How to Conduct an ERP Needs Assessment for Your Business

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17 Dec 2020, 9:00 AM

ERP Needs Assessment for Your Business: Is your company thinking about putting in place an enterprise resource planning (ERP) system? It is imperative to carry out a comprehensive requirements assessment prior to delving into the intricate realm of ERP systems. You may use this technique to determine which ERP best fits your operations and company objectives. I'll take you step-by-step through the process of doing an efficient ERP requirements assessment in this article, so you can make an educated choice that advances your company.

Why is an ERP Needs Assessment Important?

Let's discuss the 'why' before getting into the 'how'. Developing an ERP requirements assessment is similar to developing a digital transformation strategy for your company. It benefits you:

• Determine the places of pain in your company operations right now.
• Establish definite goals for the installation of your ERP.
• Recognize the essential features and functionalities.
• Refrain from splurging on extraneous features.
• Make sure the ERP solution you've selected and your business needs are more closely aligned.

Now that you know how important it is, let's get started with the procedures for carrying out your ERP requirements assessment.

Step 1: Assemble Your ERP Assessment Team

To begin the ERP requirements assessment, assemble a broad team of members from several divisions within your company. This group need to consist of:

• C-level managers
• Representatives from the IT department
• Heads of several departments (e.g., operations, finance, HR)
• End users who will regularly communicate with the ERP system

Why does this matter? Every team member offers a different viewpoint on the department's business procedures and pain areas. This diversity guarantees a thorough evaluation of the requirements of your company.

Step 2: Define Your Business Objectives

With an ERP system, what goals do you intend to accomplish? Now is the ideal moment to plan forward and match your ERP objectives with your overarching company plan. Typical goals include the following:

• Increasing the effectiveness of operations
• Improving reporting and data visibility
• Simplifying the management of the supply chain
• Increasing client contentment
• Cutting back on overhead

Put these goals down on paper and order them. This will act as a guide for you when you choose your ERP.

Step 3: Map Your Current Business Processes

It's time to go into the specifics of running your company. Make a thorough record of all the business procedures you now use, including:

• Diagrams of work flows
• Stakeholders and process owners
• Current software systems and their relationships
• Processes that are manual but might be automated
• Issues and inefficiencies with the way things are done now

Although it may take some time, this step is very important. It helps you pinpoint areas where an ERP system may have the biggest effects and provides you with a clear picture of where you are now.

Step 4: Identify Pain Points and Areas for Improvement

Once you have a map of your present processes, it will be easy to identify any inefficiencies and bottlenecks. Typical sore spots might be:

• Departmental silos of data and a lack of integration
• Mistakes and delays resulting from manual data entry
• Not having access to current information to make decisions
• Having trouble growing operations as a business
• Difficulties with regulatory reporting and compliance

Make a list of these issues and rank them according to how they will affect your company. This will assist you in concentrating on the most important characteristics while assessing ERP options.

Step 5: Define Your ERP System Requirements

Based on your business objectives, process mapping, and identified pain points, you can now start defining your ERP system requirements. Break these down into categories:

Functional Requirements:

• Required modules include Inventory Management, Finance, HR, and CRM.
• Certain attributes in every module
• Capabilities for analytics and reporting

Technical Requirements:

• On-premises or cloud-based software
• Capabilities for system integration with current systems
• Mobility on a mobile device
• Scalability to support potential expansion

Vendor Requirements:

• Assistance with implementation and instruction
• Ongoing upkeep and modifications
• Experience in the field and performance history

Budget Considerations:

• Initial expenses of implementation
• Ongoing costs for subscriptions or licensing
• Ownership total throughout a period of five to ten years

Keep in mind that it's critical to identify "must-have" and "nice-to-have" qualities. This will assist you in setting priorities and, if needed, making trade-offs.

Step 6: Conduct a Gap Analysis

It's time to perform a gap analysis now that you have a firm understanding of your planned future state and current state. This includes:

• Contrasting your established criteria with your existing systems and procedures
• Determining the shortcomings of your existing configuration
• Identifying the holes that an ERP system can fill
• Evaluating the possible effects on your company of closing these gaps

You will have a better understanding of the necessary changes and possible advantages of putting an ERP system in place with the aid of this research.

Step 7: Build Your Business Case

Now that you have a wealth of data, you can create a strong business case for the deployment of ERP. The following should be in your business case:

• An executive synopsis of the requirements analysis results
• A thorough analysis of the problems and inefficiencies that exist now
• Benefits of putting in place an ERP system that are anticipated (both quantitative and qualitative)
• Projected expenses and return on investment
• Possible dangers and methods for reducing them
• Timeline for implementation and needed resources

A compelling business case can direct your ERP decision process and help you get support from key stakeholders.

Step 8: Prepare for Vendor Evaluation

Getting ready for the vendor evaluation is the last stage in your ERP needs assessment. With your needs well specified, produce:

• A document that requests proposals (RFP)
• Criteria for evaluation and system of scores
• A shortlist of possible ERP suppliers that meet your needs

When comparing several ERP packages, this preparation will make sure you're comparing apples to apples and expedite the vendor selection process.

How to Evaluate ERP Requirements: Practical Business Examples

Walmart

The largest retailer in the world, Walmart, modernized its processes and enhanced its e-commerce capabilities by doing a thorough ERP requirements assessment.

The challenge: Walmart was to combine its massive brick-and-mortar operations with an expanding e-commerce presence as it faced increased competition from internet merchants.

Needs Assessment Process:

• Gathered the departments of IT, operations, finance, and e-commerce to form a cross-functional team.
• Mapped out the present company procedures and pinpointed the order fulfillment and inventory management problem spots.
• Conducted interviews with stakeholders at all organizational levels.
• Examined client comments to determine areas where the shopping experience needed to be improved.
• Compared the capabilities of the present systems to the desired future state of the business.

Solution: Walmart and Microsoft collaborated to develop a cloud-based ERP system utilizing Microsoft Azure based on the requirements assessment.

Results:

• Reduced incidences of overstock and out-of-stock by 30% and increased inventory accuracy.
• 40% increase in e-commerce sales thanks to improved order fulfillment connection with physical locations.
• 20% savings on IT infrastructure were achieved by switching to a cloud-based solution.
• Improved customer experience through quicker delivery times and more precise information about product availability.

Walmart was able to select an ERP solution that supported its omnichannel retail strategy and met its unique issues by carrying out a thorough requirements assessment.

Airbus

Leading company in the aerospace sector, Airbus, conducted an evaluation of its ERP requirements in order to optimize its intricate production procedures and enhance supply chain coordination.

Challenge: Airbus had difficulties in managing a complicated supply network, integrating its worldwide operations, and upholding uniform quality standards for all aircraft types.

Needs Assessment Process:

• Constituted a focused project team with members from the supply chain, manufacturing, engineering, and finance departments.
• Carried out a thorough examination of the manufacturing procedures used at each production location.
• Vendors were surveyed to find problems with collaboration and communication.
• Conducted a gap analysis between industry best practices and present capabilities.
• ERP needs were ranked according to their possible influence on productivity and quality.

Solution: Airbus selected SAP S/4HANA as its new ERP platform after the examination, including modifications made for the aerospace manufacturing industry.

Results:

• 15% shorter aircraft delivery times because to better supplier collaboration and manufacturing planning.
• 20% increase in production efficiency resulted in yearly cost savings of €500 million.
• Increased customer satisfaction, a 25% decrease in failure rates, and better quality control.
• Improved on-time delivery, 40% fewer component shortages, and increased supply chain visibility.

Thanks to a comprehensive requirements analysis, Airbus was able to choose and deploy an ERP system that addressed the particular difficulties it faced in the aerospace sector, which resulted in notable gains in productivity and quality.

Unilever

The multinational consumer products corporation Unilever carried out an ERP requirements analysis in order to streamline its worldwide operations and promote digital transformation.

Problem: Due to Unilever's use of several outdated systems in various geographical areas, financial reporting, supply chain management, and product innovation were all inefficient.

Needs Assessment Process:

• Constituted a global steering council with delegates from every significant market and corporate division.
• Carried out a thorough audit of all regions' current systems and procedures.
• Found information sharing obstacles across departments and regions by analyzing data flow.
• Future business requirements, such as integration of digital marketing and sustainability reporting, were assessed.
• ERP requirements were ranked according to their ability for both local flexibility and worldwide uniformity.

Solution: Unilever used Oracle Cloud ERP through a staged roll-out across geographies, based on the evaluation results.

Results:

• 50% less time was spent on financial closure when a single global instance of financial data was achieved.
• Increased efficiency of the supply chain, resulting in a 15% decrease in inventory levels while preserving product availability.
• 30% faster new product development cycle because of improved data sharing and teamwork.
• Improved sustainability reporting features that reinforce Unilever's dedication to environmental objectives.

Thanks to a thorough needs assessment, Unilever was able to choose an ERP solution that would support its worldwide operations while enabling the required local changes, fostering creativity and efficiency throughout the whole business.

These case examples highlight the need of carrying out an exhaustive ERP requirements analysis. Through a thorough assessment of their distinct needs and obstacles, these businesses were able to:

• Determine which areas need improvement the most.
• Select the ERP options that best meet their unique requirements.
• Boost productivity and cut expenses
• Boost client satisfaction and spur innovation
• Boost top-line revenue by implementing improved business procedures

These industry leaders had notable operational gains as a consequence, which strengthened their competitive positions in their respective markets and generated higher revenue and enhanced efficiency.

Conclusion

Initiating your ERP installation process with a comprehensive ERP requirements assessment is essential. It helps you clarify your requirements, gives you a clear view of your company demands, and creates the foundation for an effective ERP installation and decision process.

Recall that implementing an ERP system will need a substantial expenditure that will affect your entire company. It will pay off in the long run to invest the effort in conducting a thorough needs assessment, as this will guarantee that the ERP system you select actually fits your business requirements and advances your company.