Enterprise Resource Planning (ERP) is a range of software solutions designed to help you manage your business. There are different ERP software that helps organizations independently manage their financials, communication with suppliers and customers, EDI, warehousing, analytics, demand planning, and distribution departments.
Distribution ERP solutions are fast becoming a criterion for the efficient running of wholesale and distribution companies. ERP for distributors helps companies optimize inventory management, improve shipping speed and accuracy, reduce costs, maintain retailer compliance, and increase customer satisfaction. So, what are the strategies used in deploying these ERP solutions?
Fundamentals of ERP Strategy
Implementing an ERP helps organizations step up their service and overall performance, but without the appropriate fundamentals in place, even a well-intentioned ERP implementation can fall short of expectations. The fundamentals of ERP strategy (different from the fundamentals or components of ERP) are as follows:
- Understanding the vision and requirements of the organization
- A well-defined plan for achieving the organization’s goals
- A working data strategy
- An understanding of functional and process integration points
- Stakeholders working with the company toward achieving the set goals
- A sound understanding of the reporting strategy with an enabling chart of accounts (CoA)
Strategies for ERP Implementation
Once the ERP strategy fundamentals are settled, an organization can decide which strategy to implement. There are several strategies for transitioning to a new ERP system, each carrying a unique set of advantages and drawbacks. The four major ERP strategies are:
1. Big Bang
As the name implies, the Big Bang involves a single step where all the users are moved to the new ERP system at the same time. While the cost might be prohibitive, organizations that go down this route begin reaping the benefits of an ERP quickly. In addition, the instant change means they stop paying for the old system.
This strategy is only adopted when sufficient time and resources are dedicated to configuring, testing, and training users on how the new ERP system operates. Tests and training processes are essential in this strategy because any error or glitch can impact employees, business partners, and the successful digital transformation of the organization.
2. Phased Rollout
As the name implies, in this structure, moving the organization to the ERP system is done in several, well-thought-out phases which may take weeks or even months. While it is less risky than the Big Bang strategy, the benefits of implementing ERP take longer.
Because implementing the different features of a distribution ERP is done in phases, the organization will need to support and pay for two systems at the same time. However, it allows organizations to switch to an individual ERP module and tackle problems before adopting the next ERP module.
3. Parallel Adoption
In this strategy, organizations maintain their legacy systems in parallel with the new ERP for a specific length of time. Because they can fall back on the legacy system if things go wrong, this is typically regarded as the least risky strategy.
Parallel Adoption allows organizations the time required to monitor the new ERP system and switch after all the necessary testing has been concluded. However, the cost of the parallel adoption strategy can be high as it requires more staff, time, and resources to run two systems simultaneously.
This strategy incorporates components of the preceding ones. For instance, an organization might implement its main ERP modules in a big-bang manner before introducing other modules gradually to various locations or departments.
Selecting an ERP Implementation Strategy
By improving efficiency across distribution channels, ERP solutions can increase profits and ensure that an entire business uses the same real-time data. However, before the ERP implementation stage, organizations need to research the steps to implementing a distribution ERP.
The true benefits of your ERP purchase are realized in a successful implementation. To select an effective strategy, organizations should consider the size of the organization, its risk tolerance, the desired pace of return on investment (ROI), and the budget allocated for implementation.