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Selecting the Best ERP System for Your Manufacturing and Distribution Company

By Joseph Ventura, Yuki Sokolsky .

An Enterprise Resources Planning (ERP) system is a business management software that integrates various parts of an organization and automates certain operations. Business leaders at manufacturing and distribution companies should ask themselves if their organization’s growth is exceeding its managerial staff’s capability to execute day-to-day tasks. Below are several important questions to carefully consider as you evaluate the efficiency of your business.

  • Are we spending too much time on manually filling out order picking and shipping forms?
  • Are we spending too much time on creating invoices with respective customer sales terms matching purchase orders? Is it too complicated to calculate inventory costing and overhead allocation?
  • Is our lead-time accurate?
  • Do we have too many manual data entries that create data errors or duplicate records?
  • Is our accounting system not compatible with our inventory system or HR system?

If you answered ‘yes’ to some or all of the questions above, then it might be the time to consider implementing an ERP software at your company. ERP software can streamline business processes, automate manual tasks, and reveal improvements by analyzing company data across all departments. It provides insights for decision making, creates opportunities for efficiencies, controls processes and provide business agility, all which can take the company to the next level.

The key benefits of an ERP system include:

  • Integration of information – Provides the ability to store and access information in a single place where data is maintained consistently and up to date
  • Efficiency – Eliminates repetitive processes and reduces the need to enter manual information
  • Reporting and analytics – Make reporting easier and more customizable, allowing your company to view the data it values and use data in more flexible ways
  • Customer service – Streamline customer service by providing sales and customer service teams with fast access to accurate and up to date customer and sales information
  • Security – Centralize user accesses and move to role-based access to data and transactions

Currently, there are numerous ERP vendors in the marketplace. These vendors are typically grouped into three tiers, based on the user’s annual revenue and system characteristics. Tier I vendors, such as SAP, Oracle Cloud, Microsoft Dynamics, are typically suitable for companies with revenues in excess of $500M. Tier I vendor software can address multiple industries, is scalable to various needs, and can be used for complex and large businesses that have many departments or global locations, high transactional loads, and many unique requirements. Tier II vendors include NetSuite, Epicor, Infor, and Microsoft Dynamics Business Central, which are suitable for companies with revenues between $15M - $500M. Tier II ERP systems are best suited for mid-size companies who have multiple business units and locations to manage and need flexibility with their business processes. Tier III vendors are suitable for companies with revenues under $15M and offer niche functionality for simpler businesses, or as just a core function to supplement larger ERP systems.

Selecting the right system for your organization is the first step to success. According to a Gartner’s survey, “Forty-eight percent of project failures are because of issues with functionality, poor system quality, or the project was rejected after launch.” When choosing which system to use, management should consider what attributes they are looking for in an ERP system and should ask the following questions:

  • Does it come with workflow capabilities, alerts, and work queues?
  • What automation capabilities does it offer (i.e. processing shipment automatically generates invoices, and record sales)?
  • Does it accommodate the company’s costing method (i.e. weighted average costing, LIFO or FIFO)? Does it offer tracking of quantities in the appropriate unit of measure (i.e. gallons, liters, yards, inches, pounds, kilos, etc.)?
  • Does it need the ability to track inventory in multiple warehouses?
  • How can it assist with allocations of overhead?
  • Does it integrate easily with other mission-critical business systems like services, warranty, customer EDI feeds, and logistics systems?
  • How easy is integration and future upgrades?

A good selection process will prioritize the most critical use cases that drive value for your business and match them with a set of solutions. Selecting the wrong system is expensive, disruptive, and generates business risk. Although a robust selection process adds some cost up-front, it greatly reduces business risk and long-term costs.

How Citrin Cooperman Can Help

Citrin Cooperman helps mid-sized companies navigate the complicated and risky ERP landscape to develop an effective strategy, select and design a set of systems that is best for them, and then applies our disciplined and repeatable management approaches to make the implementation successful. If you need guidance in choosing and implementing the right ERP solution for your business, contact our Digital Transformation Practice.

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