Magazine article Business Credit

ERP Overhaul: Preparation, Testing and Measuring Data Are Keys to Success

Magazine article Business Credit

ERP Overhaul: Preparation, Testing and Measuring Data Are Keys to Success

Article excerpt

One mistake that some businesses make when implementing a new enterprise resource planning (ERP) system is not taking the necessary time to ensure that it complements the company's structure and business plan--a tough and, quite possibly, detrimental lesson to learn firsthand.

It is unfortunately a scenario that Ron Staebell, MSM, credit manager with Ruhrpumpen in Oklahoma finds all too familiar.

Staebell experienced an ERP mishap with a previous employer. The company completely changed systems, he explained, and rushed through the process due to concern that the old system would crash. As a result, the new system was never properly tested. "Unfortunately, while it was a good accounting system, it was a terrible warehouse fulfillment system," said Staebell, explaining that the new system could not handle the company's shipments, would duplicate orders and placed orders on another customer's invoice. Consequently, the business ended up with a giant accounts receivable mess.

"I believe the poor results [and] cost of correcting all of the mistakes it caused led to the company eventually outsourcing all of the operational side of the business--including the 18-member credit department we had built," he said. "Layoffs were in large part due to this new system not being tested and for it not being vetted as the correct fit for both the accounting and distributing parts of our company. That company is no longer in business, and this was one of the nails in its coffin."

Preparation

The decision to undergo an ERP system overhaul typically stems from a company's desire to integrate systems and increase business efficiency. Revamping a company's system is a time commitment--one that usually takes between six to 12 months of preparation and testing before it goes live. After the system is up and running, it does not necessarily mean that everything will run smoothly. Companies need to develop a baseline to measure whether the new system is successful in the short- and long-term--something that should be thought out well in advance.

"It all starts at the top and then umbrellas down," said Dee Stephens, CCE, CICP, credit manager for Dole Packaged Foods Company in California. Companies' upper management must be on board because they evaluate and drive the ERP implementation, along with all of the department heads. Because ERP systems vary from business to business, the company as a whole must determine its needs as well as ensure that the new system will fit into the overall business plan.

Michael Byrne, CCE, ICCE, credit and collections manager at Massachusetts-based Hollingsworth & Vose Company, went through an ERP implementation at a previous company. Many of his colleagues were involved in the process from the beginning, which helped make the transition relatively smooth and efficient. "As a result, we knew all of the shortfalls or the pitfalls that might happen during the implementation," he explained, "and we knew in advance because all of the different departments were there during the assessment phase of the ERP."

"It's crucial for a credit manager to be involved," added Stephens, because credit mangers cannot do their job if they are not informed.

January Paulk, director of client services, organizational change and business process management services at Panorama Consulting Solutions in Colorado, agreed. "I think it's critical for credit managers to be involved because ... you have to understand how the orders are getting in and you have to understand where the new system is pulling orders from."

Panorama, a firm that specializes in ERP consulting, helps companies find the ERP system that is the best fit. Through this process, a company defines its future needs as well as recognizes its current inefficiencies. Identifying these factors helps to lay the groundwork for developing baseline metrics that measure the new system's abilities once it goes live. …

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