ERP Scope: Your First Step to ROI

When you first begin your ERP investigation, one of the more cumbersome tasks will be to take the time to draw solid lines around all of the business processes that you intend to include in your implementation. Most people’s typical first reaction is, “well, we intend to replace all of them”, but that is not usually an accurate statement, even if there is general consensus within the company that you want your ERP system to replace “everything”.

There are several reasons why it is critical for you to be very literal about what your ERP scope is. The first is that the bigger the scope, the bigger the project, and the more people you have to work with. Another is that different ERP packages handle different areas with varying degrees of sophistication, so that one ERP package might make your short list of ERP vendors if your scope is only supply chain and finance, but another one wins if you are doing supply chain, finance, and factory floor. A final reason is that people involved in processes not included in ERP will correctly observe after the fact that they enjoyed no benefit from ERP. You should be able to explain why that is.

So what are the business processes you should be thinking about in your ERP scope? The following is not an exhaustive list, but should help you advance your thinking enough to create your own exhaustive list.

1. Common processes that are almost standard in ERP: procurement, supply chain, order entry, allocation and shipping, finance, inventory, costing, production reporting, and security.

2. Common processes that are dependent on your particular business include: quality management, warehouse management, factory maintenance, transportation management, sales and operations planning, project management, warranty management, engineering change management, and subcontracting management.

3. Common processes that are asked for, but not typically implemented initially: customer relationship management, sales lead management, product lifecycle management, strategic planning, and human capital management (HR).

Even within these groups, sub groups might exist. Within finance, for instance, perhaps ledger and cost accounting are in scope, but asset management and tax management are out of scope.

Besides functional scope for ERP, there is also the question of organization scope. Do you plan to implement ERP internationally in multiple entities or only part of the total organization? Do international entities require any functionality that domestic operations do not have? How many factories will be implemented? Will anyone have to live in two systems for a protracted amount of time?

All of the above is intended help you think about drawing pretty clear lines around what you intend to replace with ERP (and by the way: become familiar with - and avoid - “scope creep”, the very expensive and inefficient on-the-fly decision to increase the size of a project during the course of the implementation). When you have those borders well established, you can begin investigating with confidence what the financial benefits will be.