Bonus MFG ERP Champion Users Guide

CTS
Guides ERP Champion Users Guide

ERP Champion Users Guide

Table of Contents
WHY NEW SOFTWARE, WHY NOW.......................................................................................... 3 WHAT TYPE OF COMPANY ARE WE? ..................................................................................... 10 VENDOR GROUPS IN THE ERP MARKETPLACE ....................................................................... 13 IN OUR BUILDING OR IN THE CLOUD..................................................................................... 16 HOW SHOULD OUR SOFTWARE SUPPORT US TODAY AND IN THE FUTURE?.......................... 19 COMMUNICATING YOUR NEEDS TO ERP VENDORS............................................................... 39 DEMONSTRATION PREPARATION AND SURVIVAL................................................................. 42 FINAL DUE DILIGENCE PRICE NEGOTIATIONS, REFERENCE CHECKING, AND CONTRACT REVIEW ................................................................................................................................ 46 ACHIEVING THE BEST POSSIBLE OUTCOME ........................................................................... 49
2012 CTS Guides www.ctsguides.com 2

Welcome to CTS Guides ERP Champion Users Guide. This document has been developed to support you or your teams efforts to best utilize your companys time and resources to make the best possible ERP software decision for the best possible price. Each section of this Guide is part of a structured process to help its users to select the right software for your Company for the right reasons. It is suggested that you review the entire document first before undertaking the initial steps in the process of selecting ERP software. This will allow you to see how the entire process is structured as a roadmap to software selection success. You will then understand where you are on the journey and how all the stops along the way form a logical progression through the activities that support a successful software selection process.
Why New Software, Why Now

The staff of your company likely thinks constantly about improving your products and processes. Hopefully those considerations include thinking about what your software does or needs to do when you consider process improvement. It has never been more evident that software and technology are key components to continuous improvement and business success. Every aspect of growing business value requires technology to support and control improvement activities. Your companys ERP software is a critical aspect of any plans and potential benefits. During the recent economic downturn between 2008 and 2011, many manufacturers learned a lot about the value their software was providing to their company good or bad. Business leaders began to realize just what their Companys software really offered and how well it worked as fewer staff was available to supplement deficient software with spreadsheets and other activities to achieve a desired result. Many business owners came to realize that their software was not as supportive of their business as they had thought. At the same time suppliers and customers began to require stricter compliance with more efficient electronic processes (use of portals, EDI, and EFT) as they worked more efficiently to control costs and maintain or improve profitability. Marketing and sales increased its focus on the Internet and Social Media, requiring software to be web enabled and configured for remote access from tablets and phones.

As businesses continue to rebound from previous lows, their objective is to grow with minimal additional overhead. This means that software and technology needs to be most effective in supporting how they company does business and executes every day transactions most efficiently. The key is linking suppliers, customers, and utilizing the Internet to enhance company profitability. And it is no longer a given that your software needs to reside on a server in your building. Opportunities for minimizing in-house technology via running your software in the cloud (cloud computing) or having your software vendor provide a solution from their secure facility (Software as a Service or SaaS), are growing quickly. For more about the cloud vs. on premise decision please read the section titled In Our Building or In the Cloud. As you and your selection team plan for the future (you will hopefully only do this once every 7- 10 years if done right) you should carefully consider the role updated software can play for your business. Your objective should be to make sure that current software technology is supporting your business goals so that your employees can provide the greatest possible value to your Company. Along with enhanced responsiveness from lean improvements (elimination of non value added activities in your processes), technologically current software can best present your Company to your customers as their preferred business partner. Web customers will appreciate how your Company responds to their orders and inquiries. Your suppliers will be very responsive to a customer who works most effectively with them to communicate changing needs for the goods and services they produce. Customer service will be enhanced by the access to information that a well-structured software solution provides such as portals to check order status or inventory availability. Given that backdrop you and your selection team should begin this activity by deciding, for now, why your Company believes it needs new software. Also consider the timing of when a new software solution is needed (seasonality of business may impact timing for example). While not all of these reasons may apply to your specific circumstances here is a table of reasons (topical headings) that you should consider when determining why you are undertaking this important project. Please use the right hand table to list out your reasons.

Typical Software Issues The Age of Our Software: While it is not known who invented the term legacy software, the age of your software technology can become a significant issue. Software written on older platforms is not as easily integrated to newer technologies for interacting with customers and vendors. A related issue may be that your Company has not taken advantage of the updates provided by the vendor so you have made the software old through not paying annual maintenance fees to maintain the competitive advantage of the current version of the software. This may be a problem that you created for yourselves. The Scope of the Software Functionality: The current configuration of your software may lack the functionality that your business needs or will need as business circumstances and technology changes. Do you own all the modules your software vendor offers that are applicable to your business process today and in the determinable future? Are the modules you need truly embedded in the software or are they third party solutions. If there are integrated third party solutions, who is ultimately responsible for them and who provides training and implementation assistance. The Financial Health of Your Vendor: One obvious reason for changing is that your vendor is no longer in business. Another more
Our Companys Particular Issues

Typical Software Issues subtle reason is that your vendor is not updating their software to the latest version in the marketplace (still on Visual Fox Pro and not on .NET). Their customers may be used to the current version (their rationale) but the software developer does not have the financial resources or the future focus to make the change. Support From Your Vendor: You are convinced that your vendor is not providing appropriate support. Symptoms are long delays in responding to phone or Internet based inquiries. It can be awkward to go through three levels of support personnel each time you have a problem until you get to a properly knowledgeable person who can help you. Or worse, your software has been acquired by another software developer who has guaranteed support of your software for a defined number of years but has no intention, for example, of improving the software in the future to keep the software current with Microsoft releases. Or your current vendor has announced plans to discontinue support for your version of their solution. Your Business Has Changed but Your Software Cant Keep Up: You were a job shop but now you make a product line. You produced to order but current customer requirements now force you to make both to order and to stock. You now sell internationally and you need documentation
Our Companys Particular Issues

Typical Software Issues in multiple languages. All these are examples of how your business can change, sometimes suddenly, and your software will not keep pace. The vendor often makes you feel like you are the only user who needs enhanced functionality. Your Company Has Grown Up: Quick Books or Peachtree and spreadsheets just dont get the job done any more. There is too much information on one persons desktop hard drive. Multiple people come to a planning meeting with their own spreadsheet copies and nothing (important) agrees. Without jumping to an overly sophisticated solution it is time to have everyone on the same page with information that is widely visible and properly secured. Other Reasons Unique to Your Company. Our Companys Particular Issues

Once you have scheduled various challenges you should convert those challenges to real value proposition statements. For example, if your vendor is not updating the software that may be OK if nothing is really changing for your Company. But if those absent updates preclude you from doing business with one of your major customers then the value proposition associated with this deficiency is potential loss of (significant) business. Please review the comments you inserted above and convert them to Identified Challenges and Related Value Propositions. You do not have to quantify the impact of the value propositions but you will want to complete this activity to make sure that you begin the remainder of the effort on solid assumptions about why you and your team will undertake this project. This information will be included in a document that you will send to potential vendors with your current state and future state user requirements based on a later section of this guide.

Our Identified Challenges The Related Value Proposition

What Type of Company Are We?
The reason you and your selection team need to answer this question is that software developers in the marketplace for manufacturing ERP design their software based on the types of companies or industries that they want to support. Keep in mind that all software started somewhere (at some company) possibly a long time ago. Other software solutions were developed independently to serve an entire industry or industries. However, all software has a fundamental design approach for how it will support the manufacturing and business process of companies who choose to purchase that program. There are potentially two views of your Company in the ERP Software marketplace your view and the software vendors view. They may not differ a great deal but it is still worth discussing both sides of this foundation issue. The highest level of design difference addresses how a company produces their products for sale. Companies that take a number of small components and combine them into a larger item are know as discrete manufacturers. The majority of software is designed for discrete manufacturers. However there are companies that effectively take big items and make them small. These manufacturers are known as process manufacturers. A company that uses numerous components to make equipment is a discrete manufacturer. A company that converts tanks of chemicals to smaller containers is a process manufacturer even though that process manufacturer has a formula or recipe for the elements that go into producing the tank contents. In summary the main design difference is many to one for discrete manufacturing and one to many for process manufacturing. For purposes of communicating with software companies a discrete manufacturer must further define themselves in the following categories: Job Shop There are fewer job shops today than in the past. The definition of a job shop is a business that produces what customers design after winning a quote based on the customers engineering drawing. The item(s) may be produced only once and never made again. Components are bought to and costed to the job/order. There is no practical inventory because the inventory bought was consumed by the job build. If there are left over parts due to minimum purchase requirements then the inventory value is zero.

Repetitive Job Shops There are job shops that (continually) get repeat orders from their customers. Some of these orders are blanket orders with structured releases of the total quantity of parts ordered for a defined period of time. These shops also quote from customer drawings the first time a finished part is produced. Or the customer orders additional parts when they are needed without a structured relationship supported by a blanket order. In the Repetitive Job Shop environment an inventory of raw materials, work in progress, finished sub-assemblies, and finished goods exist and have calculated values. It is not unusual in this environment for a customer to require the repetitive job shop to carry inventories of certain levels of parts. Make to Order These manufacturers design and produce products that are sold into a marketplace. They create their own engineering drawings, maintain quality systems for the products they produce, and stock raw materials, work in progress, finished sub assemblies, and finished products. They quote their products to existing and potential customers but do not bid on custom work. All inventory has value. Finished goods are made only from customer orders. Configure to Order These manufacturers are a special sub-set of Make to Order. The products that they design and build can have features changed in the final design of the product. They allow for features and options that are used to take the standard product and produce an item that is better able to meet the customers needs, all within the parameters of the features and options offered. There is more about product configuration in a later section of this Guide. Make to Stock This type of manufacturer treats a customer order differently from a make to order company. In a make to stock company the inventory of finished goods is built to a forecast of customer demand with orders for the companys products ideally shipped from finished goods inventory literally the same day the order is received. This type of manufacturer relies on finished goods inventory availability rather than the rapid turn around of customer orders as the make to order company, Process Manufacturers These companies manufacture large batches of product and then sell their products in smaller quantities. These types of companies include chemical manufacturers, pharmaceutical companies, and food processing companies. Instead of engineering drawings they have formulas and recipes. They measure the yields of products produced based on raw material inputs. Their business practices still include quoting new opportunities. Smaller process manufacturers, often called pilot plants,

function more like job shops where small quantities of special products are produced in a non-repetitive environment. Mixed Mode - Primarily connected to discrete manufacturing, this classification happens when multiple type of manufacturing philosophies are in place at one company possibly your company. The most common mixed mode scenarios are make to order with configure to order. Repetitive job shop is often found with make to order. This model is the most complex to address due to the multiplicity of production modes and requirements.
Finally, many manufacturers distribute products made by other companies. This is not a mixed mode concept but rather a modification to the regular course of business where finished goods are bought and sold within the same environment as other products are produced. This is similar to distributing the products that a company makes on their own. Based on the descriptions just presented please complete the following for future communication to software vendors:
We are a _______________________ manufacturer since we __________________________________________________________.

Software vendors have solutions that address one or more of these segments of the manufacturing marketplace. Some of the largest and most sophisticated offer solutions for both discrete and process industries but these software offerings do not target the small to medium sized manufacturing marketplace. All vendors will tell you where their products fit. Some will tell you that their products fit everything. Well-structured demonstrations and reference checking will determine the validity of these statements.

Vendor Groups in the ERP Marketplace
It is important to understand how software solution providers are positioned in the ERP marketplace. While you and your team may not be ready to fully communicate your requirements to software vendors you should be aware of how these companies are focused and who they want as customers. Here are some of the general categories: Job Shops, Repetitive Job Shops, and Small Make to Order Manufacturers: Software solutions for these categories of companies (refer back to the previous section if necessary) are designed to provide more basic capabilities. Without you or your team interpreting that negatively, these companies offer solutions that are less robust and at a lower price point than other categories of solutions. They may offer their own CRM solution that addresses only lead management and customer service. The CRM may or may not integrate MS Outlook e-mails. They may offer shop floor scheduling but primarily as infinite scheduling as their customers tend to manage capacity issues (overloaded or underutilized in work centers) rather than exact production schedules (when can this job be completed at a specific work center). Their capability to handle cycle counting includes the designation of whether an item is an A, B, or C count cycle without providing the software capability to actually determine how those designations are derived. Without citing further examples these solutions are complete offerings for their market that do not offer extensive capability. They are designed for users who want to manage at a higher level of business process and dont want to utilize significant staff time to feed the beast. Pricing for these solutions, for budgetary purposes, should be estimated at $2,500 per concurrent user. The accounting suite can be an additional $3,500 for fully integrated capability vs. $500 for a link to Quick Books or Peachtree for batch transfer of data to these solutions. Other capabilities not offered as standard sometimes includes shop floor data collection software for time and materials tracking, as well as quality modules beyond incoming, first, piece, and final inspection. Yearly maintenance cost is still in the 15% to 20% range, and daily on-site implementation costs are $1,000 to $1,200 per day plus out-of-pocket costs. All price estimates presented here are pre-negotiation values. Note: A concurrent user or user seat is the number of users who can access the software at any one time. Named users are individual users identified by user login. A company with 15 named users may need only 10 concurrent user licenses or seats because not all users use the system

Small to Medium Sized Engineer to Order, Make to Order, Configure to Order, and Make to Stock and Process Solutions: These solutions are the heart of the small to medium sized manufacturing marketplace focused on companies form $5 million to upwards of $50 million of sales. They feature a large combination of modules from which you can pick and choose. The breadth of their software is reasonably comprehensive and their capabilities flex well to the low and high end of this revenue range. They differ from the remainder of the mid-market in that these solutions function better in a single plant multi warehouse environment. They are not designed to truly support a multi plant platform where all operations in multiple locations are fully integrated (example: scheduling of one work order through work centers in three distinct plants all coordinated from one location). Pricing for these solutions, for budgetary purposes, should be estimated at $5,000 per concurrent user. Additional modules for special functionality are priced in the $5,000 to $10,000 range sometimes based on the number of named users per special module who may or may not be concurrent users otherwise. Maintenance should be estimated at 20% of the final cost of all the software licenses. Daily implementation rates begin at $1,400 and go to $1,800 per day depending on the level of person involved in the implementation effort. Implementation cost for these solutions often ends up in a one to one ratio between cost of software and cost of implementation and training. All of these costs are subject to negotiations. Advanced Mid-Market Software Solutions: Before addressing high end solutions with product names familiar to many software users there is a group of ERP software solutions that are for more sophisticated mid market companies with sales in the range of $50 million to $100 million. These solutions offer comprehensive multi-plant capability and a full range of capability that is almost as the level of a large system solution. Their capability should be considered by large organizations with an international presence only in major countries. In many cases they are differentiated from the top level systems in that they are more pre- configured and have implementation cost to software license costs that do not typically go beyond 1.5 to 1.0 for dollar cost (example is software that costs $300,000 should not go beyond $500,000 to implement). Pricing for these solutions, for budgetary purposes, should be estimated at $8,000 per concurrent user, $15,000 to $30,000 for special modules depending on unique user counts, maintenance at 20% of final negotiated cost and implementation at a 1.5 to 1.0 ratio.

Tier One Solutions: These solutions offer full functionality and are sometimes sold on the premise that they will be almost totally configured to the needs of the customer. Because of this philosophy they really do not lack any functionality that is documentable. The have versions for discrete and process companies and have significant international presence on all continents. These solutions are typically considered by companies with hundreds if not thousands of users and have price points that frequently start at $1 million for software licenses and increase dramatically from there. For budgetary purposes maintenance is still around 20% of the software licenses and implementation costs are at least 2.0 to 1.0 against software license cost. Commentary about negotiating the cost of software licenses, annual maintenance, and implementation + training is provided in the last section of this guide.

In Our Building or In the Cloud
This section of the guide is included to provide you and your selection team with background information on Software as a Service (SaaS) and Cloud Computing. These terms are not interchangeable. These terms have been used extensively for some time so this guide will provide you with an understanding of what they mean in the manufacturing software marketplace and how they might be applicable to your specific opportunity. Software as a Service (SaaS) is a term used to describe ERP software that is not owned directly by your company nor loaded onto your server(s). Instead SaaS ERP software is rented by a company for a defined period of time and accessed via the Internet. This software is controlled by the software developer on fully secured servers (in house or outsourced). The software developer takes responsibility for upgrades of the software as well as the maintenance of the software so that all remote users have continual access to its capability. With SaaS you do not need extensive hardware at your facility. High speed Internet access sufficient to allow all users of the software to work with it effectively is most important. To begin to use these solutions you do not need to upgrade hardware other than to meet the requirements of the users for doing their jobs effectively. This can represent a significant capital cost savings to your Company. As of the spring of 2012 there are not a large number of Manufacturing ERP solution providers who are offering SaaS solutions to the small to mid size marketplace. One of the reasons that this alternative is not being more widely offered, for now, is that software developers need to add an entirely new business model in order to support SaaS customers. Rather than the developers merely having resource that designs and codes software programs and supports users, the developer now needs to manage customer data and possibly operate a data center. The financial model is different in that there is no up front software license purchase revenue and maintenance fees are collected monthly rather than annually. The good news for developers is that customers can no longer discontinue maintenance, as the version of the software that they are accessing daily is the only version of the software in use. You should reasonably anticipate that in the next two years all the leading ERP vendors will be offering a SaaS solution to existing and new customers. Using a SaaS solution is also different for the customer. You trust the vendor to safely store your data off site from your business. You are also going to be faced with updates to the

software that are not of interest to you. You will no longer be able to skip annual maintenance charges since this cost will be included in your monthly rental fee. You may be perpetually paying for the solution that you are using and those costs, over time, may exceed the cost to you of buying the software outright and continued the maintenance. In addition to the software cost analysis required to make a decision on acquiring ERP capability in a SaaS model, you should calculate any potential savings that might be realized by reducing the management effort of your in-house network installation. One major saving could be reduced staff resource needed to address network and hardware issues related to an in-house installed ERP solution. With stable and fast Internet connectivity to your SaaS solution, your Company may not have to respond to as many daily issues of hardware and operating system errors. The savings may be even greater if your company is multi-location. Your Company may also be able to postpone additional hardware investments, particularly if the choice of new ERP software for in house operation would have included upgrades to not only hardware but operating system software both on the server and on the desktop. This could represent a significant savings to your Company. All of these factors must be considered when evaluating a SaaS solution for your business. Cloud computing is a much more generic topic. Cloud computing is really any type of data processing performed outside the business. Computing in the cloud means accessing a desired application via an Internet connection. The number of opportunities is virtually endless. Some of the ways that manufacturers use cloud computing are presented below: Manufacturers can buy their software solution but have the developer host it. This means that the company is accessing its own software via the Internet but this is not a SaaS model where the developer is responsible for all aspects of the software. Because you own a version of the ERP solution you are not necessarily contractually committed to upgrading your version as if it were the common version used by all SaaS subscribers. Your company might have saved hardware costs at the onset of using the chosen ERP solution and then managed the maintenance cost differently in subsequent years. Regardless you are operating in the cloud. Manufacturers can run and host their ERP solution on site and back it up at a chosen frequency off site in a secure data center. You are backing up in the cloud.

Manufacturers can utilize their ERP software in house but go into the cloud for applications like CRM. Depending on the CRM solution the user may or may not be able to share information between the in-house ERP solution and the cloud based CRM solution such as sales history, invoice history, recent payments, etc.
Final thoughts about SaaS and Cloud Computing are the following. If your company already has a substantial investment in hardware, networking, and web interface, going to the cloud and incurring cloud related processing and support costs is not usually attractive, particularly if your Company operates from a single location. If your company operates from multiple locations then a SaaS or cloud configuration may be cost justified. Clearly if your company is a start up or your organization is acquiring its first true ERP software then a SaaS solution may be the right way to go and the comprehensive upgrade costs for hardware and non-ERP licensing may make the SaaS long term cost more tolerable. When making these decisions please take into consideration the cost of in-house resource to manage a more complex in house application.

How Should Our Software Support Us Today and In the Future?
In this section of the Guide you and your team will determine your current state and future state needs for ERP software to support your business process. The key concept to understand is that this is not about software, this is about your business process today and what you anticipate that your business will be like in the future. You should not plan on changing the way you do business to accommodate the software you select. You and your team should be carefully examining software to see how it will support what your Company wants to be and how software will help you to get there. Getting everyone on your team to agree to agree what the Company needs software to do can be harder than actually selecting the best possible software for your Company. Your team needs to be structured well so that different areas of the business are represented. Those representatives should be looking to find an ERP software solution that is good for the entire company. Where that is an issue then it is the responsibility of the leader to make sure that the orientation of the team is for a comprehensive solution and not islands of excellence. This guide is structured to help you and your team make the best possible choice for the business. The first level of needs assessment begins at the application level. The following list presents typical ERP systems application modules that are available in the ERP marketplace. From the earlier section titled What Type of Business Are We you and your team have determined whom you are and possibly who you want to grow up to be. The columns on the software application table that follows include the application name and a short description of its basic functionality. More information will be available in a second table. There is a column for you to check off the need as Current and the need as Future. You can check off one or the other or both. The combinations may include, per application, the current but not future need for an application, the future but not current need for an application, or the need for both. Current and future needs change due to strategic direction, life cycle end of a product or process, or addition of new product lines or markets. As much as practical the list is sequenced in the flow of a typical manufacturing company business process beginning with attracting new opportunities to quote work and ending with the accounting transactions and financial reporting that present the results of the business operations.

Module Sales Forecasting Overview We Need It Today We Will Need It
Track and utilize sales forecasts (customer or internal) to impact production planning, purchasing, and scheduling Customer Different levels of CRM Relationship sophistication support Management (CRM) lead/customer management, help desk, marketing, trade shows, etc. with integration to e-mail. Estimating & Quoting Summary or detailed BOM and routing development to provide quote of one or more products. Product Configurator Features and Options, Rules Based or Parametric capability to build product structure for quote or order entry.. Sales Order Entry Entry of customer orders for conversion to work orders or product demand for make-to- stock pick. Internet Connectivity Ability of your software to connect to transactions recorded on your web site for customer orders or inquiries Purchasing/Planning From demand signal, visibility of purchase
2012 CTS Guides
www.ctsguides.com
20

Module Overview history and vendor pricing to create purchase orders including blanket orders. Receive against open POs and transfer to incoming inspection. Visibility of transaction history, costing, and time phased availability of parts. BOM's for process industry functionality. Support of laboratory functionality including design of experiments. Forward, Backward, Finite, and Infinite schedules visible to user with what if capability. Requirements planning showing satisfaction of demand from customers or to planned stocking levels. Listing of parts and sub assemblies used to make an end product, single- or multi-level. Tracking of a job through the factory with work centers bar coded for data collection. We Need It Today We Will Need It
Receiving Inventory Management Formulas Laboratory Master Production Scheduling
Manufacturing Requirements Planning (MRP) Bill of Materials (Work Orders)
Routing/Work Instructions

Module Shop Floor Reporting Overview Tracking of time reporting and parts completion to support scheduling and job visibility. Incoming, first piece, and final inspection with parts disposition capability and RTV. Relief of finished goods, tracking # integration, signal for billing, and bill of lading and int'l docs. Billing, credit memos, cash application, AR Aging and collection follow up. Match PO and receiver, schedule payment, view cash commitments, and debit memos. Integration of subsidiary ledgers, journal entries, trial balance and financial reporting. In house processing of work hours and salary commitments, direct deposit, and tax reporting. Tracking work hours integrated to payroll calculations, visibility of who is at work daily. Tracking of interview to termination of all aspects of an employee We Need It Today We Will Need It
Quality Assurance
Shipping
Invoicing/Accounts Receivable Accounts Payable/Cash Disbursements General Ledger
Payroll
Time and Attendance
Human Resources

Module Overview relationship to an employer. Support of multiple methods of determining what a product costs and valuing inventory. Acquisition, maintenance, and depreciation of physical assets. Support of scheduling and delivery of remote activities for product installation and repair, warranty tracking, costing. Specialized tracking of warehoused goods for storage, picking, packing, and shipping. Viewing multiple work orders as part of a contract. Support of % completion revenue generation. Customer deposits and progress billings. Engineering support of technical aspects of product design, revision upgrades, and control of drawings in concurrent engineering environments. Graphical/table reporting of business performance as measured by the ERP We Need It Today We Will Need It
Costing (Standard, Actual)
Fixed Assets
Service Management
Warehouse Management Project/Contract Management
Product Lifecycle Management
Business Intelligence (Cubes)

Module International Transactions Overview system. Multi-currency and local reporting capabilities for needed overseas customers and company locations. We Need It Today We Will Need It
Once the selection team has agreed on how the application level table should be completed you can move on to more specifics about what is needed for each application in the scope of your current state and future state business process requirements. The next table takes each of the applications listed in the first table and adds some depth within the application by presenting functionality typically offered in these applications. The suggested functionality is not a list of all functionality offered by all vendors in the marketplace. Rather the functionalities listed are talking points for the selection team to use in developing the next level of detailed analysis of what your Company needs software to support in your current state and future state business process. The table is designed to allow you to check off the need for functionality (regardless of current or future state designation) so that you develop a list of functionality that can be both shared with potential software suppliers and then used as a demonstration checklist. At the end of each functional section there are two blank lines for items to be added that were determined by the selection team during discussion of that functional area of need. Feel free to add as much detail as necessary.

Once you have completed this section for the applications that you determined are necessary the next section will present how to communicate these needs to the ERP marketplace. Application Sales Forecasting Customer Relationship Management Functionality Download forecast amounts from a MS Excel Spreadsheet. Based on a user defined number of prior periods. Needs to be able to work with factors of seasonality. Need
Sub-total logical groupings of products to support internal management needs. Drill down in the forecast to underlying data. Manage prospects, leads, customers, contacts. Complete integration of e-mail correspondence whether generated from CRM or from e-mail software.
Support the upload from event software and utilization of contacts identified at a trade show. Track trade show costs, resulting contacts, proposals, business won, profitability, etc. Support for marketing campaigns by searching contact and company database in CRM to identify recipients. Access through drill down capability to the remainder of the ERP solution as appropriate. Example: answering customer questions about invoicing by accessing that function from CRM. Advanced functionality for call center support.
Estimating and Quoting
Development of quick quote for an item that is not currently in the system for a customer not currently in the customer master file

Application Functionality Multiple quantities to quote with proper allocation of fixed and variable overhead to properly price different volumes. Copy a previous quote and change for the new opportunity. Attach text for terms of business to the quote when sent to the potential customer. Develop new estimate by building detailed BOM and Routing for new opportunity. Auto fax or e-mail quote from the users desktop. Quoting system supports either Available to Promise or Capable to Promise scheduling linkages. Offers features and options or rules based product configurator capability to build properly configured end items during quote or order entry Offers parametric (dimensional) configurator if needed. Configurator software creates intelligent part number used to identify specific part and its inherent functionality. Can be accessed from the Internet so web site user can create part to their specification on line. Configurator software creates image of item being developed while configuration is taking place. Quote line items can be converted to an order while lines not selected by customer for order remain as an open quote or cancelled at the discretion of the user Need
Product Configurator
Sales Order Entry

Application Functionality Sales order can show your part number and customer part number if necessary Blanket sales orders can be entered for items where the customer has committed to a long term quantity but smaller quantities will be purchased as identified by the customer during the year. Customer is ordering for future delivery at specified intervals and specific quantities. Software can differentiate sales order line items as commissionable or not commissionable for purposes of calculating sale commission. All sales order line items have notes capability that can appear on the physical sales order or internally in the Sales Order Entry system. Sales order converts to work order for eventual production scheduling The ERP solution should provide secured access to information that can be utilized by potential or current customers including inventory availability, order status, product catalog and inquiries on a variety or subjects. Remote user, primarily salespeople, can access the system securely to look up information, or enter orders. Need
Internet Connectivity
Purchasing/Planning Order requirements drive purchasing recommendations using either Net Requirements Planning (order demand against available inventory for each order or Material Requirements Planning (multiple orders at future times against time phased available inventory).
2012 CTS Guides www.ctsguides.com
Purchase orders include your company part number and
27

Application supplier part number. Request for Quote for specific part numbers automatically generated for primary and secondary vendors identified in the item master file. Demand from Net Requirements Planning System or Materials Requirements Planning system across all customer requirements grouped by supplier and combined on one purchase order with appropriate line item due dates cross referenced by sales order or work order number. Purchase orders can be e-mailed or faxed from users workstation. Items received against open purchase orders with bar code or data entry. Items identified for incoming inspection requirements or warehouse location for put away. Receiving information used in automated three way match of purchase order, receiving documentation, and customer invoice for payment to supplier. Items not received automatically entered in back order status or vendor relationship identified as no back orders allowed with auto notification to purchasing of undelivered items. Functionality Need
Receiving
Inventory Management
Item master file contains sufficient information for item identification, item quantities status, costing information, and other fields of data that your Company needs to manage inventory effectively. Item quantities are shown as on hand, on order, demand,

2012 CTS Guides
www.ctsguides.com
28

Application Functionality and available. There are min-max quantity fields as well as minimum order quantity fields. Lead times, primary vendors and unlimited secondary vendors are identified. Item vendors have fields to enter and update quantity price breaks. Vendor e-mail addresses for on-line RFQ issuance and evaluation. Time phased visibility of each part with running balance going forward based on order demand and customer supply from open and planned purchase orders. Preferred method of inventory valuation offered by the software solution including Weighted Average FIFO, Weighted Average LIFO, Actual, Average, Standard, Last, or Lot. Need
Formulas
For process manufacturers this is the equivalent of a Bill of Materials. In the food processing industry this can also be known as a recipe. Sufficient decimal places need to be supported. Small batches may require items with three to six places to the right of the decimal point. Software functionality supporting all testing and development activities that are performed in the laboratory of a process manufacturer or discrete manufacturer. Verify support for Design of Experiments (DOE) functionality and well as sufficient support of tracking results. Support of forward scheduling, backward scheduling, infinite scheduling, and finite scheduling methodologies
Laboratory
Master Production Scheduling

2012 CTS Guides
www.ctsguides.com
29

Application Functionality as needed by your Company. What if scheduling allows for recasting of the current schedule with one or more changes without finalizing the changes as the newest version of the schedule. Support for scheduling of multiple locations on separate schedules or one schedule. Scheduling for multiple locations should include support for a routing where different operations of a work order are performed at different locations but coordinated on one master schedule. If needed utilizes a time fence to segregate orders that are released to a schedule that will not change while orders on the far side of the time fence are tentatively scheduled. The schedule can be adjusted for splitting lots to move forward a smaller quantity that identified on the work order while accommodating the scheduling of the remaining amount. Ability to forecast into a defined period of time the demand for and supply of components in a Bill of Materials Flexibility to set time periods by days, weeks, months based on the needs of your Company. Capability to take forecasted demand for known needs and not consume the forecast if a new need is identified that adds to the forecast rather than uses a portion of what was already known. Can be as simple as Net Requirements Planning where Need
Materials Requirements Planning

2012 CTS Guides
www.ctsguides.com
30

Application Functionality demand is for one order at a time. Bills of Materials (Work Orders) Single level or multi-level listing of all components and sub assemblies that comprise the structure of the top level or end item to be manufactured. The BOM should have unlimited levels of production (indentation) Need
BOM revision level must be tracked for all versions. System must support the ability to create a work order for a prior revision level of a BOM. BOM should be able to accommodate a unique item in that version that is not in the item master file as a one time addition to the structure. Capability to copy and edit an BOM into another BOM. Capability to support where used search for any item in any of the BOMs in the system. User should be able to drill down from the BOM (double click on the BOM line item) to see the item master file information including quantity details. Provide for phantom items. Verify each software vendors definition of a phantom item in comparison to your Companys definition.
Routings (Work Instructions)
Includes sequenced operations that present the details of how the top level item will be produced. Sequences internal and external (sub-contract) operations (work centers) and activities (first piece inspection) to represent production. Routings need to be flexible to support splitting of a work order quantity with a smaller quantity moving through the remainder of the production process and costs

Application Functionality properly matched to the newly structured activity. Unlimited notes capacity to support work instructions and the attachment of pictures or CAD drawings to support the manufacturing process. Recognition of cellular activities where routing steps include more than one individual in a group or routing steps identified separately but produced in a multi- workstation cell. Closing each routing step individually or closing selected routing operations causes the previous routing steps not closed to close simultaneously with identical quantity complete. Automated collection of data for labor time and parts completed, scrapped, or held for lot splitting using bar code data collection technology. Need
Shop Floor Reporting
Operator can split time between two or more work orders (pieces of equipment) with either an actual or default allocation of time. Offers sufficient flexibility of reporting to allow operator to identify scrap but also identify a code for scrap reason. Operators have codes for charging time to activities other than work orders (Safety Committee, Materials Review Board, Waiting for Inspection, etc.) Capability to record results of incoming inspection, first piece inspection, in-process inspection, and final inspection results. Support of inspection failures and other issues into a Material Review Board with resolution recorded in the
Quality Assurance

Application Functionality software for analysis at a later point Vendor performance ratings for quality of product delivered, on time delivery, correct quantity received, and other agreed upon measures of specific vendor quality. Functionality for Return Material Authorization (RMA) with complete tracking of disposition of product returned, cross reference of product replacement, warranty tracking of the returned part as well as warranted components of the returned part. Support of specific ISO requirements for documentation as defined in the Quality Manual of your Company. Lot and serial number traceability with support for when the serial number is assigned to the finished part (beginning or end of the process). Tracking of serialized components in the completed part for possible warranty claims. Need
Shipping
Support for shipping with common carrier for on-line access to relevant information from UPS, FedEx, DHL, or a common carrier for full or LTL truckloads. Preparation of all documentation associated with shipping such as Bill of Lading, packing slip, and international documentation as required for export activities. Shipping activity, including freight cost where applicable, drives billing of shipment in the associated accounting software on a batch or individual shipment basis. Linkage of shipping actions to drive invoicing
Invoicing/Accounts Receivable

Application Functionality Real time or batch updating of invoicing to Accounts Receivable functionality. AR Aging detail sufficient to support collection activity. Flexible data entry for on-account customer payments and NSF check adjustment to the Accounts Receivable information. Month end closing, ability to post to a future month, and number of open months satisfactory for your Companys unique circumstances. Need
Accounts Payable/Cash Disbursements
Support for the three way matching of purchase order, receiving reports, and supplier invoices, either manually or automated to validate payment of the supplier invoice. Support for adjustments of supplier invoices for subsequently discovered quality problems causing rejection of supplied parts or costs for modifications that will be absorbed by the supplier as an invoice adjustment. Real time or batch linkage to the general ledger of accounts payable and cash disbursements transactions. Cash management supported by an aging of accounts payables that allows easy selection of open supplier invoices by as of date or individually selected invoices. Month end closing, ability to post to a future month, and number of open months satisfactory for your Companys unique circumstances. Ability to support financial information of more than one company as required by your Companys unique circumstances.
General Ledger

Application Functionality Flexible general ledger chart of accounts structure with sufficiently long number structure to accommodate divisions, departments, staff, etc. Journal entry flexibility to support recurring, reversing, and other entries with sufficient description capability. Structured as a batch or real time system relative to your Companys need for General Ledger detail needs. Month end closing, ability to post to a future month, and number of open months satisfactory for your Companys unique circumstances. Ability to enter a GL account budget and allocate a portion of each actual transaction to a budgeted amount in more than one GL account. Ability to use the payroll capability offered by the ERP vendor or gather payroll data effectively to interface to one of many payroll service bureaus. If payroll is processed internally, make sure the system can handle all overtime calculations and fringe benefits, particularly if union contract terms are involved. This is not the same as shop floor data collection but a related timekeeping system on which payroll can be based. Confirm how the proposed solution handles early and late clock ins as to time docked from pay or time not compensated for. Determine compatibility of your current automated time and attendance system with the software proposed if in- house payroll will be calculated and paid. Need
Payroll
Time and Attendance
Human Resources
2012 CTS Guides
Verify the scope of HR software offered. HR software can
www.ctsguides.com
35

Application Functionality manage activity and transactions from the time the position was identified as needing to be filled until the employee who fills the position leaves employment of the Company. Costing Financial statement costing methods such as standard and actual need to be evaluated based on your current methodology. Need
Costing of inventory can include Weighted Average FIFO, Weighted Average LIFO, Average of quantity on hand, Last Cost, Actual Cost (bought to the job, no inventory), and Lot Cost. Ensure that they method you use is supported by the solution(s) under review. Confirm any changes in method of inventory valuation with your Companys accountant. Support for all asset additions, useful lives, and multiple methods of depreciation. Support for separate scheduling of service calls and allocation of resources of service staff to support calls. Segregation of service parts from regular inventory in a separate warehouse location. Warehouse locations also include service vehicles or service cases where parts and tools are stored. Determine whether installation of new equipment is tracked in service management software or is the last operation in the equipment build routing.
Fixed Assets Service Management
If appropriate understand how the proposed software will share staff between production and service responsibilities and how movement of a worker from production to service trips reduces capacity in the factory.

Application Warehouse Management Functionality Review flexibility of warehouse location designations. If needed understand how warehouse physical locations are then broken down as warehouse shelf or area locations and how both are linked when necessary. Determine warehouse pull structure between primary, secondary, and overstock locations when large quantity orders are involved. Verify that needed pick, pack, and ship functionality is available based on your Companys detailed needs, particularly if your Company is delivering to a major retailer. Verify support for activities like walking sequence for pulling orders, zone picking, partial picking on incomplete line items, and early picking of future orders. Verify support for business processes such as progress billings and percentage completion calculations that impact financial policies and practices. Flexibility of quoting system to support a major proposal for a project or a contract that includes significant text, images, and schedules. Verify that routing and BOM structures support multi- phased activities. If a military contract make sure that support of production includes rules of the customer for work breakdown structure data collection, reporting, and billing. WBS may require special software modules. Identify need for support of New Product Development activities by the Companys Research & Development group. This includes product definition and management of the steps required to bring the product to market. Need
Project/Contract Management
Product Lifecycle Management

Application Functionality In Engineer-to-order companies ensure that PLM supports full management of technical drawings including initial drafting, revisions (definitions), concurrent engineering activities (your engineers and the customers engineers), vaulting, and other controls Verify how PLM links drawing revisions to manufacturing activities and how manufacturing activities (as designed vs. as built) are linked back to the PLM system. Need
Business Intelligence Understand the full scope of how the proposed Business Intelligence system will add value to your Companys need to manage and sort data. Be sure the offered BI capability is not overkill for your Company. Identify who in the business may be able to learn the BI capability to continue to utilize the tool for the Company. Understand how many cubes come with the base system and the vendors interest in and cost for creating new ones. International Transactions
Verify the utilization of foreign currency calculations in the proposed software and how those valuation principles impact costing and inventory valuation. Make sure all the foreign currencies your Company needs are included in the system under review. Verify that the international capabilities of the software under review support local requirements for financial and compliance reporting.

Communicating Your Needs to ERP Vendors
Now that you have completed the information in all the previous sections you are in a position to begin the activities of contacting potential vendors to see how they can support your business processes today and in the future. This is not just about using their software solution. This is about using their software solution to full advantage to enhance the value of your business. From previous sections you have identified your basic business structure. You have identified the types of vendors you should be considering. Your team has agreed not only what applications should be used by the business, but what functionality will be most helpful to supporting your business processes today and in the future. Your approach to contacting ERP software vendors is to provide more than a checklist of needs that need to be reviewed. Most good vendors respond to only a checklist reluctantly as they need to know more about how the potential customer works and in what environment the software will be used. To communicate best with software vendors utilize the following approach to developing a comprehensive document for each vendor to review. Introduce the business Explain what type of manufacturing the Company does, what products the company makes, and to what industries you sell your products. Explain what makes your company unique. Include your web address so the vendor can look up the company on the Internet to get a better understanding of your business and how their software will help you. Explain Your Current Technology Provide a quick overview of your current hardware technology including server configuration, desktop environment, and related operating systems. Letting the vendor know what tools the company uses such as Microsoft Office or other software solutions is also important. Please tell them if you are using an e-mail solution other than Microsoft Outlook as this may be an issue. While this part of the document does not have to be highly detailed it should tell the potential vendor where your technology stands. Also tell the vendor how many users are on your network and how many are using your current ERP software. You should provide the number of named users on the network and both named and concurrent user counts for those who will need access to the ERP software. Overview What the Company is Trying to Achieve Another term for this is explaining the value proposition. Why is the Company looking for new software? How does new software

add value to the business? Is there a budget for the new software (optional). What is the timeframe for acquiring and implementing new software? Is there something(s) about what new software needs to do that, if absent is a deal breaker. In todays software sales environment these are important questions that a potential vendor is going to ask. Explaining all this up front adds efficiency to the overall process of selecting software. It is surprising how quickly potential vendors will refuse an opportunity that is not ideally suited for them despite the low cost of remote demonstrations. Explain Your Business Processes Using the initial software application list in the beginning of the previous section; provide an overview of your current business process. Begin with how your company gets business (customers), how you make what your customers need, how you deliver products to your customer, and how you get paid. For this portion of the document you will want to provide two paragraphs on each section of the applications software list where a capability is needed. In connection with these application level needs you can then add the functional requirements from the second table above. Please be sure to use both the functionality pre-listed in the table and the additional needs your team added to each section. Identify Potential Vendors: Using the information presented earlier in this guide select the vendors that should receive your document. Make sure that every member of the team has agreed that the document that was prepared was the best possible presentation of who your company is and wants to be. Define What You Want the Vendor to Do and When: Your document should be sent electronically to each vendor after you have contacted the vendor either by phone or e-mail to see who in the vendors organization should receive it. Wait until the correct individual has been determined and then e-mail your document to all vendors on a single e-mail. Sending to all together allows each vendor to see whom the other vendors are so that they can further determine whether they want to compete for your business. In the e-mail it is recommended that you first ask the vendor to review your document and let you know if they have any interest in the opportunity. They will likely want to ask a number of questions prior to communicating their interest. Do not be surprised if they ask questions you thought you already answered. Sometimes these questions are confirming questions that explain to the vendor the importance of a particular function or functions. Other times the questions may be asked because your document was not reviewed carefully. The way the

questions are asked and the tone of the conversation are potentially early indicators of the quality of the vendors effort and effectiveness. If the vendor expresses an interest you should ask for budgetary pricing for the software that appears to be needed to meet your current state and future state needs for support of your business process. Cost should be presented for software licenses (estimates provided earlier), annual maintenance, and an estimate for implementation and training. The implementation and training estimate may be presented as either a dollar amount or as a mathematical relationship to the software license cost (1 to 1). In your e-mail you should also ask each vendor to respond to each section of your document with a short summary of how their solution meets your current state and future state needs. Their responses should be only a few paragraphs each. They should not copy text from a sell sheet (too long and not necessarily focused well or too short (We do that). You and the selection team are trying to get an early view of the capability of the proposed software solution. Once you get all the responses you should schedule out the information received on a spreadsheet to begin to determine initial questions as you line up proposed capability apples to apples. Initial questions primarily focus on clarifying the scope of applications software proposed in comparison to other vendors proposed solutions. Not all vendors title each application similarly and it is not unusual to learn that a particular functionality you are seeking clarification on is included in another application. For example, many software now process RMA transactions in CRM. It is likely that you will see pricing variations. A good guideline is to see variation in software licenses of about 25% from the average of the proposed solutions for the initial review. If there are variations greater than that then you should contact the vendor to understand the larger than expected variation (both higher or lower). Do not consider initial discount offers as that discussion should be saved for later. Once you have obtained full disclosure on the applications that are included in the proposed solution and you have obtained any adjusted pricing estimates, you are now positioned to decide which potential solution(s) you will move forward with for full evaluation. At this point you and the team should be satisfied that you have identified three or four vendors who appear to have the functionality you are seeking and a price point that is in a range of reasonableness based on your initial assessment.

Demonstration Preparation and Survival
The selection team should prepare for two rounds of demonstrations. The first round should include all the vendors that you want to review initially. The second round of demonstrations will include only those vendors who you want to evaluate more carefully. At the end of the second round of demonstrations your team should be in a position to decide which vendor is preferred so that final due diligence can be completed along with negotiating a contract. Looking at four solutions in round one and narrowing down to two solutions in round two is a good way to proceed. First round demonstrations are usually limited to the selection team members completing the initial review of the software in response to user requirements provided. The first round often takes from three to six hours depending on the extent of the requirements you need to review. This round is presented using the vendors existing data in their demonstration database. Many first round demonstrations are presented remotely over WebEx. You and your demonstration team, and not the vendor, are responsible for the structure of the first round demonstration. You are responsible for telling the vendor what you and the selection team need to review and not just what the vendor wants to show you. You achieve this by providing the vendor with a list of what you want the vendor to show you and your selection team. The vendor must show the team at least what the team needs to see. More could be presented but the needs of the selection team must be met first. It is best to provide the list of needs to be reviewed on a two-column table (use Microsoft Word) with the first column showing the functionality and the second column for team members to write comments about the functionality being reviewed. Most first round demonstrations begin with a Microsoft PowerPoint presentation introducing the developer of the software and the reseller if one is involved, the product, its presence in the marketplace, its philosophy of software development, and what in their opinion distinguishes them in their marketplace. This presentation usually includes one slide that is a compilation of the logos of many of the companies that use their software. You should tell the vendor ahead of time that they have no more than 20 minutes for this portion of the presentation.

Once that presentation is completed the vendor will provide an introduction to the navigation of the software including how screens work, how the directory of functionality is structured and how a user will navigate the various applications. This overview often includes how reports are accessed and how database searches are done. This segment of the demonstration should take no more than one-half hour. Following that overview the vendor should begin to show the selection team how the software will actually work for your company. Your structure of the demonstration should be based on a flow of CRM all the way to accounting, often known as quote to cash. The vendor should be encouraged to follow the outline you have provided. If they stray too far from your list they must be told to return to the structure provided. Caution team members to stick to the outline in the first round so that the presentation covers the scope identified so that the team will be able to fully compare competing solutions. You should control the flow of the demonstration by making sure that an area of the demonstration checklist should not be left until the comment fields in the right hand column have been completed. This is an appropriate control over the flow of the presentation and a realistic way to make sure that all the information the team wanted to know is recorded. At the end of each round one demonstration the document should be filled in and the selection team should feel confident that they have had a quality review of the potential software solution. It is recommended that one of the team members take the notes and combine the comments of team members in the right hand column into a final demonstration checklist. You should send a copy of the final document to the vendor and ask them to confirm that the notes included are an accurate representation of the presentation. This is useful in referencing representations that were made in earlier sessions when there are discussions with a finalist competitor. At the end of all round one demonstrations the selection team should meet to determine which two vendors should move forward to the final round. Since the ultimate objective is to select the best solution for the Company, the initial number of vendors should be narrowed to no more than two finalists if possible. Even if one solution is preferred over all the others it is necessary to have two finalists for negotiating the final terms of the contract and for protection if the preferred solution is not as good as originally understood in the initial review.

Selecting the final two solutions for more detailed review can be challenging for a number of reasons. The primary reason is that many of the better software solutions offer similar capabilities. To help with screening options you can use the following criteria: Technical capability of the software across all the areas of need. Presentation of the demonstration was the presentation team well prepared and did they support your efforts by sticking to the checklist as much as possible. Did you sense that the product was being oversold when the vendor made a number of comments about being the only solution to offer a particular capability when you saw the same capability in other systems? Did the team like the user interface how the system was organized, system navigation and whether perspective users find it intuitive and easy to use? Is each system appropriate in scope for your company? Does your staff agree that the scope of the functionality matches the resources available to implement and gain full value from the solution? Is the solution too much for your internal resources to learn and operate successful? This is a crucial question to ask because a good percentage of software failures can be attributed to buying capable software but one which is too complex for your staff to use effectively. Sometimes the decision is easy when clear functional differences allow you to eliminate one or two competitors easily. Another common elimination factor is when the team did not like the vendor presentation or selling approach. At this point you may also have a vendor come back to you and withdraw from the competition when they have determined they are not a good fit for your opportunity. This can also mean that their resources are stretched and they are not confident that they can win the business. Once you have decided on the finalist systems you are ready to prepare for second round demonstrations. Round Two demonstrations are more detailed than the first round overview. The approach to the second round is that this is the opportunity to see your company running on both finalist systems. In this round you will provide both vendors with sample data from your company and you will be inviting company staff to see the portion of the demonstration that applies to their work. The sample data supplied to the vendor is based on what you need to see to confirm that a particular software solution is right for your company. The second round demo will be based on, mostly, seeing orders for your parts entered in the system and then seeing how the system works with your parts from quote to cash.

At this point it is essential to provide the vendor with information on two or three parts that includes item master file information, the related bills of material and routings (can be partials), a few vendors for buying the BOM parts, and a few work centers for producing and scheduling portion of the demonstration. You can provide names of customers and contacts for CRM, order entry and ship to demonstration. Without asking the vendor to take days to enter your sample data, you can position the second round demonstration presentation so that those viewing each solution will feel like they are looking at their company rather than sample data that has no relevance to your companys operations. You should anticipate a different timetable and participation for the second round demonstration. For instance, the first segment of the demonstration may focus on CRM, quoting, and order entry. You should allocate a segment of time for this portion of the demonstration (45 minutes for example) and you should invite key system users from those areas to view each demo and provide feedback on the presentation. These new attendees should be encouraged to ask questions so they can formulate their preferences. You should plan that a round two demonstration will take most of a day with each segment being allocated sufficient time for a larger number of participants viewing and questioning the functionality of the two finalists. Original team members should continue to take notes on what is being presented and share those final notes with the vendor for confirmation of representations made during the session. In the second round of demonstrations yes we do that is not an acceptable answer to a question. All functionality must be demonstrated, particularly what you consider critical functionality for your business. At the end of the round two demonstration, you should feel that you have seen what you need to see to make a final decision. If there are specific areas where more review is needed, dont hesitate to set up a short Web based review of the application necessary to reach a final conclusion on the capabilities of each finalist solution. The original selection team aided by input from the additional attendees who viewed the round two demonstrations should make the final decision. If possible your team should be as comfortable telling the successful vendor why they were successful as telling the unsuccessful vendor why they were not chosen. This means that you have thoroughly examined all the issues that were part of the decision and you have solidly concluded why you chose one solution over the other.

Final Due Diligence Price Negotiations, Reference Checking, and Contract Review
The team is now at the point where you are ready to take the final steps to contracting with the software vendor. Communicate to the vendor your continuing interest and request three to four references (preferable of companies in your industry or having your fundamental structure such as make to order or make to stock) and one site to visit before making a final commitment. Ask for a final cost proposal based on the two rounds of demonstrations and any discussions that have occurred during your interaction with them. Immediately send these documents to your companys attorney for review and comment. Reference checking is an often-debated practice. Many believe that checking references is really nothing more than talking to the better users of the vendors software or those that are happy with its functionality. It seems as though you never talk to companies who are unhappy which may yield the real truth about the software. The response to that argument is there must be reasons why the vendors software is working well for a company, so knowing those reasons may be important to your ultimate decision. Problems with implementation of software are much more the fault of the customer than the vendor if the correct review of potential software solutions was completed. Reference checking should be completed with the following dozen questions as a guideline: Why did you choose this solution? What other software did you compare this solution to? Has the software met you expectations for providing the value you were seeking? Have you implemented all the functionality you acquired? How close did the implementation planning come to the actual implementation activities? What problems were encountered during implementation and how were they resolved? Were you satisfied with the quality of the training? How did the final cost of implementation and training compare to the budget estimate? How is ongoing support for the software? Is your company getting any value for the annual maintenance fee you are paying?

Can you recommend any vendor staff members for implementation, training, or ongoing support that we should request for our project? Please name three functions about the software that you would like to have changed today.
Since you are presumably reference checking the good customers you should be looking to hear some enthusiasm for the software over the phone. You should expect to hear about problems and how they were overcome. You will hope to hear that the reference company is getting full value from the software they chose. Once the reference checking is complete you should consider a visit to a user. It is helpful to go to a company and discuss how the software is working for them. You should expect to get a plant tour and a meeting in a conference room with some of the users to discuss the software and how it is working. You should not expect to visit with users at their work stations to see how they are actually using the software. The vast majority of plant tours provide a tangible event where part of the due diligence for the purchase of a solution is the completed plant tour. Plant tours rarely yield more than a candid conversation with multiple users of the software. There is a difference between negotiating the terms and provisions of a software contract and negotiating the cost of the software, annual maintenance, and implementation cost. Software vendors rarely change the legal terms of their contract. In essence this document says that your company is paying an amount of money to license the software for daily use in your business. If you find a problem with the design of the software the vendor will fix it. If you need more or better functionality the vendor will charge you to change the software, often only when they believe it will benefit a large number of users as the vendor does not want to be in the business of supporting a large number of versions of its original solution. Negotiating cost is a different opportunity. The profitability of a software vendor is more closely tied to the implementation revenues they earn and the annual maintenance fees that they collect. Profitability from new software sales is more subjective and open to broader negotiations. Given this financial reality here are some guidelines for negotiating price:

Software Licenses: Initial offers of 20% discount are not unusual. Improvement beyond that discount is then based on the interest of the software vendor in your business and their desire to compete with the other vendor(s). If your opportunity is small then the flexibility to push discounts beyond 20% is limited but larger projects with aggressive vendors can result in surprising discounts. Also some vendors who have quoted concurrent user prices can switch to lesser-cost named user prices to the benefit of your company. Annual Maintenance: This is an area of significant vendor income so it is less easily negotiated because of its significance to the vendors financial performance. A request for a 10% to 15% reduction in the annual cost and a cap on the annual cost for up to five years can result in savings in this area. Implementation Cost: The biggest savings in the potential cost of the implementation is managing the process as well as possible and transferring as much of the effort to your companys staff as possible. Beyond that many vendors offer a discount on hourly rates if a block of hours are prepaid (10% off the hourly cost if a block of 100 hours is prepaid). You can push back on hourly rates based on the rates that you have seen from a competitors proposal, but the larger and more complex the project and the software the less chance to adjust downwards the hourly rates. Try for a 10% reduction without prepayment but expect the vendor to try to hold the line.
Every vendor expects to negotiate price. Some of the smaller vendors provide initial estimates with discounts already included. As the size and scope of the project increases the opportunity for flexibility in software license cost increases while reductions in the cost of implementation diminish, especially since the total cost is an estimate anyway. By working with two finalist solutions until you are ready to make the final decision you should be able to achieve the best advantage.


Achieving the Best Possible Outcome
Following the steps presented in this Users Guild will help you, your team, and your company to achieve the best possible outcome for this opportunity. Heres a recap of what you need to do and what happens when you dont. You and your team need to understand who your company is in the ERP marketplace. If you dont have agreement on your business structure and where that places you in the marketplace then you could lose valuable staff time looking at the wrong group of software solutions. You and your team should reach agreement on your CURRENT STATE AND KNOWN FUTURE STATE needs for software functionality. Without this foundation you are positioning your organization for coming up short with the value of the new software for your business. You might be positioning the Company to go through the selection process again much sooner than should be necessary. Its not uncommon for companies making ill-considered software purchases to replace their system multiple times in a 5-7 year span. You should be looking for a solution that will support the Company for the next 7 to 10 years. You and your team must control two rounds of demonstrations. Stick to the agenda, make sure the checklists are fully documented, and make sure that you are totally comfortable that the critical needs of your company are fully met. Actively pursue all due diligence activities aggressively. This is your best chance to confirm in the real world that you are making the right choice. Know that there will be ups and downs during the implementation process, and be sure that you are comfortable that the software vendor is capable of helping you to work through these challenges. Finally, think of yourself as the owner of the business about to receive a recommendation for the purchase of new software. You should be totally sure that the final recommendation is based on a thorough work effort with all relevant questions answered to your satisfaction. Imagine that you are being asked to sign a large check for this system. Would you sign it based on what you know and how you arrived at the recommended solution? You should be able to answer that question with a resounding YES!

Bonus MFG ERP Champion Users Guide

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Bonus MFG ERP Champion Users Guide

Загружено:

Авторское право:

Доступные форматы

CTS

Guides ERP Champion Users Guide

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 2

ERP Champion Users Guide

Why New Software, Why Now

2012 CTS Guides www.ctsguides.com 3

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 4

ERP Champion Users Guide

Our Companys Particular Issues

ERP Champion Users Guide

Our Companys Particular Issues

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 7

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 8

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 9

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 10

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 11

ERP Champion Users Guide

We are a _______________________ manufacturer since we __________________________________________________________.

2012 CTS Guides www.ctsguides.com 12

ERP Champion Users Guide

ERP Champion Users Guide

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 15

ERP Champion Users Guide

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 17

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 18

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 19

ERP Champion Users Guide

ERP Champion Users Guide

Receiving Inventory Management Formulas Laboratory Master Production Scheduling

Manufacturing Requirements Planning (MRP) Bill of Materials (Work Orders)

2012 CTS Guides www.ctsguides.com 21

ERP Champion Users Guide

Invoicing/Accounts Receivable Accounts Payable/Cash Disbursements General Ledger

Time and Attendance

2012 CTS Guides www.ctsguides.com 22

ERP Champion Users Guide

Costing (Standard, Actual)

Warehouse Management Project/Contract Management

Product Lifecycle Management

Business Intelligence (Cubes)

2012 CTS Guides www.ctsguides.com 23

ERP Champion Users Guide

2012 CTS Guides www.ctsguides.com 24

ERP Champion Users Guide

Estimating and Quoting

2012 CTS Guides www.ctsguides.com 25

ERP Champion Users Guide

Sales Order Entry

2012 CTS Guides www.ctsguides.com 26

ERP Champion Users Guide

Purchase orders include your company part number and

ERP Champion Users Guide

We are a _ manufacturer since we ____________________________________.