As manufacturing-focused organizations become more complicated through acquisitions, mergers, and all sorts of new global business pressures, ERP systems for manufacturers are becoming increasingly important, more deeply interconnected with business processes, and more expensive. Throw in a rocky and uncertain economic environment, and managing ERP can seem like a trip into a confusing and foreboding labyrinth. However, forging ahead to create a coherent management plan doesn't have to start with guesswork.
Here are five core ERP management best practices from Ray Wang, a partner for enterprise strategy at Altimeter Group. Use them to get better value out of your ERP solution.
- Reduce legacy costs.
There are plenty of areas for reducing legacy ERP costs, chief among them the consolidation of systems on newer, more energy efficient hardware. This tactic can also sometimes come with more favorable support contracts. In addition, savvy ERP managers will examine each ERP module, application, and supporting systems closely, looking for direct business value delivered from each component. "Limit exposure and future investments in applications that are not providing value," Wang said.
- Identify areas for consolidation.
Do you really need 15 ERP systems? Probably not. Can you consolidate to gain some efficiency? Usually, yes. For example, companies can usually consolidate from 15 down to five systems. But moving from five down to one may be tougher.
- Consider third-party maintenance.
If a manufacturer has experienced in-house staff, it may be possible to reduce its reliance on direct ERP vendor maintenance costs, particularly with ERP systems that are stable and are unlikely to need major upgrades for years. But by going to reputable third-party maintenance and support providers, it's not uncommon for organizations to cut maintenance fees in half.
- Renegotiate contracts.
The first step in renegotiating contracts is to truly understand how much your organization uses a solution or service. If there are only a half-dozen support calls a year, it creates a sense of value compared to the overall cost. When the services delivered don't match the actual value received, that presents an opportunity for renegotiation.
What about companies that are paying for more end user licenses then they actually need? There's another opportunity for renegotiation. Another key element is understanding your company's overall software adoption and lifecycle strategy so that contracts can be aligned.
- Prepare for innovation.
Manufacturing ERP management best practices aren't all about cost-cutting. Successful manufacturers will consistently lay the foundation for innovation. You can extend application life for key apps with vendors who are innovating and add innovation through Software as a Service (Saas). Some examples of SaaS solutions might include expense management, talent management products or SaaS-based manufacturing ERP for new divisions.
What other resources would you like to see on manufacturing ERP management best practices? Email us at email@example.com.
About the author: Chris Maxcer is a freelance writer.
This was first published in February 2010