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Why Manufacturing ERP System Selection Teams Should Look Beyond Price

Why Manufacturing ERP System Selection Teams Should Look Beyond Price

Manufacturing & Distribution

Many manufacturing companies form an internal selection team that spearheads the search for and implementation of a new ERP system, also known as accounting and financial management software.

The Role of an Internal Selection Team

Having an internal team that defines business rules and “must have” features of the system, issues an RFP, evaluates ERP (enterprise resource planning) systems and software partners (resellers),  and creates and manages a budget is a fantastic idea.

A good internal selection team needs to look at all facets of a system, and not focus too much on any one aspect of it. It’s easy, for example, to get caught up in the amazing features of a particular system, while ignoring price. Likewise, it’s easy to home in on price and overlook the fact that the cheapest system won’t work for your organization.

Case Study: What NOT to Do

We see our share of mistakes when businesses go down the path of looking for a new ERP system.

Take the following case as an example … A biotech manufacturer was on an ERP system that handled their sales orders, purchase orders and inventory. The company’s ERP system had no manufacturing modules to handle bill of materials, work orders, or materials requirements planning. Clearly, the system was lacking.

This manufacturer assembled an internal team to research and implement an ERP system. Their software vendor at the time offered a hefty discount if the company chose to upgrade to a system in the same family of software products.

The manufacturing company brought us in because we are a reseller of that vendor’s software products. The company was ready to simply upgrade to a higher-level system within the same vendor’s product family. Although it would have been a slam-dunk sale for us, we could not recommend this approach. While it would have been a great financial deal, the ERP system they were considering was simply not a good fit for this manufacturing company. It was missing two critical components for this particular manufacturer: multicurrency and multi-bin inventory functionality.

Another ERP system – one that is NOT in the other vendor’s family of products – offered both of these important components. The ERP system that was best for this company was in fact more expensive than the other system they were considering, but it was the right fit.

The biotech manufacturer did not take our recommendation and chose to implement the heavily discounted system through another vendor. The other reseller sold them add-on patches for multicurrency and multi-bin inventory, neither of which worked very well. When inventory involving multi-bins was released, the system would lock up and corrupt inventory quantities. These lock ups occurred daily. The company’s IT department was constantly on the phone with the add-on vendor, trying to fix transactions and backend data.

The Cost of a Bad Decision

The company spent approximately $85,000 and ended up dropping the whole system within two years, and experienced an unparalleled level of frustration in the process.

Gross Mendelsohn's Technology Solutions Group was brought in to help bandaid and support things. Ultimately, this organization abandoned the ERP system altogether when it was absorbed by a new parent company.

Price is no doubt an extremely important factor to consider as you select a new ERP system. But this story illustrates why it can’t be the leading factor.

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Published on November 14, 2013