Manufacturers should avoid buying generic ERP systems, industry watchers argue

Manufacturers should avoid buying generic ERP systems, industry watchers argue

One ERP system does not fit all. Food suppliers of different sizes, operating in different sectors have different requirements and implementing a generic ERP product may not work.

Implementing an ERP system is a crucial piece of the puzzle for food companies wanting to compete within the industry supply chain. The challenge when it comes to integrating ERP systems into the industry is not a matter of companies deciding whether to implement these systems or not but what benefits they want from ERP, and what features they need from these systems.

Although there are some core requirements that need to be satisfied for all food companies – such as ensuring traceability and making sure expired lots are never sold – features do vary depending on whether the company is a small-and-medium-sized enterprise (SME) or a large multinational. Larger companies generally have more complex requirements for ERP systems for a variety of reasons, including the fact that they tend to cross more geographic boundaries – so inventory management, legal compliance, and purchasing and communication between various organisations, levels, functions, and locations becomes more challenging.

"Given that larger companies tend to have more complex requirements, the ERP systems that can best address these are typically very complex themselves… they need to be extremely flexible in terms of customisations, and the ability to offer various methods to accomplish a particular requirement so that it fits the needs of a particular food company," says Bob Swedroe, president and CEO of US-based ERP software vendor Expandable Software. 

The downside of these complex ERP systems of course, is that they are quite expensive to implement and maintain, and require intensive training.  

This is why, Swedroe says, investments "need to be analysed to ensure that a proper return on investment is realized before the investment is actually made". No matter what ERP system a food company ultimately chooses, however – be it in-house; on a cloud; highly customised; or generic  – any company considering upgrading or implementing an ERP system must follow a relatively similar process, he explains.

Companies need to take "a hard, objective look at the current ERP situation so that all the current pain-points and important operational improvement opportunities are identified and understood". Swedroe says it is important for a company to take into account in its ERP system selection process not just the current situation, but potential for future growth/complexity as well. Firms must also research and seek feedback on various systems to find out how they can relate to their particular requirements and issues, and finally, select an ERP system based on functionality, fit, cost, and complexity. While most ERP systems on the market today boast robustness and customisability, according to the 2012 ERP Report by US-based Panorama Consulting Solutions, it is not until software implementation actually gets going that companies can start running into trouble.

At the very core of ERP roll-out, there are different ways to implement a system and it is important for businesses to take into consideration the pros and cons of each method before deciding how to go about deployment.

The first model for roll-out, according to Panorama, is the "big bang" approach, where all modules go live at the same time in all locations, and employees are forced to use the new system with no opportunity to fall back on the old one.

Other companies may use a phased approach, where they implement modules across multiple locations or departments at different times, which can help avoid business disruptions – but may also create some resistance to change within departments.

Some companies could use hybrid approaches, where they may use a third-party vendor to host a Tier 1 (for large enterprises – usually with annual revenues exceeding US$200m) or a Tier 2 ERP system (for mid-sized companies). According to survey results from Panorama, 34% of companies have used the big bang approach in implementing their ERP system; 47% used a phased approach; and 20% used a hybrid approach. Food companies cannot simply look at which approach is used more often when deciding how to implement systems for themselves however – they must take their individual goals and business operations into account on a case-by-case basis.

"The basic thing that any software should do is give you some immediate business benefits," says Roman Bukary, GM of manufacturing/wholesale and distribution at web-based ERP software solutions company NetSuite. "Then, once you've got your business running you can look at things and ask 'what can we do better?'"

While vendors like NetSuite can offer food customers suggestions, and examples of best practice in the process of picking ERP software, Bukary explains, it is up to the food companies, ultimately, to define their own goals for success, and what they would like to achieve through implementing ERP systems.

"You need to ask what is really unique about your company, and how you can leverage that," Bukary says, adding it is also important for companies to be realistic in their expectations for ERP systems. "It’s not about settling, but about making sure that your ambition, your objectives, your definition of success, the technology you’re putting in place are all aligned."

Overall, selecting the wrong system can pose some serious trouble for companies, says James Wise of UK-Canadian Solarsoft Business Systems. "A lot of people will buy generic ERP systems, instead of one built for the industry from the ground up," he says. "They may have heard buzz about a particular system, and decided to implement it without seeing really whether the software fits that company's particular needs." With the investment then already made, companies will then start to bolt on additions and modifications, and "start to become this software company [they] never intended to be".