Manufacturing Inc. is thriving. Orders are flying out the door, customers are satisfied, and its customer base is growing. Then, one Friday, its ERP system — the beating heart of its back office operation — goes down. The company hasn’t touched its ERP system since installing it eight years ago, but there had been other, seemingly more pressing investments to make. Now, the company is in a bind. It can’t ship product and can’t invoice, which has a severe impact on accounts receivable and cash flow. And, worst of all, customers are starting to look elsewhere.
This nightmare scenario may sound extreme, but it’s closer to reality than many manufacturers want to believe. While manufacturers rarely hesitate to spend on equipment for which there is a clear return on investment, many put off ERP upgrades, which are harder to justify financially, for far too long.
And the upgrade process only grows more cumbersome the longer companies put it off. While vendors typically release new ERP software every three to four years, they often release minor updates within that timeframe. And these updates build on each other, making upgrading a mounting challenge with each missed update. In a perfect world, manufacturers would update with every new release. But the reality is that many resource-constrained manufacturers struggle to grab every update, and before long, they have a significant amount of catch-up to do.
For manufacturers, keeping the ERP system updated is a necessity to guard against business risk and ensure compliance with important regulatory requirements. And it can be an important step for manufacturers looking to secure a competitive advantage and improve efficiency.
Manufacturers with outdated ERP systems not only fail to take advantage of the latest enhancements and functionality on the market, but they also run the risk of relying on an unsupported and an increasingly unreliable system, making their entire business vulnerable to any technological hiccup.
But even if a manufacturer has fallen behind with its ERP system and missed a series of updates, all is not lost. By following four steps, they can ensure a seamless upgrade to a more robust and reliable ERP system.
Create a Team Anchored by Strong Executive Leadership
When it comes to ERP implementations and upgrades, a vast majority of problems result from a lack of executive oversight. Without a strong executive steering committee that sees the project through to completion, ERP upgrades and implementations can quickly become frustrating and unorganized. An executive team can ensure the right people with the proper authority end up leading the day-to-day upgrade work.
Beyond the executive steering committee, it is important to structure an ERP upgrade team very much like an ERP implementation team. This includes a project team — led by a project manager — which includes senior leaders from all the functional areas impacted by the upgrade (e.g., finance, supply chain, warehousing, planning, production, engineering, quality control, human resources).
Perform a Technical Assessment and Migrate Data
To ensure a seamless transition to an upgraded ERP system, manufacturers must ensure they carefully and accurately transfer their voluminous amounts of data.
This starts with a thorough technical assessment of the current operating posture and ERP system. If a company has gone a significant amount of time, say 8-10 years, without an upgrade, it likely has made modifications to data tables and functionality that can’t simply be transferred over to the upgraded system. Instead, it involves a larger, more thorough and sometimes challenging migration process. Even when an ERP system has an upgrade script that will transfer old data tables into the new system, it only works when a company has kept up with the latest software updates.
Similarly, hardware such as computers, printers and scanning equipment will often need to be updated along with the software. With proper planning and a thorough technical assessment, manufacturers can ensure all data ends up in the right place in the new ERP system.
Put a Project Plan in Place to Minimize Downtime
No matter how fool-proof the upgrade seems, it’s crucial that manufacturers test, test and test again. To start, practice the data migration multiple times to ensure customer profiles carry over in the new system, customer subsidiaries live under the correct parent companies and that inventory totals are the same in the new system as they were in the old system. Repeated data migration testing will ensure the project team catches and deals with any discrepancies pre-launch.
After the data migration testing, a “conference room pilot” is a key moment of truth during an upgrade. It allows the project team to do a mock upgrade and run through different scenarios on the new system, including data conversion, issuing sales orders, invoicing products and paying bills. This helps the team identify and fix any glitches before flipping the switch on the new system.
Train Your ERP Users
Manufacturers upgrade to advanced ERP systems to take advantage of new tools, functionality and business intelligence capabilities. But without the proper training for the day-to-day users of the system, those new features go untapped and the company ends up largely where it started.
Any organizational change is difficult, and an upgraded ERP system forces employees to alter the way they do their job. To make sure employees embrace the new and improved system, companies need to make sure the system has been fully tested and configured before beginning employee training. This limits the possibility of users running into errors, inundating IT with requests and losing faith in the new system. Further, it’s crucial to only train end-users on the aspects of the system most relevant to their daily tasks. This enables them to master the new functionality that impacts their day-to-day work.
The ERP system is at the center of any manufacturing operation. Just as manufacturers need the most up-to-date manufacturing equipment, they need to keep their ERP systems updated to take advantage of the latest functionality, maximize efficiency and minimize risk.
Using a methodical, structured and thorough approach to data migration, testing and training — all anchored by strong leadership — manufacturers can successfully upgrade their ERP systems and position themselves for continued growth.
Al Galinot is a partner for Microsoft Dynamics AX at Sikich LLP.