Is your current ERP system capable of meeting all of your requirements? If not, you should consider implementing a new ERP solution. However, keep in mind that ERP implementation is fraught with difficulties. It can, for example, disrupt your core business operations, reduce employee productivity, and the implementation process can be costly and time-consuming.
9 steps to creating a business case for a new ERP system
1. Identify the difficulties you are experiencing.
- What are your main aches and pains?
- What processes must be addressed immediately?
Analyze all of your business processes to determine which are broken, slow, and inefficient. This analysis will reveal which barriers you must remove to significantly improve your business.
2. Observe and evaluate potential opportunities
- How can process improvements benefit your company?
- What are the solutions to the problems you’ve identified?
Many ERP benefits stem from interconnected processes and functions and the availability of critical data to all departments spread across different geographies and time scales. As a result, it will be very critical to understand which processes are essential for your organization and what types of roadblocks are preventing you from reaching your objectives.
3. Determine your objectives
- What goals does your organization hope to achieve within a specific time frame?
- Where do you see your organization in five years?
Following the identification of potential benefits, it is critical to understand which ones are most important for your organization’s success and are aligned with the vision you wish to achieve. Following that, your organization’s senior management must identify the changes that will most impact your business. The functional managers should then create a step-by-step plan to implement those changes.
4. Investigate potential solutions and third-party vendors.
- Which vendors are well-known in your industry?
- Which software solution includes all of the functionalities required to carry out your business operations?
- Which software solution is best suited to your company’s requirements?
There’s a good chance you started looking for a capable ERP solution before working on your business case. But now that you’ve identified your pain points, identified your objectives, and comprehended the potential benefits of ERP systems, you have a better understanding of your requirements and how your organization can benefit from implementing the right ERP solution. In short, you can quickly and easily find the best ERP solution.
5. Calculate the costs
- How much will the ERP implementation project cost in total?
- What are the primary features that can increase or decrease the cost of implementation?
A proper business case necessitates an accurate estimation of the cost of implementing the ERP software. Of course, the most significant portion of the cost is the software itself, which is determined by various factors such as the number of users, employee training hours, data migration, whether the solution is hosted on-premises or in the cloud and many others. Change management, software configuration, project management, maintenance fees, licenses, and other implementation services are additional costs.
6. Determine the return on investment
What is the total monetary value of intangible benefits?
To calculate the ROI, go back over the opportunities and goals you identified previously. Typically, your ROI will be derived from more efficient production and lower inventory, operating, and labor costs. To get a clear picture of the benefits, compare the operating costs of the current system with the system that will replace it. Also, keep in mind that intangible benefits add significant value to the company’s total revenue. A significant increase in customer satisfaction, for example, means a higher number of repeat sales, which leads to more revenue.
7. Recognize risks and develop risk-mitigation strategies
- What factors jeopardize project success and potential benefits?
- What risk-mitigation strategies can be used to lower the risk quotient?
Significant changes to enterprise systems raise the risk level. Effective change and project management, extensive project planning, and prudent resource allocation, on the other hand, help to mitigate risk.
8. Develop a well-structured implementation strategy.
What is the procedure for putting the solution into action?
At the outset, you must assess the project’s business value and clearly understand how the project will proceed. Furthermore, it necessitates a high-level understanding of the resources required, time investment, and implementation timeline.
9. Take note of the value and benefits.
- What advantages will each department receive?
- What are the main reasons for the need for a new ERP?
Remember that business stakeholders will always ask questions about implementing a new ERP or upgrading an existing ERP. You must present an impenetrable business case that demonstrates compelling logic about implementing ERP software’s short-term and long-term benefits. Remember to quantify the functional advantages of a new and improved ERP solution for each department.
A business case is more than just a document that justifies the implementation of a new ERP system. It is a business transformation roadmap that provides a compelling rationale for each organizational department’s benefits from implementing ERP software. The best part is that it also serves as a monitoring tool, keeping track of the implementation process and observing the relationship between the various stakeholders involved in the project.