Many companies start a selection project by asking the users what they need in a new system. This approach will miss key requirements needed for the business to succeed with its business plan. The business needs to be sure the business strategy is input and linked to the information technology strategy.
A new ERP system is one of the components of the company information technology strategy, and the information technology strategy should support the company’s business strategy. The company business strategy should be one of the inputs to the ERP requirements.
Most companies have a multi year business plan. The plan usually includes the following:
- Vision of next few years for the company
- Mission statement
- Annual goals and objectives
- Plans and action
- SWOT analysis (Strengths, Weaknesses, Opportunities, Threats)
- Competitive and market analysis
- Critical success factors that are needed to achieve vision and goals
- Key measurements
Often the company management has the enterprise departmental managers develop business plans to support the company plan.
When planning the needs of the future system, the company and the department plans need to be input to the definition of the new system.
The business plan can drive critical requirements for the new system.
At Ultra, we assist the ERP selection team with the development of a Business Goal Driver Framework. This Framework will link critical ERP software requirements to the business goals. The framework has the following linkage:
- Business goals are linked to strategies
- Strategies are linked to processes
- Processes are linked critical software function
The development of this framework depicts how the company business plan is linked to the future ERP system.
Consider the following example:
- Business goal – the company has decided it needs to reduce inventory. It has compared its inventory levels to peers and best in class companies. The comparison has showed management that their inventory levels are higher than other companies. Management has set a goal to reduce inventory levels.
- Strategy – the company has decided to use a “pull” strategy to reduce inventory levels. During their analysis of peer and “best in class” companies, management has found the use of a “pull” strategy can facilitate the reduction of inventory.
- Process – the “pull” strategy will be implemented for the replenishment process of certain components and finished goods. The strategy is linked to the replenishment process. During their review of component and finished goods replenishment they have identified the parts that can fit into a “pull” strategy. They have designed a “pull” process chart, and determined the Kanban quantities for the parts.
- ERP Software Requirements – In order to implement a “pull” replenishment process, the team has determined the new ERP system must have Kanban capability. This capability needs to include electronic Kanban notification, electronic Kanban visibility, and Kanban quantity calculations.
The ERP team builds a framework that shows the connection of the:
- Goal to Strategy
- Strategy to Process
- Process to ERP Requirement
By analyzing the business goal, and linking it to a business strategy, that links to a business process, and ERP requirement, the Team has identified and defined a critical requirement that will be used to evaluate ERP software. This framework communicates to everyone involved in the project the importance of the software requirement. It also establishes a clear objective and ROI for management in the implementation of a new ERP system.