HOW TO KNOW WHEN YOUR DISTRIBUTION BUSINESS NEEDS A NEW ERP SYSTEM And why duct tape isn’t going to help you. INTRODUCTION Imagine an old car. On the outside, this car looks great – it’s shiny, has a new coat of paint, and the interior is nice. Yet, all the things that make the car work are experiencing problems. The radiator is cracked and overheating, spark plugs need replacing, the rear tire is losing tread, and there’s an oil leak. For anyone on the outside looking in – the car looks great and therefore assumes must be running great. Yet, the person driving the car knows the truth, which is that the machine itself is always just getting by. Sure, it drives and it can get from point A to point B, but there is a constant worry and maintenance involved. This car is just like your typical distribution business – it’s always just getting by and requires constant maintenance 2 and attention in order to stay functional. Yet, rather than take the time and invest in the complete improvements, most just opt for the quick, temporary fixes. They use duct tape to seal up the oil leak, they seal the radiator up with putty and top off with water, and they just hope the tires make it a little longer. For a distribution business, this constant maintenance kills productivity, causes you to miss opportunities, creates chaos in the entire organization from the top to the bottom and gives you sleepless nights and unnecessary anxiety. If all of the moving parts of the machine that is your business aren’t operating in the most streamlined way possible then you’re always in danger of being passed up by the competition and the thing is – duct tape and quick fixes are only going to keep you at that fine line between “getting by” and “bankruptcy” for so long. The only way to solve your enterprise resource planning (ERP) problem is to find a stable, long-term solution by streamlining operations, boosting productivity, and creating prosperity in your business in a repeatable, scalable way. The 3 most efficient and intelligent way to solve this problem is through a “tried and trued” business software solution. In this informational guide you will learn how the internal systemic problems faced by distributors of every size can be solved by using the right ERP tools as well as how to choose the best ERP provider for your needs while avoiding the pitfalls that many other people face when making such an important decision. By the end of this guide, you will have a more solid understanding of how to streamline your business in every way. Let’s get started. 4 WHAT IS ERP AND HOW DOES IT WORK? ERP stands for Enterprise Resource Planning and it is the very foundation of your business’s operations. For example, a runof-the-mill ERP solution would contain the following: `` General Ledger `` Accounts Payable (purchase ledger) `` Purchase order `` Accounts Receivable (sales ledger) `` Fixed assets `` Payroll `` Human resources `` Customer Relationship Management (CRM) `` Management reporting `` Analytics/Business Intelligence 5 There’s are a wide variety of ERP software solutions out there and depending on the needs and functions of your business, you may need custom solutions in the following areas: `` Inventory `` Capital Projects `` Credit and collections `` Consolidation `` Talent management `` Billing `` Order Entry `` Supplier Relationship Management Although ERP is useful for service industries, its primary strength is in manufacturing and distribution industries, which thrive off this software as the foundation for all its internal operations. You see, the right ERP application software is dynamic in that it grows and scales with your business. The right ERP application software ties in with your business best practices, office automation productivity suites, helps increase the effectiveness of collaboration among workers for idea and document sharing, and supports external stakeholders like suppliers, strategic partners, and customers. Not only that, 6 it ensures your business operations are tied neatly in with current and emerging mobile technology (smart phones, tablets…etc) social networking, and online marketing. When your operations are neatly collaborative in every aspect then analytics are incredibly simple to obtain and understand, it also ensures you’re seeing the whole picture. Often referred to as Business Intelligence, these tools allow managers to see information from both inside and outside the total enterprise. This allows managers, CEOs and CFOs to easily gain insight into prospective customers, the supply base of the business, and key analytics information across the entire spectrum of business intelligence. Here’s the thing – you already use ERP on a daily basis to a certain extent. The question is whether or not the ERP solutions you are utilizing now are actually making your job easier and more streamlined, or infinitely more difficult to the point where you’re lagging behind your competition who are better optimized in responding to customers, sourcing products, shipping order, sales… 7 HOW DO I KNOW I NEED AN ERP UPGRADE? When your business operates like a Rube Goldberg machine The above illustration and accompanying instructions is a classic creation of the late, great cartoonist Rube Goldberg whose illustrations often depict elaborate machines and processes with multiple moving parts that must be set in motion in order to accomplish a menial task. In this case, the task is to squeeze orange juice into a glass. For many distribution businesses, their operations act similarly to a Rube Goldberg machine – you’ve massaged several independent processes, systems and software to 8 work together in order for a single task to be accomplished. To a certain extent, this is to be expected. All businesses – especially growing ones – must have multiple moving parts. However, the question is, can this process be more streamlined, uniform, optimized , and reliable in order to accomplish the end task more quickly and simply? The answer is almost always an emphatic “yes!” The Problem As discussed previously, as a distribution company, you already have some form of ERP. The problem arises when that ERP is a fragmented list of application software. For example, you’re still using spreadsheets. You have a different desktop application software and in-house app for planning, budgeting, forecasting, customer relationship 9 management, invoicing, business intelligence, and so on. This causes contradictory data, delays in decision making, mistakes across departments, and a lack of fluidity between departments and applications. Basically – all you need to do is squeeze some orange juice, but you’re using an elaborate web of unrelated tools in order to accomplish that task, when you could just throw it in a juicer and get the job done. These situations arise due to rapid, uncontrolled growth. Your headcount, product count, customer count are rising, making it increasingly more difficult for your management team to stay on top of all your personnel and business functions (think about how much maintenance a Ruth Goldberg machine would take in order to keep operating!). In this situation, you’re not even entirely sure of your exact financial performance, inventory performance, product costs, 10 COGs, etc…. Your “on shelf” inventories are either falling too short or exceeding requirements on a habitual basis. Data is being duplicated across applications and departments. You’re experiencing manual order entry errors and you’re not satisfying customer expectations. You’re missing shipment and delivery dates and the whole darn system under which you’re operating is impeding what could and SHOULD be stellar growth. The term “growing pains” doesn’t even come close. When your staff is using one system for receivables and payables and your sales department uses a completely different system to enter customer orders and the entire process of taking and fulfilling those orders is turning into a time-sucking manual micromanagement hell with everything running separately , there is no way you can accurately receive data from sales and inventory. This affects all aspects of operation from marketing budgets to payroll. So – now you know the problem and if you’re experiencing these same things, you now know it’s time to upgrade your ERP. Let’s find out how exactly an upgraded ERP solution can solve these problems. 11 OKAY, SO HOW EXACTLY CAN AN IMPROVED ERP SOLUTION SOLVE MY PROBLEMS? With a little A, B and C `` A is for Aggregation – Life without a streamlined ERP solution is jumbled, to say the least. Disparate and stand-alone applications offer incomplete and, more often than not, inaccurate illustrations of the company performance. This drains employees’ productivity as they spend tons of time attempting to aggregate and analyze data from each business unit and location. However, aggregating all these standalone 12 application systems into some kind of coherent workflow is like emptying a bag of feathers outside during a hurricane and attempting to gather them all up again – it’s impossible. An improved ERP solution consolidates and aggregates all these components together into a fluid operational, sales, and financial information flow that moves seamlessly through multiple departments, sites and even international locations. This provides managers and executives with real-time visibility into every performance aspect of the organization while providing the ability to anticipate trends and make vastly more informed decisions while employees refocus efforts back on productive tasks. `` B is for Business Impact – If employees are running around worrying about keeping up to date with antiquated manual and paper processes and correcting data entry redundancies the resource that is that employee is misplaced and the time that employee spends on productive work is limited. When a business relies on unnecessary paper and hard-copy record storage it is also accumulating unnecessary storage costs, increasing its rate of inaccurate orders (far above what is considered tolerable), and the time it takes to complete an order to delivery takes longer than your competition. In aggregate this has an overall negative business impact. With an improved ERP solution manual entries are vastly 13 reduced and you’re no longer paying your employees for menial tasks rather than fulfilling orders (which is the goal). With an improved ERP solution you’re not wasting money on storage space and these paperless processes speed up order fulfillment and overall delivery times. This is a positive business impact as it optimizes your inventory levels, makes maximal use of vendor and supplier relationships, and dramatically lessens chargebacks due to inaccurate orders. That means happy, loyal customers who want to brag about how awesome you are. `` C is for Compliance, Customers and Customization – As your business expands complications due to software integration issues can get in the way of a variety of issues. For example, you risk non-compliance with a variety of local tax laws along with inefficient managing of complex international customer and vendor relationships. You have to be able to gather data in order to track performance of each new location along with its impact on the company as a whole. With an upgraded ERP solution you will be able to integrate with local offices and subsidiaries across multiple entities and borders all while sharing services, planning, and budgeting. This allows customization for varying local requirements all while meeting the organization-wide requirement for data consolidation, tracking, and analysis. This makes compliance simple with tools to manage local tax, regulatory, and market 14 requirements with multisite, multi-language, and multi-currency capabilities. Not only that, with better customization options your organization can easily scale to support new locations, geographies, and industries. Now that you know the ABCs of how a competent ERP solution solves your operational ills, let’s look at what kind of best practices there are for actually selecting an ERP solution. 15 HOW DO I PICK THE RIGHT ERP SOLUTION PROVIDER? Carefully Picking the right ERP solution provider for your company is not as easy as, say, choosing between a Mac and a PC. It’s a much more complicated decision-making process than choosing between Android, Windows Phone, and iOS. Most importantly – it doesn’t just involve a few people. On the contrary, you need department heads, employees, and multiple channels of input in order to really make the right decision. Let’s go through how to do that right now. Danger! First of all, let’s look at the danger of picking the wrong ERP program. While it’s true that the Aberdeen Group reports that companies who implement inventory control systems (ERP software) increase their quality of inventory management by 22% (which saves a ton of money) the implementation process itself is a monumental undertaking and therefore 16 cannot be considered lightly, especially considering that there are plenty of companies out there producing lowquality products looking to bank off the projected 17% growth in ERP implementation by 2017 (as reported by web technology statistics and analytics website Tech Crunchies). For example, Forbes reported that using bottom-barrel providers can lose your company a lot of business. Just look at Hershey’s poorly-written ERP software implementation in 1999 that lost the company $100 million during what should have been one of their most lucrative seasons – Halloween, a holiday virtually built around the mass purchase of candy. To avoid this pitfall, you have to know what you’re looking for. I don’t want to lose a bunch of money – how do I find the best ERP provider? 1. Establish a core team and make a list – Finding the right ERP solution provider is multi-faceted and reaches into business, technical, financial, political, process, and organizational aspects. This means it’s essentially a group decision. Before attempting to contact ERP solution providers, accumulate a team of individuals within the company that can carry on an open-minded and fair evaluation process by performing research on various solutions that are available, creating a list of vendors, and comparing this to the overall needs of the business across multiple departments. This list needs to consider 17 the company’s size, the industry in which the company operates in, software solutions needed for delivery methods, software and vendor support, and more. 2. Whittle – Now that a long list of potentials has been establish, it’s time to break out your trusty pocket knife and whittle away whatever doesn’t fit your overall vision. Ideally, this should leave you with two or three solution providers. 3. Interview – Now that you have a clear idea of your needs, you have done comprehensive research, and you’ve whittled down your list to a manageable number of prospects, it’s time to start interviewing them by requesting customer interviews, case studies, reference cross-checking, and more. Basic questions include pricing and functional industry availability. 4. Deliberate and decide – It’s now down to the wire. The evaluation assesses the risk associated with any given product and its subsequent implementation. As a business, you never want to disrupt your activities due to software glitches so risk management and mitigation are key priorities when deliberating on solutions, implementation methods, and delivery methods. 18 How are ERP solutions implemented? There are three primary ways in which ERP solutions are delivered. They are as follows: `` On-premise – This delivery method entails physically installing software onto the computers at the actual business location. The ERP software is purchased and the users are responsible for the hardware and software of the solutions along with any upgrades, patches, or fixes given by the software provider. `` Cloud – This method allows users to access the ERP application software on another firm’s computing equipment. Within this delivery method, there are many branches of cloud delivery models. Sometimes this entails simply providing a place in which the software can run. Other times the cloud is run and operated by the ERP vendors. Cloud ERP can actually be cheaper if the cloud provider also supplies all the software like database, security, backup, and other technologies. The most straight forward cloud option is the hosted application, which ensures customers don’t have to get computer servers or other computing hardware and sometimes they don’t even need database licenses or systems management software. 19 `` Hybrid – In this case providers will offer a variety of delivery modes including on-premise or cloud hosting, for example. NOTE: It’s important to take into account the IT needs of your business as it exists currently. For example, if your infrastructure is based on the Microsoft platform, it would make sense to find an ERP solution that runs on .NET. This will ensure that the overall transition is smoother and faster. This is THE most important aspect of choosing an ERP solution The benefit of ERP software solutions isn’t just the software itself, it is the team BEHIND the software. When it really comes down to it, the most important aspect of choosing an ERP solution is knowing whether or not the provider will be there to partner with you now, tomorrow, and over the long term. In fact, the team behind the software is often more vital and important than the software itself. When you pick a provider, you’re really picking a strategic business partner. Ensure you trust your partner by reviewing past case studies, customer testimonials, and following up with references personally to get the horse’s mouth word from those who have worked with the provider for an extended amount of time. 20 WHILE YOU’RE SEARCHING FOR THE PERFECT ERP SOLUTION …Why not consider NSA Computer Exchange Corp.? We sincerely hope you’ve enjoyed this short report on how an improved ERP solution can benefit your business and how to go about seeking an ERP provider. While you’re making a list of potential vendors, we would love to be included. Of course, we don’t want to toot our own horn (toot!), but we have over 30 years of experience, a bunch of loyal customers (some who’ve become widely successful) who absolutely love and trust us, and a team who wants nothing more than to see your business succeed at its full potential. You see, NSA was founded way back in 1984 on the forefront of emerging computer technologies. Here’s the thing – since 21 that time, we’ve worked solely for wholesale distribution companies and entrepreneurs. That’s 30+ years of experience in YOUR niche. During that time we’ve made mistakes, we’ve seen pretty much everything that can go wrong, and we’ve learned from it all while still staying on the cutting-edge. All this experience and hyper-focused niche development has enabled us to work with companies on a personal basis, understand their needs, and helping them accomplish their goals. We get that implementing a new software system isn’t number one on your list – running your business is. That’s why we take the reins as much, or as little, as your company needs while providing you with an army of devoted team members who are always right there when you need them and treat you with urgent priority. If you’d like to find more out about how we work, how we can help implement effective ERP solutions for your business, and our track record with companies just like yours, visit www.NSAcom.com, call us at 516.240.6035, or email us at [email protected] 22