ERP implementation for small, medium-sized manufacturers

Jan. 11, 2017 – ERP implementations — those words can cause heart palpitations in the most experienced business manager. Stories abound of failed SAP projects that take two, three or four years to complete. Or, companies spending $50 million on an implementation that ultimately go out of business during or due to the project.

Small business owners face a real dilemma. In today’s market, it is a competitive disadvantage to run your business with Excel or homemade systems. In the Internet age, when data moves at the speed of light, staff who live in their own isolated islands of information are an incredible risk.

The result is that the small business needs an ERP and needs to face all the risks and concerns that come with it. The dangers of a failed implementation are very real and can ultimately risk the survival of a company. So the big question is, how can you avoid that risk? How do you prevent the problems that happen in these huge enterprise projects? The answer can be found by understanding enterprise type ERP projects.

Enterprise in my usage means a business that has many facilities or operates in multiple verticals (for instance, all distribution, discrete and process manufacturing). The larger ERP systems should not even be considered by a company with less than 250 employees in just a few facilities. That would be considered a small- or medium-sized company, not an enterprise.

There is a very big difference between the small single (or few) facility manufacturer and an enterprise. The biggest difference is in the size and quality of management. In an enterprise, even the IT department might have 20 or 30 employees. In the small manufacturer, there might not even be a full-time IT manager. Enterprise ERP projects are run largely with internal resources, and often these large cost overruns are internal salaries.

The enterprise ERP implementer is used to working with these strong IT departments, and management with lots of ERP experience.

Small business projects need to be treated entirely differently. The larger ERP firms, the ones that are used to dealing with enterprise companies, are familiar with experienced management. They leave big decisions to the small business managers that have no experience with ERP. It’s not really their fault, they are used to customers that want to make the decisions.

Project management is also very different. An enterprise ERP deployment is highly planned, with all decisions being documented and signed off by the customer, and project managers running the implementation against a very well-defined scope of work. This makes a lot of sense in highly complex environments.

In a small business, a highly planned project with detailed sign off doesn’t work. The reason is the small business customer doesn’t understand the decisions. They can’t give an informed consent to the project. They really don’t understand the consequences of the decisions. Vendors have historically been afraid to make decisions for their customers. This is because in the enterprise, a bad decision made by a vendor could lead to six or seven figures of rework cost.

So what does the small business do when selecting an ERP? These seem to be huge problems. Well, the simple answer is don’t implement using the methods an enterprise would use. Beware the ERP vendor who places all the focus project scope and documentation, and insists on your involvement in all decision making. Find a vendor with specific and extensive experience with your type of manufacturing. A vendor that can prescribe best practices and a recommended approach is going to increase the chances of success. Decisions made by your vendor are going to be inherently better than those you would make yourself because they have so much more experience than you. 

Robert Jolliffe is president of Sabre Limited, a Six Sigma trained consultant, an ERP guru who has implemented and re-implemented far too many systems for his age.  He lives in Kitchener, Ont., where he enjoys live music, good food, fine beer, hot tea and a good book.