Tags: ERP

July 12, 2012

Three Missed Opportunities for Maximizing ERP Value

ERP’s value can no longer be tied to just standardizing business processes or centralizing data. Many companies only realize a fraction of the business value from their initial ERP implementation. Usually due to the magnitude of an ERP implementation project, companies implement phase 1 (the minimum requirements), and rarely go back to enhance the solution.

The 3 Missed Opportunities are:

1. Not evolving ERP strategy to mirror business goals
2. Inability to bridge the gap between IT and business users
3. Not streamlining business processes to maximize your ERP’s ROI, ASAP

Continually evolving your ERP strategy is critical to adding value to the business and in achieving desired results.

Key strategies include:


1. Developing an ERP Application Roadmap that defines your application strategy and ensures alignment with business goals – short and long term.


2. By engaging IT and functional users in developing the roadmap you bridge the gap between IT and the business users.


3. The roadmap is then used as a foundation to conduct a current state assessment to identify areas for process improvement – to streamline and accelerate results.

Identify and document quantifiable metrics for key areas to ensure you are maximizing your ERP applications and driving real business value.  If you don’t have a roadmap in place driving the direction of your ERP, you are at risk for not achieving your desired business outcomes.ERP, Business Applications, ROI, ERP Roadmap.

By Judy Sunblade, ITK Solutions Group, LLC

 

April 30, 2012

What’s So Important about Discovery & Requirements Gathering?

The Top Five Benefits of Discovery & Requirements Gathering

  1. Develops an understanding of client’s goals and values
  2. Defines project scope and governance model
  3. Identifies opportunities for process improvement
  4. Illustrates current gaps (internal and external)
  5. Generates cross-organizational dialogue towards an improved business model

Getting Started…

You’ll want to minimize the risk involved with a project of this nature, and balance the achievements or success with the required timeframe.  As importantly, you will want to establish the “win criteria” which will sustain the implementation over the long haul.  Internally, you will want to show mini wins to continue to show the value you are adding to the client and its executive sponsorship. The common goal will require agreement and understanding across all of your constituents in order to achieve the desired results within the timeframe and budget that has been established.

Governance Model – Who should be involved?

The process of discovery and requirements gathering should involve key executives and stakeholders who are capable of identifying and explaining the goals and strategy that have been established for the company. Identifying the goals and strategy are the basis for driving a discovery and requirements process.  Within these two elements are a basis for the project without which could lead to an unfocused effort that may yield lackluster results.

Communications Plan What to say, and when?

A communication strategy should be developed so that as the project progresses, there are clear milestone announcements that are circulated throughout the company to not only further emphasize the goals and importance of the project but also to help keep people engaged and understanding the short term wins and progress that are being made.

A communication strategy is critical to any enterprise project to maintain the end state in the minds of all those being impacted by this project.  The teams in the discovery/requirement phase will need to articulate how each department, office, region will be affected, i.e. what’s the purpose of the project, what’s it look like at the end state, what are the perceived benefits, etc. You should be looking to create a common understanding of the process at all levels that will be affected. With a global project, it will be important to have a common design that will accommodate localization….all consistently supporting the overall business model and vision of the company.

Interviews and Information Gathering

Throughout the course of the initial interviews with stakeholders, you will encounter the following:

  1. Collective problem solving – you, along with the consultant, will create the future-state throughout the discovery process.  Leverage these conversations to build strong relationships!
  2. Collaborative creation of business solutions – you will identify a variety of opportunities that drive value across the business.  Use these moments as an opportunity to build on the relationship moving forward!

Watch the Gaps – Illustrates current gaps (internal and external)

You will be addressing needs before a final budget has been established, which gives you the power to visualize an ideal future state for the business. It will become apparent that gaps will surface between what your current/future processes are compared to what the current product can provide. It’ll also create a gap analysis between your needs/processes and the functionality of the product out of the box, which is a KEY ELEMENT for the consulting partner and client to understand.  The benefit in this process is identifying the gaps during the sales cycle which helps determine “must have” vs. “nice to have” functionality and the ability to assess where, how and if you need to adjust your business process to avoid the need for customization.

Future-State Planning & Project Management

This phase will establish and identify the skill of the consulting team you will be working with during the implementation. You will also begin to identify key resources from your company who will become integral to the implementation.  You will want to be sure the consultants understand business process, in general, but in particular your processes and needs.  Establishing those relationships early on helps to ensure greater success for an on time/on budget implementation. It should be noted that changes to the project will come up after the implementation begins. Different perspectives will develop as you progress through your project plan, which will create change. A change order process must be established during the project planning phase with approval criteria that must be adhered to in order to prevent scope creep. The goal is to have a process stable for and to minimize that concern for change orders and drive to an identified target that has been established early. Structure like this will also foster a stronger working relationship with your consulting partner who then becomes part of the entire project team. Chemistry and trust are key success elements between partner consultants. That’s a goal that should not be understated.

The Demo

So we can now assume that the discovery and requirements gathering have taken place. The goal is that the demonstration should offer proof points validating the assumptions we have developed at a high level. The product demonstration is not a training session; it is used to see your processes integrated within the product and to identify those areas that don’t fit, also known as the fit-gap. Once those key elements have been accomplished, the data and information that has been collected thus far should be the basis for a meaningful implementation strategy. Again, as above, a communication strategy must be established and executed before and during the implementation. Key stakeholders should be able to articulate where the project stands compared to the budget and timeline with the support of the partner consultant. Typically, an executive steering committee has been identified with key stakeholders as regular participants in meetings.  The committee should include a senior level consultant (Project Manager) from the partner to meet regularly to discuss the project, the budget, its critical path and any obstacles that might have an impact the timeline. These meetings are, and should be, an open dialogue. I have seen this concept of the executive steering committee as being very effective and shows continued executive commitment and involvement in the project.

Wrapping Up

My goal in this article was to take a snapshot of a key phase in the sales cycle for investigating a product. I believe that Discovery and Requirements Gathering are critical elements that will help to ensure the success of your project and significantly help you sleep better at night. This phase is the foundation for driving real value into the project. This phase is an opportunity for the consultants to become experts on your business, build strong relationships with your stakeholders, and become partners moving forward!

In summary, if you want to know how successful your next project will be in the end, I suggest taking a good look at how it begins.

Best,

Sam

Sam Coluccio is the co-founder of ITK Solutions Group, a retail-focused consulting firm specializing in retail enterprise resource planning (ERP) solutions. 

April 27, 2012

Does Your Retail Implementation Have the ROI it Should?

It’s budgeting time and you are evaluating capital expenditures for next year. One project that has been put off for several years is a new, better integrated retail system.

This is sometimes a hard sell with the operations and financial segments of the company. Retail systems touch almost every part of the company and can be expensive. After all, you are getting timely sales information, your customers are able to pay out promptly and efficiently, system uptime is reasonable (maybe not great) and loyalty information is being gathered. That’s really all you need, right? Maybe, maybe not.

Here are some ideas about what you should expect from a new system and how to evaluate whether such an expenditure would have an appropriate payback for your organization.

1. What is your current inventory out of stock percentage and how can your new implementation improve that?

Measuring out of stocks from a web portal is easy; the number of times customers look for products that are not in stock can be electronically captured. In a brick and mortar store situation, the numbers are not so straightforward. You don’t have the dress in the right size or style. Does the customer tell the manager? Usually not. Would it convert to a sale if you did? Often, but not always. A current assessment of your out of stock ratio is important here, if your new system is supposed to integrate more closely to provide better inventory tracking, ordering and replenishment.

Let’s consider some numbers at work here. If your out of stocks run 10% of all transactions and you believe that you could convert half of those out of stocks to a sale with better inventory integration and metrics, you should expect to increase your sales by about 5% if the new system fully realizes the potential here. Even a 50% realization of the potential capture would result in a 2.5% increase in sales, which would often fully fund a retail project.

2. How can your new system reduce the amount of dead inventory and deep discounting that’s required to move slow selling items?

The flip side of not having the right items in stock (#1 above) is having the wrong items in stock. What is the cost of your dead inventory disposal? How many items are put on clearance because you had the right items at the wrong time, or in the wrong size? Shelf and rack space is wasted on items that will not sell, with an opportunity cost of displaying items that would sell.

How many items are sold at clearance for 50-75% off that should never have been purchased in the first place? Choosing styles involves human judgment, and so it is an art (rather than a science), but a good system can ratchet up the science side and improve the buyer’s chances of nailing down the art side.

Again, the numbers in play are large. If your inventory is sold at 70% of suggested price, on average, and your new system could increase that to 75% by better anticipating demand flows and seasonality, a 5% increase in sales could be realized.

3. Can a new system enable new revenue streams?

For example, the best new retail systems enable pick, pack and ship functionality at the brick and mortar store level. That is, customers can place an order over the web that your system automatically routes to a store when your fulfillment warehouse is out of stock or low on stock for that item. The store that has the right item in the right color and the right size receives a notification to ship the item directly to the customer. You have not lost a sale, the customer’s needs have been fulfilled and your store manager’s volume goes up, all positive trends. To quantify the possibility, what amount of out of stocks from your web orders could have been filled with store inventory? 1-2 transactions per store per day could increase sales substantially.

Some things to consider:

  • All the above initiatives increase inventory turnover. In a leveraged situation (where money for inventory is borrowed), the reduction in borrowing costs should be quantified as a project payback (increases your Return on Investment or ROI for the project).
  • The above initiatives should also increase customer satisfaction which, while more difficult to measure, is intrinsic to the success of the company.
  • The above initiatives should be wrapped into project objectives with the before and the expected ‘after’ metrics so that you can measure the project success and tune areas where the project is falling short.
  • Finally, when quantifying project objectives, don’t take all the upside out of the numbers. If you feel the project could get a 10% increase in sales, should get a 7% increase in sales, and a 4% sales increase is a surety, use the surety number. If the ROI justifies from that, the project should be a ‘go’.

Susan Alvarez is the Vice-President of Consulting Services at ITK Solutions Group. ITK Solutions Group is a retail-focused consulting firm specializing in retail enterprise resource planning (ERP) solutions.