When are ERP Best Practices and Industry Pre-Configurations Good For Your Business?
One of the key reasons that companies implement ERP systems is to incorporate best practices into their business operations. Pre-configured ERP systems for a specific industry can bring embedded business processes, functionality, and configuration to the table. After all, there is no need to reinvent the wheel when hundreds of other companies have implemented the same functionality, right?
On the other hand, a competing and conflicting reason is the need to leverage one’s ERP software to gain and sustain a competitive advantage over industry peers. If your biggest competitor is using the same system with the same business processes to win over scarce customers, is that a good thing?
Having said that, best practices and industry pre-configurations can help save time, money, and redundant effort, but not as dramatically as ERP vendors often suggest. As illustrated below, there is a core basic layer of your business that will probably benefit significantly from processes and functions that are baked into the software.
Three Levels of ERP Best Practices
For example, accounting and general ledger are overhead functions that generally do not provide a sustainable competitive advantage. In these cases, it would be inefficient and overly costly to build functionality from scratch. Our experience with ERP implementations is that companies can expect to leverage best practices or pre-configurations that apply to approximately 60-75% of a businesses functions in these areas. The remaining portion will still need to be configured to meet your specific needs.
The next layer pertains to internally-facing processes that are somewhat unique to your specific industry and are not common across as broad of an ERP software customer base. For example, not all companies need global supply chain management or contract manufacturing capabilities, so these best practices are generally not as mature within ERP systems. In these cases, a company may be able to address approximately half of its business needs with best practices.
The final and more difficult layer to address are those customer-facing functions that provide a company’s unique and sustainable competitive advantage. Examples include CRM, social marketing, and eCommerce, where only a fraction of best practices are applicable. Quite frankly, this is the one area where companies should resist leveraging best practices if they are not aligned with their competitive advantage (then again, it’s probably not a competitive advantage if it’s a “best practice” built into ERP systems). For this reason, companies are more likely to look at advanced modules, customization, and integration to other systems to address these needs.
It is important to note that as you move up to the top layer, time, cost, and effort increases. So while the bottom layer may be relatively simple and straightforward to implement, the higher layers take more time to design, build, and test within the enterprise solution.
The key takeaway here is that best practices can be a very useful starting point for successful ERP implementations. However, they are typically not the advertised silver bullet for an effective ERP implementation.
What are your thoughts? Take our poll below to share your experiences with ERP system best practices and pre-configuration.
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About Eric Kimberling
After 15 years of ERP consulting at large firms including PricewaterhouseCoopers and SchlumbergerSema, Eric realized the need for an independent consulting firm that really understands ERP. He began his career as an ERP organizational change management consultant and eventually broadened his background to include implementation project management and software selection. Eric’s background includes extensive ERP software selection, ERP organizational change, and ERP implementation project management experience. Throughout his career, Eric has helped dozens of high-profile and global companies with their ERP initiatives, including Kodak, Samsonite, Coors, Duke Energy, and Lucent Technologies to name a few. In addition to extensive ERP experience, Eric has also helped clients with business process re-engineering, merger and acquisition integration, strategic planning, and six sigma. Eric holds an MBA from Daniels College of Business at the University of Denver.
