ERP_Project_Toolkit_-_Do_You_Need_ERP_-_A_Growing_Pains_Checklist_-_Part_One

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ERP Project Toolkit: Do You
Need ERP? A Growing Pains
Checklist [Part 1]
A guide which shows you how to recognise when your business has
outgrown its existing software systems - and gives tips to help you
now quantify the scale of the problems that it is causing you.
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ERP Project Toolkit: Do You Need
ERP? A Growing Pains Checklist
[Part One]
A guide which shows you how to recognise when your business has outgrown its
existing software systems for ERP/MRP - and gives tips to help you now quantify the
scale of the problems that it is causing you.
To the optimist, the glass is half full.
To the pessimist, the glass is half empty.
To the engineer, an engineering change note is needed.
Anon
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This guide is Part One of a three-part series aimed at helping small and medium-sized manufacturers like you.
The series is for middle, executive and senior managers who suspect that their business’s current systems
are now no longer fit for purpose and, rather than helping the growing business move forward, may in fact be
hampering day-to-day running.
Specifically it is for manufacturing SMEs (small & medium-sized enterprises) that perhaps do not have the
benefits of full-time dedicated IT staff or support.
This, Part One of the series, helps you examine your complex relationship with your Enterprise Resource
Planning (ERP) approach. It shows you how to look for symptoms of stresses and strains within your
administration procedures, and provides some hints to identify if those strains are impacting upon growth, the
bottom line or customer service levels. You will also receive some easy-to-use tips for quantifying the scale of
the problems.

3
Few businesses do exactly the same thing for ever. Consequently,
the software systems you bought six, eight or ten years ago most
likely reflect the requirements of a completely different business to
the one you are now.
Also available in the ERP Project Toolkit:
The situation your company now faces . . .
because business never stands still.
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ERP Project Toolkit: Howto Spec an ERP System, AComplete Step-by-Step Guide[Part 2]
A guide for small to medium-sized manufacturers which shows how
to plan, choose and implement an ERP project, helping you to avoid
costly mistakes.
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ERP Project Toolkit: How
to Spec an ERP System, A
Complete Step-by-Step Guide
[Part 2]
costly mistakes.
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OJECT TOO
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Download Now!
ERP Project Toolkit: How to Spec an ERP
System, A Complete Step-by-Step Guide
[Part 2]
For those who have realised that system change
is needed. It shares practical steps for how to
compile a ‘requirements’ document, action plan,
and an evaluation process – all without resorting
to the expense of hiring external IT consultants
and spending days producing a specification which
in many cases may simply replicate your current
system.
ERP Project Toolkit: How to
Spec an ERP System, A Complete Step-by-
Step Guide [Part 3]
You will find all the tools you need to start your
project, including free templates and a checklist for
the key steps.
www.sanderson.com
ERP Project Toolkit: TheUltimate Checklist and Tools toStart your ERP Project [Part 3]With part three of our three part ERP Project Tool Kit series you will
learn how you can make the right ERP choice for your manufacturing
business the first time around.
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www.sanderson.com
ERP Project Toolkit: The
Ultimate Checklist and Tools to
Start your ERP Project [Part 3]
With part three of our three part ERP Project Tool Kit series you will
learn how you can make the right ERP choice for your manufacturing
business the first time around.
ERPPR
OJECT TOO
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Download Now!

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This may be in terms of complexity of processes, product range, legislation and indeed customer-imposed
quality standards. Most certainly your systems will not include technologies which embrace the internet to
support global trading or customer services.
Expectation is limited by experience.
Anon
When you started life as a manufacturer, you could probably manage all works orders in your head, your
BOMs/formulations on spreadsheets, Quality Records on paper, Contacts in Microsoft Outlook and Finance
in Sage.
But then you won that new contract . . . . You offered customers more product options. . . Your sales agent
spotted a market opportunity. . . Your customers imposed audits . . .
At first the initial changes simply required a new paper process, a couple of new spreadsheets, another
weekly production meeting and more communication between the departments.
But next: five people required access to the same paper record at the same time, or tried to update the
same spreadsheet at the same time, or your customers were talking to three different people about the
same order delivery.
Perhaps deep down you enjoyed this period because it showed you were getting very busy. But perhaps you
started to acknowledge a growth plateau was approaching because current processes and systems were
reaching their limits.
It’s time to recognise that your systems
are now no longer working for you –
but against you.

As we emerge from the financial crisis in the UK economy, times have been hard
for many manufacturing sectors (although some have seen firms experience fast
expansion).
This is a case of ‘déjà vu’ for us here at Sanderson – in our 30 years of supplying
manufacturers with specialist ERP systems we have seen this twice before.
Yet something was different this time around.
Organisations have fought tooth and nail to retain skilled employees, engineers in
particular – sometimes surprisingly at the expense of sales and marketing staff. There
is perhaps an acknowledgement that engineers are a maturing breed with retirement
just over the horizon for many, and few youngsters arriving to fill the skills gap.
Are administration staff carrying the burden?
Many organisations have turned to their administration teams to pick up extra duties –
e.g. become customer service agents as well as conducting credit control, purchasing,
issuing statements and preparing the monthly accounts. Job sharing to spread the
workload is commonplace.
There will be challenges ahead.
We have seen evidenced optimism about the upturn on the horizon.
There will be a point in time when more business volumes improve, new contracts are
gained and sales initiatives for new products pay dividends.
When this happens, will your admin team be able to cope with an upturn?
Will essential tasks, contract reviews, tight credit control and timely purchasing
become mired in the rush to perform rising volumes of day-to-day transactions?
Will you simply restore admin staffing levels to pre-downturn levels or seek different
ways of doing more with the same, just like your shop floor?
You have invested heavily in Lean Manufacturing procedures . . .
. . . should you now be looking at Lean Administration?
Are your systems ready for the upturn?
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As an author and supplier of manufacturing resource planning (MRP) business
software, we have seen an uptick in enquiries from firms moving off very old or
inadequate systems. Why?
When the economy ground to a halt in September 2009, capital projects and
expenditure were quite naturally put on hold by many organisations.
This upset the natural buying cycle for computer systems, which in the small- and medium-sized world
is seven to ten years. Companies who bought new systems for Year 2000 compliance should have been
replacing in 2008 to 2010. They did not and mostly have not.
These organisations have generally adopted a make-do-and-mend approach with systems that are perhaps
only 80% fit for current needs.
There will be a point in time when most manufacturers will purchase new MRP or ERP systems as they can
no longer make do and mend with their existing, restrictive systems.
Industry compliant systems will be a condition of doing business with your customers.
Many industrial sectors are coming under tighter standards of scrutiny and legislative
drivers, sometimes spurred by recent high-profile industry failures.
This decade’s European horsemeat fiasco has made every consumer aware of the
importance of supply chain controls.
Insurance companies have driven the need for Certificates of Conformance verification
and audit across a wider range of components used in the Oil and Gas industries
following on from the Deepwater Horizon disaster. Automotive and aerospace
companies are also driving their component suppliers towards increasingly demanding
standards of quality audit and product compliance.
Quite soon, having a modern ‘compliant’ MRP system will become a condition of doing
business in certain industries. So if you are thinking of changing your MRP software
soon, think quicker and act sooner because somebody, somewhere may already be
deciding that you cannot trade with them.
Don’t get caught napping in the MRP rush.

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So against this backdrop, let’s examine your growing pains, or:
7
TELLTALE SIGNS OF
ERP STRESS . . .
For the avoidance of doubt, we are not talking about stress regarding morale or staff taking
time off work. We mean the challenges to your processes, procedures and systems which
may help or hinder the performance of your administration team. Your growing pains.
#1 - Month end reporting
The more time taken for this monthly task, generally the less your existing computer
system is achieving integration.
Symptoms to watch:
• Time is spent (wasted) compiling and cross referencing manual systems
against the core computer system.
• Information is frequently rekeyed to a reporting tool, e.g. a spreadsheet,
and inserted into a Word document for presentation purposes as a
‘reporting’ pack. Even though the information is immediately out of date.
• KPIs such as delivery performance, production non-compliance, machine
utilisation, and estimating conversion rates are all compiled by hand.
• Statements are still printed and posted.

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General root cause:
Your accounting system and operational system are separate.
Primary questions
Can you accurately report and cost how much time and effort is spent by your admin
team compiling month end reports?
Suggested action
Conduct a simple time analysis with your team asking them all to complete a timesheet
for their month end tasks.
Do you need to do a monthly stock count for the P&L? Do you spend days preparing an
Intrastat report? Quantify the time and costs.
#2 - Outstanding debtor days
Cash collection and extended payment terms have long been the bane of the SME
manufacturer. This becomes even more frustrating when the UK media reports large
corporates sitting on cash mountains.
The trick for all companies is to catch an increase in outstanding debtor days before
it becomes a runaway train. Many are deploying stand-alone credit risk management
tools and factoring to provide insight on customer credit worthiness. These are all good
tools but need to be part of a joined-up process.
Symptoms to watch:
• Orders are being taken from, and goods despatched to, credit suspect
customers.
• Accounts or customer support teams are spending more hours on the
phone each month chasing outstanding debt.
• You have become dependent upon a few very large customers for a
significant part of your business.

• Customers are starting to place smaller, more frequent orders.
• Customers are placing a large order but then amending the quantities
down and still requiring the original bulk price.
• Customers suddenly raise quality issues as reason for delayed payments.
General root cause:
The first and second symptoms are generally by-products of running two separate
systems, i.e. accounts and sales orders are literally not reading from the same page.
The accounts system is credit suspended/stopped but you have no way (other than
human memory) of flagging the same on Sales Orders.
Equally you may have posted cash in the ledgers, but still have the sales orders system
flagged as credit stopped; a potentially quite embarrassing situation.
Primary questions
Will your IT systems provide insight into Customer Order placement trends?
Can your IT systems identify any trends in quality issues, delivery performance?
Can you quantify the hours spent each month by your admin team on cash collection
activities? Is it constant, increasing, or even decreasing because the team have given
up the battle?
Suggested action
Get your simple timesheets out and start to quantify the real efforts and cost.
#3 - Progress chasing
If you want to know what is happening in your
business, ask reception.
Anon

Once upon a time every manufacturer had Progress Chasers. Now we may call them
Project Managers, Customer Service members, Client Liaison, even Production
Planners. In many organisations individuals may wear many hats to achieve the same
goal. All have the same objective of being the interface between the customer and the
shop floor. But have you ever contemplated the cost of this possibly non-added-value
service?
Symptoms to watch:
• Phones are ringing in the sales office without being answered, because
your Progress Chaser is away from their desk.
• Reception is taking increasing numbers of messages from customers.
• Production Planning meetings are taking longer than usual.
• Production Plans are constantly changing.
• Impromptu production meetings are happening daily.
• Production Planners put their phones on ‘Do not disturb’.
• Late despatches are being made via high-cost couriers.
General root cause:
Let’s be fair and acknowledge that sometimes customers do not help themselves
with late order placements, changes to schedules and unplanned revision changes.
However, the primary cause is that even companies who have installed a full MRP
system have often not extended their systems to the shop floor itself. So the shop
floor has become an ‘abyss of non-awareness’ to those not deployed on it. It fails to
communicate to your customer service team, let alone your customers.
Suggested action
Make a list of who requires what information - for both staff and customers. Compare
this to your current processes and systems' capabilities to identify where you are
missing out.

#4 - Shop floor work in progress (WIP)
As mentioned above, many small manufacturing companies have, in their infancy, the
status of every single works order in the head of the Production Planner. One phone call;
immediate answer, satisfied customer. But as business grows, they find themselves
running separate systems for finance and stock operations, giving little consideration for
events on the shop floor. Because of this, the production plan becomes a stand-alone
system which serves the needs of the shop floor but provides no visibility or awareness
beyond it.
Consequently WIP and production status is not known to the rest of the company until
finished product arrives in stock. Quite often this physical visibility goes hand in hand
with a lack of financial awareness about true product costs. Actual time bookings,
rework, scrap and quality rejects are often handled via offline ‘island’ systems and
product costs dissipated into them.
Symptoms to watch:
• Phones in the production office are constantly busy.
• Delivery Promise Dates are hard to calculate and achieve.
• Physical production is counted via an offline system.
• Scrap is booked into a spreadsheet.
• Shop floor timesheets always balance exactly to 37.5 hours.
• Timesheets are posted one week in arrears.
• Production plans change too often for comfort.
• ‘Works Order Set Up’ accounts for a high proportion of total shop floor
time.
• On-time despatch accuracy is less than anticipated.
• Order schedules are always in arrears.
• Planning is interrupted by tool and gauge availability.

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General root cause:
• The shop floor process is completely uncoupled from the main ERP or MRP system.
• The perceived effort of introducing WIP tracking is too high.
• The MRP system only schedules against infinite capacity.
• The MRP system has no shop floor scheduling/loading capability.
• The MRP system uses a third-party shop-floor data collection package that only
books time.
• Shop-floor staff are ‘averse’ to booking onto a computer.
Suggested action
Get your Production Planners, works manager or indeed anybody involved in controlling
the shop floor to document:
• Top five most annoying disturbances.
• Top five callers who ring them the most.
• Top five people they ring the most.
• Top five tasks which consume most of their time.
Once the top issues are identified, conduct a workshop to identify the causes. Ask
why these actions happen. A couple of hours spent once every other month may well
highlight:
• A knowledge gap.
• A capability gap.
• A process gap.
• A systems gap.
Make this part of the Production Planning meeting. Repeat the process as an iterative
programme to see if the problems change. If you conclude with persistent process and
system gaps then you are already identifying the need to change computer systems.
Once the ‘top five’ issues become fixed, go back to your timesheet and quantify the
costs. By this stage you are building a requirements list and a cost justification for your
new system.

#5 - Stock management
We know from experience that stock control is one of the key factors driving the need
to change ERP or MRP systems. And a well-implemented system will have beneficial
impact upon your stockholdings.
As companies grow, stock becomes a competing commodity in the eyes of
management. To Sales, it is customer service, competitive advantage; an asset. To the
pure accountant, it may be seen as a cash drain and a liability. In reality you will always
find the acceptable middle ground.
Symptoms to watch:
• Production stoppages because stock shortfalls are increasing.
• Partial kitting of works orders is increasing, causing an increase in
back orders.
• Delivery performance is diminishing beyond acceptable levels.
• Production compensates for stock outs by overtime working.
• Purchasing spend more time chasing deliveries than ‘buying’.
• Stock offcuts are becoming a drain on profits.
• Non-moving parts are increasing.
• Obsolete parts are increasing.
• Stock write-offs are increasing.
• Month end stock valuation is increasing.
Stock management is complex and fast moving in a manufacturing environment. You
are not looking at free stock today, but free stock in three weeks’ time, or three months’
time.
Yet surprisingly so many manufacturing companies use systems which are physical
stock re-order point driven and not free stock driven. Because they started life with a
package designed for Distribution, they then bolted on works orders, or kitting or MRP
from a third party developer, but the stock control application stayed the same.

General root cause:
• BOMs and component requirements are being calculated via spreadsheets.
• Purchasing is always days behind the manufacturing requirements plan.
• Buyers are manually compensating for production and purchase quantities.
• Sales order demand is being manually calculated into purchasing requirements.
• Your systems support kitting today, but not forward stock planning.
• Your systems do not cater for engineering/component revisions.
• You run a distribution system which does not understand scrap/waste.
• You are running a system which does not understand production batches.
• Sales order amendments have to be fed manually to purchasing.
• Your system does not differentiate between available and quarantined stock.
• Your system cannot ‘recognise’ customer consignment stock.
Suggested action
As with Work in Progress, get your people to individually identify:
• Top five most annoying situations (collate and compare).
• Top five most time-consuming activities.
• Top five people who always ring them.
• Top five people they are always ringing.
Suggest remedial plans, and revisit this investigation every other month. You may find
the situation has changed, or indeed new problem situations have arisen.
You are looking for the ‘zero point’ whereby no change in internal processes can
compensate for the existing computer system.

#6 - Quality standards
As mentioned earlier, from a quality and regulatory standpoint industry and
manufacturing is becoming increasingly sophisticated. It is fair to say that if you most
likely operate within an ‘industry standard’ it will become even more complex, and if you
currently don’t operate within a regulated industry you soon will.
Compliance with industry standards can be seen as a competitive advantage or equally
a simple prerequisite of doing business. We shall leave you to decide that point.
So is managing these toughening standards difficult with your current systems?
Symptoms to watch:
• All quality recording is being done off-system.
• Quality recording uses multiple separate systems.
• Quality records are paper based and subject to risk of loss/damage.
• Quality inspection is not inbuilt into your production capacity requirements.
• Quality non-conformances are paper-based and subject to
loss/damage/risk.
• There is no formal change management approval process.
• There is no audit of approved change records.
• Your current system does not handle ‘effectivity’ change dates.
• Your current system does not comprehend ‘quarantine stock’.
• Your current system does not comprehend ‘single batch’ production rules.
• Off-cuts still need Identification and Certification.
• QC tools are handled via manual subsystems.

General root cause:
• Quality requirements have evolved independent of any ERP/MRP plan.
• New accreditations have been gained based upon manual quality processes.
• Your current system understands serial number and batch tracking, but not quality.
• You have invested into a new market/product but your ERP capability is lagging.
There could easily be 101 reasons for your computer systems and the quality system
being separate, but in most cases this is creating an administrative overhead which
perhaps could be managed more easily, formally and in a structured process.
Suggested action
This is very similar to the action plan for Progress Chasing, requiring you to identify:
• Where are the key issues?
• Where are the key bottlenecks?
• What are the implications of losing your quality records?
• What are the consequences of losing quality accreditation?
You need to conclude whether your current IT is a help or hindrance or even puts your
business plan at risk.
#7 - Visibility
Visibility, KPIs, Management Dashboards or Board Packs, give it whatever title you
wish but the absence of timely and accurate management information is usually the
final straw in determining that your current accounting or ERP system has come to the
end of its useful life.
As any business grows, changes direction, enters new markets or comes upon lean
times, the information that you need changes constantly. Some are the classic
business KPIs, other are legislative. Often the information needs to be made available
‘on the go’ via mobile devices, submitted to customer portals or made available to your
suppliers via your website. This is a data and information hungry world.

Symptoms to watch:
• Management Information is not real-time.
• Management reports require extensive manual compilation.
• Departmental managers are devising their own reporting tools.
• Report packs can provide conflicting information across departments.
• Sales sold £nnn;
• Operations despatched £nn;
• Accounts invoiced £nnnn.
• Customer submissions are compiled manually.
• Performance trends cannot easily be identified.
• Prior year comparatives are difficult to identify.
• Effort and time to compile is becoming excessive
General root cause:
This is the end position which probably dictates your current ERP systems are no
longer capable of supporting the business. They still do the job they were originally
designed to do, but the productivity and requirements have changed, and generally
for very good reasons: you are outgrowing them. Your systems either make information
hard to find or see, or don't support its capture and reporting on in the first place. Often
spreadsheets have been roped in to plaster over the cracks, causing a host of delays,
risks and issues
Suggested action
Compile your list of essential KPIs and key reporting requirements. Generally a key
report will tell any competent software author of the underlying functional requirements
and capabilities that you require.

Summary: stressed computer systems
Your instincts have been telling you for a while that your computer systems are struggling. Hopefully
we have provided some thought-provoking processes and topics for investigation that may help to
confirm or even disprove that belief.
A computer system is no different than a FANUC robot, Mazak machine or delivery van. It was
selected to perform specific identified tasks at the time. But just as new materials, precision standards
and production volumes have impacted on the viability of those machines you bought nine years back,
so current-day information demands have impacted on the viability of your computer system.
You will always come to a decision point about replacing vehicles, machinery, production materials
and components and the deciding factors for business software are similar:
• Is it fit for current purpose?
• What is the indirect cost overhead of using multiple subsystems?
• Is it causing disruptions to daily business operations?
• Is there a perceived cost payback (ROI) in replacing?
Learn more in parts two and three of our
ERP Project Toolkit
Part Two will provide experience-based examples of how
small- and medium-sized manufacturers can:
• Prepare for an ERP project.
• Prepare an effective statement of requirements.
• Marry the business plans to IT Investment.
• Conduct effective Evaluations and Due Diligence checks.
• Compare software authors and resellers.
• Prepare effective implementation plans.
• Improve the probability of success.
We hope that this, Part One, has been of value and that you look forward to Parts Two
and Part Three of our ERP Project Toolkit.
www.sanderson.com
[Part 2]
costly mistakes.
ERP
PROJECT T
OOLKIT
2
www.sanderson.com
[Part 2]
costly mistakes.
ERPP
ROJECT TOO
LKIT
2

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ERP Project Toolkit: Howto Spec an ERP System, AComplete Step-by-Step Guide[Part 2]
costly mistakes.
ERP
PROJECT TO
OLKIT
2
www.sanderson.com
[Part 2]
costly mistakes.
ERPPR
OJECT TOO
LKIT
2
'To find out how to choose and assess new ERP/MRP systems
for your business, download now Part Two of the ERP Project
Toolkit:
How to Spec an ERP System, A Complete
Step-by-Step Guide [Part Two]
Download Now!
To speak with Sanderson about your manufacturing
ERP/MRP system options:
Call now: 0333 123 1400
Email: info@sanderson.com

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ERP_Project_Toolkit_-_Do_You_Need_ERP_-_A_Growing_Pains_Checklist_-_Part_One