Did you miss our distribution leader panel on choosing and leveraging the best ERP for your distribution business? Watch now.
Selecting, implementing and leveraging an ERP is as complex as the systems and workflows these platforms integrate. What key considerations should be top of mind?
Distribution Strategy Group’s Ian Heller spoke with three distribution leaders on what worked for them – and their lessons learned in the process.
- Jon Fendenheim, CIO, Elite Roofing Supply
- Craig Costa, Vice President of Business Technology, Porter Pipe & Supply Co.
- Scot Stein, CIO and Digital Officer, IEWC
Each of our panelists has gone through at least one ERP implementation during their careers. According to Gartner, “55-75% of ERP projects either fail or don’t meet their intended objectives,” so learning from successful experiences is essential.
Prepare for Initial Slowdowns
Costa understands the benefits of cloud ERP. He remembers the days of waking up in the middle of the night to check that a server still functioned or worrying about installing the latest platform upgrade.
Cloud ERP offers real-time software updates and the reliability of server redundancy backed by the biggest names in the business. Despite these benefits, there’s a learning curve for any company implementing new technology. Team members are used to specific workflows that become like muscle memory—even if these tasks were redundant or unwieldy before the migration. When switching to a new ERP, distributors must prepare for an inevitable slowdown, whether it’s slower processing from remote cloud interactions or simply learning a new system.
For Costa, slowdowns dissipated after about half a year. That gave his team time to redevelop the muscle memory that increased their speed on the new platform.
Most distribution companies build extensions and customizations upfront in an ERP implementation, but this slows down the initial data population, particularly in order entry. Costa suggested that distributors need six months or so after go-live to tweak data exchanges and other critical behind-the-scenes configurations that ultimately make your ERP faster and run more efficiently in the long run
How Much ERP Functionality Do You Really Need?
Using even 90% of an ERP’s functionality is rare. The panelists agreed that ERP platforms are so robust most companies barely touch 50% of the capabilities of these tools. Within this context, distributors must tackle the question: What functionality do you need in your ERP?
Defining requirements for your ERP is critical because, as Stein said: “One vendor can’t be great at everything, and if they tell you that, it’s probably not true.” Each vendor will have strengths and weaknesses. They will all emphasize their strengths, but different ERPs have different pros and cons. That’s what makes requirements gathering so critical. If you get this wrong, it creates massive risk for your company after implementation.
Costa started with one goal and built requirements from there. “Our entire department has one goal: To create a compelling experience for our customers.” For his company, this overarching strategy narrowed the lens when looking at the wide-ranging feature functionality of ERPs. It gave them a necessary baseline. From this, they realized the most crucial functionality of their selected ERP was the third-party integrations with their existing software tools. Costa’s team focused closely on the integration ecosystem within ERP functionality as the primary selection requirement for their software.
The idea here is that every ERP platform has strengths. The goal is to determine which of these areas is most important to your distribution business, then find the ERP that gives you what you need.
Tips for Requirements Gathering
As Costa put it: “Aside from a natural disaster, implementing an ERP is the most disruptive thing you can do to a distribution business.”
Many distribution companies divide their requirements between functional and technical. IT typically takes charge of the technical, including functionality geared toward growth. When it comes to functional on-the-ground requirements, Stein said, “engaging the business-process owners upfront” is critical.
Stein pointed out that a new ERP shouldn’t clean the functional workflow slate. He encouraged distributors to consider: “What strengths do we have today and what do we need to keep?” And look at the possibilities for streamlining workflows with new ERP functionality. Think about functional requirements within the context of “nice-to-have vs. what I really need to have,” he said. This emphasis on retaining and enhancing key business processes is not only vital to selecting a suitable ERP, but it also engages stakeholders in the success of the selection and deployment.
This will help your organization keep each vendor demo within the rails of what ERP functionality you will use. Vendor demos can be overwhelming, but Stein said focusing on “the things we have to get right” helps organizations avoid getting snagged on a small, insignificant requirement that the vendor doesn’t meet but isn’t essential.
Fendenheim agreed. He emphasized engaging with a business’s functional areas as early as possible. “As much as you can get them engaged, get them to ask the right questions,” he said.
Costa added: “If you’re not the person with the understanding of all the areas of the business, make sure you have someone who does. One of the advantages we had was an implementation partner. It was the make-or-break for our go live.”
Preventing an ERP Implementation Failure
While the panelists have yet to go through what they would consider an ERP implementation failure; they know what can cause these disasters.
Stein shared four red flags that can signal an ERP implementation failure:
- Rushed implementation
- Lack of good training
- Poor data migration and planning
- Not enough buy-in from the business stakeholders
Costa emphasized managing expectations of a rollout across the entire organization. He says, “You don’t know what you don’t know, but going through everything with a fine-toothed comb” is critical to change management.
Fendenheim pointed out that communication was critical. “You’ve got to be in constant communication and not let things go dark.” ERP planning and implementation is a long process where many things happen behind the scenes. Regular two-way communication across the distribution company through a one- or two-year implementation increases your chances of success.
Top Data Considerations for ERP Implementation
The idea of “garbage in/garbage out” should be the cautionary tale guiding the cleansing, standardizing and migration of your data. The last thing you want is for your technical debt to enter your new ERP. “Sometimes the new ERP gets blamed” when it’s simply a failure to clean up old issues with your database before migration, Heller said.
You can use a third-party vendor to handle the data scrubbing. If you handle it yourself, Stein advised starting as early as possible. “You can never start too early and never test enough.”
Even minor issues, like naming conventions, can trip up a data migration. “Getting those data requirements, understanding how things should look, and then having the right processes to clean the data and get it in” are critical, Fendenheim said.
Should You Use an Integration Partner?
Integrating your existing systems, such as your customer relationship management (CRM) or warehouse management system (WMS), is vital to your rollout. Identifying how many integration points you’ll need and then systematizing how you conduct these critical connections makes a difference.
“Find those bolt-on systems that provide best-of-breed functionality and integrate with them,” Stein said. Organizations should define these interfaces during requirements gathering.
While you can use a third-party integration vendor, some ERPs have a built-in platform to connect your software tools. If you have the IT resources, you can build application program interfaces (APIs) or use existing ones to integrate with every third-party platform your teams use. For example, integrating your ERP with electronic data interchange (EDI) software allows distributors to automate everything from order entry to invoicing. This integration speeds up these processes while reducing manual errors.
The final piece of the ERP selection and implementation puzzle is to create an environment where continuous improvement of your new platform is accepted and welcomed. How can you prepare your organization for what comes after the ERP rollout?
Fendenheim said: “Go-live isn’t the big bang theory anymore. Realistically, you’ll find things that need repairing as you go along. Stack those tasks behind the go-live date, and you’ll eventually get everything right.”
“Getting an ERP is like having a heart transplant,” Stein said. “You must change the heartbeat of daily work. That’s going to take time. You’re going to have some recovery.”
Communicating this reality across your organization will build the fortitude and resilience your teams need to handle this massive workflow shift. The reality of any ERP implementation is that, for a time, things may be more challenging, not less.
“You’re going to run faster and have more endurance with this new ‘pump’ in your organization,” Stein said. “But this doesn’t happen overnight. Getting people to go along with the idea that it will be more complicated before it gets more manageable is the No. 1 goal of change management in any ERP implementation, no matter what platform you choose.”