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To address the common mistakes that lead to a poor ERP system selection it is important to apply key principles to the process, some of which are listed here under:

Structured approach

The first step in selection of a new ERP system is to adopt a structured approach to the process. The set of practices are presented to all the stakeholders within the enterprise before the system selection process begins. Everyone needs to understand the method of gathering requirements; invitation to tender; how potential vendors will be selected; the format of demonstrations and the process for selecting the vendor. Thus, each stakeholder is aware that the decision will be made on an objective and collective basis and this will always lead to a high level of co-operation within the process.

Focused demonstrations

Demonstrations by potential vendors must be relevant to the business. However, it is important to understand that there is considerable amount of preparation required by vendors to perform demonstrations that are specific to a business. Therefore it is imperative that vendors are treated equally in requests for demonstrations and it is incumbent on the company [and the objective consultant assisting the company in the selection process] to identify sufficient demonstrations that will allow a proper decision to be made but will also ensure that vendors do not opt out of the selection process due to the extent of preparation required.

Objective decision process

"Choosing which ERP to use is a complex decision that has significant economic consequences, thus it requires a multi-criterion approach.". There are two key points to note when the major decision makers are agreeing on selection criteria that will be used in evaluating potential vendors. Firstly, the criteria and the scoring system must be agreed in advance prior to viewing any potential systems. The criteria must be wide-ranging and decided upon by as many objective people as possible within and external to the enterprise. In no circumstance should people with affiliations to one or more systems be allowed to advise in this regard.

Full involvement by all personnel

The decision on the ERP solutions must be made by all stakeholders within the enterprise. "It requires top management leadership and participation… it involves virtually every department within the company". Representatives of all users should:

Be involved in the project initiation phase where the     decision making process is agreed;

Assist in the gathering of requirements;

Attend the Vendor Demonstrations;

Have a significant participation in the short-listing     and final selection of a vendor.

Government regulations require that companies working in certain industries control their documents. These industries include accounting (e.g., 8th EU Directive, Sarbanes–Oxley Act), food safety (e.g., Food Safety Modernization Act), ISO (mentioned above), medical device manufacturing (FDA), manufacture of blood, human cells, and tissue products (FDA), Healthcare (JCAHO), and Information technology (ITIL). Particular industries are also held to a higher level of documentation control, for privacy, warranty and insurance purposes. For example, in the construction industry, it is common that project documentation is held on record and adequately controlled for warranty periods ranging on average for 5-10 years.

Documents stored in a

document management system

— such as procedures, work instructions, and policy statements—provide evidence of documents under control. Failing to comply could cause fines, the loss of business, or damage to a business's reputation.

The following are important aspects of document control:

Reviewing and approving  documents prior to release

Reviews and approvals

Ensuring changes and revisions are clearly identified

Ensuring that relevant versions  of applicable documents are available at their “points of use”

Ensuring that documents remain  legible and identifiable

Ensuring that external   documents like customer supplied documents or supplier manuals are   identified and controlled

Preventing “unintended” use of   obsolete documents

Documentmanagement system commonly provide storage, versioning, metadata, security, as well as indexing and retrieval capabilities. Here is a description of these components:

Metadata :     Metadata  is typically stored for each document. Metadata may, for example, include the  date the document will be stored and the identity of the user storing it. The  DMS may also extract metadata from the document automatically or prompt the  user to add metadata. Some systems also use optical character recognition on  scanned images, or perform text extraction on electronic documents. The  resulting extracted text can be used to assist users in locating documents by  identifying probable keywords or providing for full text search capability,  or can be used on its own. Extracted text can also be stored as a component  of metadata, stored with the image, or separately as a source for searching  document collections.

Integration :

Many  document management systems attempt to integrate document management directly  into other applications, so that users may retrieve existing documents directly  from the document management system repository, make changes, and save the  changed document back to the repository as a new version, all without leaving  the application. Such integration is commonly available for office suites and  e-mail or collaboration/groupware software. Integration often uses open  standards such as ODMA, LDAP, WebDAV and SOAP to allow integration with other  software and compliance with internal controls. 

Capture :

Capture  primarily involves accepting and processing images of paper documents from scanners  or multifunction printers. Optical character recognition (OCR) software is  often used, whether integrated into the hardware or as stand-alone software,  in order to convert digital images into machine readable text. Optical mark  recognition (OMR) software is sometimes used to extract values of check-boxes  or bubbles. Capture may also involve accepting electronic documents and other  computer-based files.

    Validation :  Visual  validation registration system and important data. E.g. document failures,  missing signatures, misspelled names, this can be printed on paper documents  or images on paper.

Indexing :   Indexing  tracks electronic documents. Indexing may be as simple as keeping track of  unique document identifiers; but often it takes a more complex form, providing classification through the documents' metadata or even through word indexes extracted from the documents' contents. Indexing exists mainly to support retrieval. One area of critical importance for rapid retrieval is the creation of an index topology.

Storage :

Store  electronic documents. Storage of the documents often includes management of  those same documents; where they are stored, for how long, migration of the  documents from one storage media to another (hierarchical storage management)  and eventual document destruction.

Retrieval : Retrieve  the electronic documents from the storage. Although the notion of retrieving  a particular document is simple, retrieval in the electronic context can be  quite complex and powerful. Simple retrieval of individual documents can be  supported by allowing the user to specify the unique document identifier, and  having the system use the basic index (or a non-indexed query on its data  store) to retrieve the document. More flexible retrieval allows the user to  specify partial search terms involving the document identifier and/or parts  of the expected metadata. This would typically return a list of documents which match the user's search terms. Some systems provide the capability to specify a Boolean expression containing multiple keywords or example phrases expected to exist within the documents' contents. The retrieval for this kind  of query may be supported by previously built indexes, or may perform more time-consuming searches through the documents' contents to return a list of the potentially relevant documents.

 Distribution :  A  published document for distribution has to be in a format that can not be  easily altered. As a common practice in law regulated industries, an original  master copy of the document is usually never used for distribution other than  archiving. If a document is to be distributed electronically in a regulatory  environment, then the equipment tasking the job has to be quality endorsed  AND validated. Similarly quality endorsed electronic distribution carriers  have   to be used. This approach applies to both of the systems by which the  document is to be inter-exchanged, if the integrity of the document is highly  in demand.    

Security : Document  security is vital in many document management applications. Compliance  requirements for certain documents can be quite complex depending on the type  of documents. For instance, in the United States, the Health Insurance  Portability and Accountability Act (HIPAA) requirements dictate that medical  documents have certain security requirements. Some document management  systems have a rights management module that allows an administrator to give  access to documents based on type to only certain people or groups of people.  Document marking at the time of printing or PDF-creation is an essential  element to preclude alteration or unintended use.

Workflow :  Workflow  is a complex process and some document management systems have a built-in  workflow module. There are different types of workflow. Usage depends on the  environment to which the electronic document management system (EDMS) is  applied. Manual workflow requires a user to view the document and decide whom  to send it to. Rules-based workflow allows an administrator to create a rule  that dictates the flow of the document through an organization: for instance,  an invoice passes through an approval process and then is routed to the  accounts-payable department. Dynamic rules allow for branches to be created in  a workflow process. A simple example would be to enter an invoice amount and  if the amount is lower than a certain set amount, it follows different routes  through the organization. Advanced workflow mechanisms can manipulate content  or signal external processes while these rules are in effect.     Collaboration: Collaboration  should be inherent in an EDMS. In its basic form, collaborative EDMS should  allow documents to be retrieved and worked on by an authorized user. Access  should be blocked to other users while work is being performed on the  document. Other advanced forms of collaboration act in real time, allowing  multiple users to view and modify (or markup) documents at the same time. The  resulting document is comprehensive, including all users additions.  Collaboration within Document Management Systems stores the various markups  by each individual user during the collaboration session, allowing document  history to be monitored.

Versioning :

Versioning  is a process by which documents are checked in or out of the document  management system, allowing users to retrieve previous versions and to  continue work from a selected point. Versioning is useful for documents that  change over time and require updating, but it may be necessary to go back to  or reference a previous copy.

Searching : Searching  finds documents and folders using template attributes or full text search. Documents  can be searched using various attributes and document content.  

Publishing : Publishing  a document involves the procedures of proofreading, peer or public reviewing,  authorizing, printing and approving etc. Those steps ensure prudence and  logical thinking. Any careless handling may result in the inaccuracy of the  document and therefore mislead or upset its users and readers. In law  regulated industries, some of the procedures have to be completed as  evidenced by their corresponding signatures and the date(s) on which the  document was signed. Refer to the ISO divisions of ICS 01.140.40 and  35.240.30 for further information. The  published document should be in a format that is not easily altered without a  specific knowledge or tools, and yet it is read-only or portable.

Reproduction :

ERP systems connect to real–time data and transaction data in a variety of ways. These systems are typically configured by systems integrators, who bring unique knowledge on process, equipment, and vendor solutions.

Direct integration—ERP systems have connectivity (communications to plant floor equipment) as part of their product offering. This requires that the vendors offer specific support for the plant floor equipment their customers operate. ERP vendors must be experts in their own products and connectivity to other vendor products, including those of their competitors.

Database integration—ERP systems connect to plant floor data sources through staging tables in a database. Plant floor systems deposit the necessary information into the database. The ERP system reads the information in the table. The benefit of staging is that ERP vendors do not need to master the complexities of equipment integration. Connectivity becomes the responsibility of the systems integrator.

Enterprise appliance transaction modules (EATM)—These devices communicate directly with plant floor equipment and with the ERP system via methods supported by the ERP system. EATM can employ a staging table, web services, or system–specific program interfaces (APIs). An EATM offers the benefit of being an off–the–shelf solution.

Custom–integration solutions—Many system integrators offer custom solutions. These systems tend to have the highest level of initial integration cost, and can have a higher long term maintenance and reliability costs. Long term costs can be minimized through careful system testing and thorough documentation. Custom–integrated solutions typically run on workstation or server-class computers.

Most ERP systems incorporate best practices. This means the software reflects the vendor’s interpretation of the most effective way to perform each business process. Systems vary in how conveniently the customer can modify these practices. Companies that implemented industry best practices reduced time–consuming project tasks such as configuration, documentation, testing, and training. In addition, best practices reduced risk by 71% compared to other software implementations.

Use of best practices eases compliance with requirements such as IFRS, Sarbanes-Oxley, or Basel II. They can also help comply with de facto industry standards, such as electronic funds transfer. This is because the procedure can be readily codified within the ERP software, and replicated with confidence across multiple businesses who share that business requirement.

ERP systems connect to real–time data and transaction data in a variety of ways. These systems are typically configured by systems integrators, who bring unique knowledge on process, equipment, and vendor solutions.

Direct integration—ERP systems have connectivity (communications to plant floor equipment) as part of their product offering. This requires that the vendors offer specific support for the plant floor equipment their customers operate. ERP vendors must be experts in their own products and connectivity to other vendor products, including those of their competitors.

Database integration—ERP systems connect to plant floor data sources through staging tables in a database. Plant floor systems deposit the necessary information into the database. The ERP system reads the information in the table. The benefit of staging is that ERP vendors do not need to master the complexities of equipment integration. Connectivity becomes the responsibility of the systems integrator.

Enterprise appliance transaction modules (EATM)—These devices communicate directly with plant floor equipment and with the ERP system via methods supported by the ERP system. EATM can employ a staging table, web services, or system–specific program interfaces (APIs). An EATM offers the benefit of being an off–the–shelf solution.

Custom–integration solutions—Many system integrators offer custom solutions. These systems tend to have the highest level of initial integration cost, and can have a higher long term maintenance and reliability costs. Long term costs can be minimized through careful system testing and thorough documentation. Custom–integrated solutions typically run on workstation or server-class computers.

ERP (Enterprise Resource Planning) systems typically include the following characteristics:

An integrated system that operates in (or near) real time without relying on periodic updates

A common database that supports all applications

A consistent look and feel across modules

Installation of the system with elaborate application/data integration by the Information Technology (IT) department, provided the implementation is not done in small steps

Customization can be problematic. Compared to the best-of-breed approach, ERP can be seen as meeting an organization’s lowest common denominator needs, forcing the organization to find workarounds to meet unique demands.

Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activities.

ERP Solutions can cost more than less integrated or less comprehensive solutions.

High ERP switching costs can increase the ERP vendor’s negotiating power, which can increase support, maintenance, and upgrade expenses.

Overcoming resistance to sharing sensitive information between departments can divert management attention.

Integration of truly independent businesses can create unnecessary dependencies.

Extensive training requirements take resources from daily operations.

Due to ERP’s architecture (OLTP, On-Line Transaction Processing) ERP systems are not well suited for production planning and supply chain management (SCM).

Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and money.

Recognized ERP limitations have sparked new trends in ERP application development. Development is taking place in four significant areas: more flexible ERP, Web-enabled ERP, inter-enterprise ERP, and e-business suites.

ERP can improve quality and efficiency of the business. By keeping a company’s internal business processes running smoothly, ERP can lead to better outputs that may benefit the company, such as in customer service and manufacturing.

ERP solutions supports upper level management by providing information for decision making.

ERP creates a more agile company that adapts better to change. ERP makes a company more flexible and less rigidly structured so organization components operate more cohesively, enhancing the business—internally and externally.

ERP can improve data security. A common control system, such as the kind offered by ERP systems, allows organizations the ability to more easily ensure key company data is not compromised.

ERP provides increased opportunities for collaboration. Data takes many forms in the modern enterprise. Documents, files, forms, audio and video, emails. Often, each data medium has its own mechanism for allowing collaboration. ERP provides a collaborative platform that lets employees spend more time collaborating on content rather than mastering the learning curve of communicating in various formats across distributed systems

The fundamental advantage of ERP is that integrated myriad businesses processes saves time and expense. Management can make decisions faster and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include:

Sales forecasting, which allows inventory optimization.

Chronological history of every transaction through relevant data compilation in every area of operation.

Order tracking, from acceptance through fulfillment

Revenue tracking, from invoice through cash receipt

Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced)

ERP solutions centralize business data, which:

Eliminates the need to synchronize changes between multiple systems—consolidation of finance, marketing, sales, human resource, and manufacturing applications

Brings legitimacy and transparency to each bit of statistical data

Facilitates standard product naming/coding

Provides a comprehensive enterprise view (no “islands of information”), making real–time information available to management anywhere, any time to make proper decisions

Protects sensitive data by consolidating multiple security systems into a single structure

Data migration is the process of moving, copying, and restructuring data from an existing system to the ERP system . Migration is critical to implementation success and requires significant planning. Unfortunately, since migration is one of the final activities before the production phase, it often receives insufficient attention. The following steps can structure migration planning:

Identify data to migrate

Determine migration timing

Generate data templates

Freeze the toolset

Decide on migration-related setups

Define data archiving policies and procedures

Times have changed where companies used to build their own customized IT systems as the scope was too less and now that the technology has advanced so much and there is competition almost everywhere and even in terms of the right ERP product, it’s the most important decision any organization has to align with its current business requirements and understand how can IT in their business change their future and what does it take to do so.

Implementing ERP typically requires changes in existing business processes Poor understanding of needed process changes prior to starting implementation is a main reason for project failure. The difficulties could be related to the system, business process, infrastructure, training, or lack of motivation.

It is therefore crucial that organizations thoroughly analyze business processes before they implement ERP software . Analysis can identify opportunities for process modernization. It also enables an assessment of the alignment of current processes with those provided by the ERP system . Research indicates that risk of business process mismatch is decreased by:

Linking current processes to the organization’s strategy

Analyzing the effectiveness of each process

Understanding existing automated solutions

ERP implementation is considerably more difficult (and politically charged) in decentralized organizations, because they often have different processes, business rules, data semantics, authorization hierarchies, and decision centers. This may require migrating some business units before others, delaying implementation to work through the necessary changes for each unit, possibly reducing integration (e.g., linking via Master data management) or customizing the system to meet specific needs.

A potential disadvantage is that adopting “standard” processes can lead to a loss of competitive advantage. While this has happened, losses in one area are often offset by gains in other areas, increasing overall competitive advantage.

Two-tier ERP software and hardware lets companies run the equivalent of two ERP systems at once: one at the corporate level and one at the division or subsidiary level. For example, a manufacturing company uses an ERP system to manage across the organization. This company uses independent global or regional distribution, production or sales centers, and service providers to support the main company’s customers. Each independent center or subsidiary may have its own business models, workflows, and business processes.

Given the realities of globalization, enterprises continuously evaluate how to optimize their regional, divisional, and product or manufacturing strategies to support strategic goals and reduce time-to-market while increasing profitability and delivering value. With two-tier ERP, the regional distribution, production, or sales centers and service providers continue operating under their own business model—separate from the main company, using their own ERP systems. Since these smaller companies’ processes and workflows are not tied to main company’s processes and workflows, they can respond to local business requirements in multiple locations.

Factors that affect enterprises’ adoption of two-tier ERP systems include:

Manufacturing globalization, the economics of sourcing in emerging economies

Potential for quicker, less costly ERP implementations at subsidiaries, based on selecting software more suited to smaller companies

Extra effort, (often involving the use of Enterprise application integration) is required where data must pass between two ERP systems Two-tier ERP strategies give enterprises agility in responding to market demands and in aligning IT systems at a corporate level while inevitably resulting in more systems as compared to one ERP system used throughout the organization.