Selecting the Right ERP and MES Software System


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To avoid choosing the wrong software system for your company, a careful evaluation of your company's needs and the supplier's offerings is a must.

By Chang Yun

Selecting and integrating new manufacturing software requires knowledge, experience and the correct selection methodology. It requires a step-by-step process that, if followed, will lead to success. Without careful evaluation of each facet, half of the manufacturing software projects will be terminated. Of those that are implemented and reach the operational mode, 75 percent are rated as "poor" by the users. The reasons for these disappointing numbers are too often based on a lack of knowledge, experience or methodology.

Knowledge and ExperienceKnowledge is knowing how things are supposed to work if everything goes right. Experience is an understanding of the reality that the job must perform in spite of the fact that things can, and do, go wrong. Knowledge without experience can result in a seemingly perfect plan that proves impossible to implement. Experience without knowledge often leads to repeating the mistakes of others. Balancing the two ensures proper selection of the system and successful implementation.

MethodologyMethodology is the organized process for selecting a manufacturing software to meet the requirements of your company. Methodology doesn't have to be complex to be effective. Get organized, focused and keep it simple. The aim is to provide a framework within which many diverse, yet interdependent, activities relate in an orderly sequence.

Understanding Types of Manufacturing SoftwareThere are three types of manufacturing software available for implementation Manufacturing Resource Planning (MRPII, also known as ERP), Manufacturing Execution System (MES) and process control software. MRPII is designed to manage sales and customer service issues, material planning, purchase control and inventory control management, and accounting. MES is designed to control production management including: production planning, production engineering, scheduling, shop floor tracking, monitoring the quality process and managing ISO processes. Process control software is used to control manufacturing machinery.

As a rule, MRPII suppliers do not get involved with MES, and MES suppliers do not get involved with process control software. Most of the companies that purchase MRPII and MES packages run them independently or integrate the systems through custom programming to interface between the two. As part of the software search criteria, make sure to define whether you want MRPII, MES or both. Define them accordingly.

Avoiding FailureThe concept of MRPII has been around for more than 35 years, and its most recent manifestation is Enterprise Resource Planning (ERP). However, its technologies and approaches are nothing new. More bells and whistles, additional attention to user-friendliness, the ever-widening availability of industry-specific functionality and a greater number of ERP/MRPII-experienced people have created a mature technology.

A significant percentage of ERP and MES installations still fail either partially or totally. The human factor is the key component in success or failure; unlike machines, you cannot get people with technology built in. The lack of methodology and training is the major cause of the following implementation failures:

  • Users are unprepared for the size of the task
  • System information flow is not defined
  • Upper management's commitment wavers
  • System users are not committed to the implementation
  • Initial pains of implementation create resistance
  • Operational ignorance is unchecked
  • There is a lack of system data integrity
  • Saboteurs and general inertia take over.

Methodology for Avoiding FailureHow does one avoid failure? Management must show its commitment through project justification, such as a detailed cost-benefit analysis that sets realistic goals with a realistic schedule. The user must show commitment by establishing project specifications. Both groups must agree on requirements. But users need to define how key business processes should flow and what changes must be made in their departments to make them work. Both management and users must recognize the positive effects of the new system. The first few months of operation will create frustration and you need to be prepared for a temporary negative impact associated with implementing a new system.

Too often, companies skip steps in the preparation and qualification process to save time and money. The one thread that ties together more than half of all implementation failures is the lack of preparation and commitment to the process. Going through each step prepares your company for the change.

What Is Management's Role?It is important to understand what the proper role of management is in systems selection and implementation. Management must establish objectives and stand behind the implementation team. Any more involvement is often inefficient. Management should do what they do the best provide the backbone of the project, not the brains and muscle.

One way they provide the backbone is by defining the business environment so that the implementation team can select a software application that fits. Envir-onmental issues include organization, structure, industry, policy, scope and function. The act of defining the environmental does not need to be time consuming or include many details; it is basically the answering of pertinent questions about business practices.

Management must look to the future, but not succumb to the temptation of opening themselves up to a more complex installation. As a rule, systems should not be more complex than the business they are serving.

Selection CommitteeThe project committee will decide, within the bounds of the business environment, what the system must do and how they will do it. They will also evaluate what each software supplier can provide.

The project committee should be composed of the following department managers: master scheduling and production control manager, materials manager, production manager, sales manager and accounting manager. Members should be responsible for deciding how business is conducted.

JustificationCost justification is the first hurdle that a business system implementation project must clear. If this step is skipped or performed haphazardly, negative results will continue to be felt throughout the course of the project. A good justification will be a key step to garnering the management and user support. Support or justification won through realistic identification of the true costs and benefits of any new system will ensure the proper management attention and involvement.

The best justifications match the project goals to the company's business objectives. Following are some of the major elements of a justification model:

Benefits. There are two types of financial benefits: Day-to-day savings that eventually aid the bottom line, and increased working capital (cash availability) resulting from reduced assets such as inventory and receivables. New systems usually cost less to operate than legacy systems.

Revenue and profits. Revenue increases as a result of: more responsive customer service; accurate forecasting and manufacturing scheduling; increased sales volumes; the competitive edge engendered by on-time deliveries made possible by better manufacturing performance; lower costs through increased quality and productivity; and having the right material at the right place at the right time.

Inventory management. Inventory is the repository of many of the company's past mistakes and a vast resource of potential working capital. Better scheduling reduces inventory by taking delivery of the right material at the right time and preventing buildup of obsolete materials. Purchasing control and more reliable scheduling reduces purchase prices and lead times. Fewer shortages improve manufacturing performance.

Costs. Capital expenditures, on-time project expenses and ongoing support activities include:

  • Application software and hardware, which can cost between $50,000 to $500,000 (for small- to medium-size companies), even without modifications
  • Modification of applications software that potentially increases the risk and length of the project, in addition to having future cost implications
  • Software and hardware maintenance
  • Communications equipment and installation
  • Education and training
  • Conversion of initial operating expenses including the cost of parallel operations, part-timers, consultants and programmers
  • Consultant and temporary staff expenses.

Remember, a sound justification is a first step to successful implementation. If it is justified, management support will follow.

Specification and Software Supplier SelectionIdentifying detailed functional requirements is the most intricate task of the management and project committee. The specification commits users to the selection process. If they contribute to the specification process, they have a good chance of getting what they need. If they do not, they must realize that they have to live with what they get. Subsequently, they will judge systems based on their own requirements.

Preparing a detailed specification involves more than preparing a list of requirements to present to a software supplier. It is the definitive statement of the system required to run the bus-iness. We all work in a box defined by our education, knowledge and experience. If you don't want to just automate what you are doing today, you must look outside the box to find out what you don't know. This is one of the major reasons for keeping an open mind during the software demonstration to see if there is a better or more efficient way of running the business.

The first step in defining specification is to break the job down into manageable pieces by business function. Specifications for each function can be defined with the help of experts in that functional area.

Perhaps the most difficult aspect of defining detailed functional requirements is determining how much detail is enough and how much is too much.

After gathering all the functional requirements, weigh them for importance. Throughout the specification process, the committee must stay focused on the important issues. It is easy to get sidetracked by the pet projects of a vocal minority. With each issue ask, "Is it really necessary to run the business?" If the answer is "no," spend time somewhere else.

In the case of inventory management or tracking material in production, there may be many systems that perform each detailed function, but there may only be one or two that perform it the way that is needed for your business. These functions should be described by a detailed information flow and analysis, and used to disqualify suppliers in the initial specification survey process, or during the software demonstration.

Request for ProposalThe Request for Proposal (RFP) must do the following: describe your company to the supplier; provide understanding of the needed software capabilities as it relates to functional requirements; and solicit bids (price estimate based on system requirements).

RFP should contain an introduction to the company, the industry it serves and the scope of the planned systems. Describe only what the supplier needs to ensure they understand the framework in which their system will run. You need to provide a summary of the reasons for changing the current system.

Fully disclose the criteria that will be used to make the final selection. Detail functional requirements (survey form) to which you want the supplier's capability response, including all the functions you must have.

The detailed functional requirements should be a subset of those requirements developed as part of your specification process. The specification and RFP processes have different goals. The specification process allows users to define everything they want the systems to do, irrespective of availability from any vendor. The RFP should ask questions necessary to understand the product's capabilities and allow you to select three or four suppliers for software demonstrations.

The suppliers often suggest workarounds for some requirements different than originally envisioned. These are usually worthy of consideration. Decide on a case-by-case basis whether your needs will be satisfied. The goal is to find a software package with the least amount of workarounds (though some may be needed). Suppliers deal with variations of the manufacturing process more often and more widely than do their customers. They've seen it all, so don't be afraid to consider workarounds as a good or better approach than what you had in mind. Use their expertise.

The average supplier will spend two to six hours answering the document, so make it something that can effectively be dealt with in that time frame. Don't ask the supplier to prepare more detail than you are willing to review when it comes back. If you want a quality effort, keep it concise and focused, and you will save time for all involved in the selection process.

Software DemonstrationHow many supplier demonstrations should be conducted? Remember that the value of the software demonstration process often works in inverse proportion to the number of suppliers included. Experience shows that when three to four suppliers participate, optimal results are gained.

Prepare a demonstration agenda that includes a list of system functions to be exhibited. The agenda should contain from 50 to 100 requirements depending on whether you are looking at MRPII alone, or MRPII and MES together. Although you can set the sequence for demonstrating these functions, it is usually better to submit an agenda at least a week ahead of time and let the demonstrator set his or her own sequence.

The agenda is also the demo scorecard, listing the capabilities stated by the supplier. Evaluate both truthfulness and their understanding of the requirements. Record any changes to the supplier's score throughout the demo and review these observations afterward.

Ask questions as the demo progresses and do not hesitate to bring up all specific issues critical to functionality. How is the system designed? What industry did the designer have in mind when designing the software, or is it general purpose software? Why is this software more likely to solve my issues than other systems? What is the background to the designers and technical support personnel? The motto for all participants should be: "The only stupid question is the one not asked."

Throughout the process of selection, you must remember you are making a major decision for the company. If you get it wrong, your company will not realize the benefits for which it is spending significant money and resources.

Supplier RankingThe selection of the right software supplier is a combination of objective scoring (the hard facts) and subjective impressions (the soft issues). The objective scores focus on detailed requirements and how well each vendor's software meets your needs (Table 1). The subjective issues, on the other hand, focus on opinions and feelings. Which software feels more user-friendly? Which supplier would make the best business partner? Who has the best support? Should flexibility be taken over functionality?

Decide what factors are most critical to the success of your business. This should be done early in the process, before you send out the RFPs. From the initial contact with the first supplier, note facts about each software package and the soft issues involving each supplier. Learn as much as you can about both.

Once you are down to your final supplier, check references. It will help you to determine if other users of the system agree with your selection and help you succeed with implementation of the system.

CHANG YUN may be contacted at Manex Systems Inc., 1030 G East Duane Ave., Sunnyvale, CA 94086; (408) 720-8221, ext. 104; E-mail: Changsuyun@email.msn.com.

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