS COMMENTS
Sales $500,000,000 7% at 10% $3,500,000 Modest improvement due to improved product availability
at the profit margin of 10%
Direct Labor
Productivity
25,000,000 10% 2,500,000 Reductions in idle time, overtime, layoffs, and other items
caused by lack of planning and information flow.
Purchase cost 150,000,000 5% 7,500,000 Better planning and information will reduce total purchase
costs.
INVENTORIES
Raw Material and
WIP
25,000,000 10% at 15% 380,000 2,500,000 One time cash flow.
Finished goods 25,000,000 30% at 15% 1,130,000 7,500,000 One time cash flow.
Obsolescence 500,000 30% 150,000 Conservative savings
Premium freight 1,000,000 50% 500,000 Produce and ship on time reduces emergencies
SUB-TOTAL 15,660,000 $10,000,000 One time cash flow.
Less costs for:
Contingency 15% -2,349,000 1,500,000
Recurring -720,000
NET ANNUAL BENEFITS $12,591,000 $8,500,000 One time cash flow.
Cost of a one month delay (Total/12) $1,049,250
Payback time (One Time Cost/monthly benefits) 7.7 months
Return on investment (Annual benefits/One Time Costs) 193%
Once benefits, costs and risk are quantified and analyzed, an ERP investment can then be appraised and (hopefully) approved.
By following the steps outlined above, you’ll be able to clearly and articulately build a business case for your ERP initiative and make sure
your audience is making an educated decision. Getting the executive support and buy-in for your ERP initiative will lead your organization
to success.

GET YOUR QUESTIONS ANSWERED BY
A MAX EXPERT
Choosing the right ERP solution doesn’t have to be a daunting task.
Get in touch with a MAX Expert by calling 1.855.392.2862 to schedule
an introductory consultation. You won’t believe how easy it can be to
use MAX to help you control your business.
If you have any questions about our products and services, please
contact us at 1.855.392.2862 or visit us online at www.max4erp.com.
SEE MAX
IN ACTION
Visit us at max4erp.com/events to register for an
upcoming webinar so you can see for yourself why
so many manufacturers rely on MAX for ERP.
Things were getting out of control
with divergent systems. We needed
a more integrated approach and we
found it with MAX.”
DCA MANUFACTURING
Carl Proescholdt, General Manager
“

MAX ERP software is an Exact product for manufacturers.
Exact builds business software for SMEs and their accountants.
Our innovative technology is aimed at specific business needs,
providing an overview of today and insights into the opportunities
of tomorrow. Exact inspires businesses to grow. Our 1,600
employees love, share and support our customers’ ambition. Like
them, we aim high. Like them, we aspire to lead the way. That’s
how we know it’s a bumpy road to success. And that’s why we build
software to help smooth it out, enabling our customers from all
over the world to grow.
MAX. ERP software for manufacturers.
www.max4erp.com
© Exact Group B.V., 2016. All rights reserved. All trademarks mentioned herein belong
to their respective owners.
MCL510101US014
MAX
777 Mariners Island Blvd
Suite 210
San Mateo, CA 94404
Tel: 1.855.392.2862
Website: www.max4erp.com

The Complete Guide to ERP

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