Enterprise Resource Planning And Vendor Selection Are Crucial For Effective Business Operations.

Background Information

Discuss about the Enterprise Resource Planning and Vendor Selection.

This paper examines in details the use of the ERP software and vendor selection process with a focus on the overview of the related processes such as the vendor research, matching of the features to user requirements, making requests for bids, bid evaluation and vendor analysis as well as license agreement and contract management. While applying theoretical life practices, the paper as well evaluates different academic literature in the discussion of these processes and as well provides recommendations that can be adopted in managing the challenges and issues involved in the general process of adopting the software in business.

Enterprise resource planning (ERP) is defined as management software used in business to allow a business or organization to use an integrated application system in the management of the business and automation of different back-office functions concerning services, technology, and human resources. In his study, Peri (2014) denotes that the ERP software is essential in the integration of all the facets of the business operation such as development, product planning, sales activities, product and services marketing, as well as manufacturing. The same study denotes that ERP is enterprise application software that is strategized to be adopted in large business enterprises but often requires essential customization terms in analyzing the data and handling of deployment and upgrades. The application can as well cover a lightweight business management solution that can be customized for a vertical or specific business arena. The modules are as well essential in the standardization of the critical business procedures, redundant tasks, lowering of purchase costs, and the management of human resources payrolls among other duties. However, the deployment of the ERP system can at times be a time-consuming and expensive process; it is necessary that a business makes the right choice in deciding on the vendor selection factors that are most vital for the organization. In his study, Sahling (2016) also points out various factors that should be considered in comparing the ERP systems and the vendors that provide them in evaluating if they are good partners for business. For instance, Fulmer and Gerard (2014) denote that it is necessary to evaluate;

• The organizational change and transformation of the vendor with time
• Most recent products of the vendor as well as the new products it plans to issue
• The time the company has taken in the industry
• The specialized experience of the vendor in the provision of the ERP solutions to businesses of similar type and size
• The vendor’s future direction in business
• Budget requirements and resources
• Future scalability and underlying technology
• The functional requirements of the ERP software that the organization needs to monitor

In his study, Bucki (2016) denotes that the research, analysis, and selection of a vendor require the request for information from the vendors. The information provided by the vendors will be essential in the evaluation and examination of viable vendors that can be shortlisted through a request for proposals depending on the business an enterprise is pursuing and the enterprise resource planning adopted. The shortlisted vendors are then given a four-week deadline, a time for response and demonstrations. At this stage,Bucki (2016) denotes that the financial viability of every vendor is examined on the likelihood of being acquired as well as the research and development they devote to the value-add and the must-have requirements of the list. Each vendor is then given a discovery opportunity where they are given a platform to ask questions on what the organization expects on the demos or even invite them to tour the site.

Vendor Research, Selection, and Analysis

In their study, Walter (2016) denotes that vendor selection can be a very emotional and complicated process is not handled carefully using the best approach from the beginning. Every business should hence adopt a relevant process that can help the business to effectively identify prospective and relevant vendors and leading the team in a selection process of the winning vendors while providing insight on the negotiation of contracts while avoiding negotiation mistakes. Once the gathering and prioritization of the project requirements are complete, the project team can send a request for information to the vendors while focusing on 10% of the requirements that are essential or the company (Choudhury2016, p. 56). As a result, the following methods can be adopted in the process;

Before starting the data collection process of performing interviews, it is necessary to assemble a group of people with vested interest in the particular vendor selection process. The first task that should be accomplished is the definition in writing the products, services, or materials that you are searching for a vendor. The step is followed by the definition of the technical and the business as well as the vendor requirements. The documents are then published in the areas relevant to the vendor selection process while seeking their input for approval. The team should then have an analysis of the final document creation.

With the agreement on the vendor and business requirements in place, the team searches for possible vendors that can effectively deliver high-quality materials, services, and products. Malde (2016) denotes that a large scope of vendor process requires a high number of vendors on the table since not every vendor will match the minimum requirements hence giving the team the opportunity of seeking more information from the most qualified. A Request for Information (RFI) is then drafted and submitted to the vendors shortlisted. Their responses are then evaluated while selecting a small number that will be shortlisted for the next stage.

The requirements for the business are defined while having the list of selected vendors that should be evaluated. Request for quotation and request for proposals and then written containing information on the detailsof submission, the introduction, the executive summary, business background, and overview, constraints and assumptions, detailed specifications, terms, and conditions, as well as the selection criteria.

This phase is mainly focused towards minimizing human emotion as well as the political positioning so as to make a decision that best matches the interest of the company (Choudhury2016, p. 345). The process requires a thorough investigation while seeking input from all the stakeholders and using a specific methodological procedure in a unified selection decision of the vendors. It hence involves the preliminary review of all the vendor proposals, recording business requirement and vendor requirements, assigning the value of importance for every requirement, assigning performance value for every requirement, calculation of a total performance score, and selecting the winning vendor.

Analysis of the Business Requirements

It is the last stage of vendor selection process involving the adoption of agreed-upon contract negotiation strategy. It hence requires the selection team to review the objectives of the contract negotiation as well as the possible legal requirements that may be necessary for the process of adopting the ERP Software in the process. The negotiation plan should hence cover a list of the ranked priorities and the possible alternatives, and assessment of the possible risks and liabilities. It as well involves the definition of the time constraints and benchmarks as well as the political liabilities and risks, and evaluation of the legal requirements on the confidentiality, dispute resolution, and non-competency changes in requirements. The business should as well choose the enterprise level the suits it operation. Large enterprise ERP is adopted for larger markets and is globally dominated by three primary companies; the Oracle, Microsoft, and SAP. Mid-market ERP is adopted by midmarket vendors such as Epicor, Sage, IFS, QAD, and Infor among others. The small business ERP such as the Exact Globe, Visibility, Consona, and CDC software are adopted as activant solutions for small business.

In his study, Sahling (2016) denotes that providing an employee demo training beforehand enables employees to get a clear instruction and expectation not to give any clue about their feeling towards the performance of the software. During the demos, the organization needs to focus on priority areas while bringing the subject matter experts that would be able to express their interest as well as ERP pain points so as to ensure that the requirements are written accordingly. Neves, Fenn, and Sulcas (2014) also assert that it is vital to document all the business issues that arise in the sessions even to the very small ones that can have minimal impacts on the business such dollar limits that will trigger manager sign-offs.  Doing so at early stages can help in solving problems that can arise later as a result of the documented information. The organization as well require t set up an interactive process that will help in gathering ERP requirements such as review sessions with all the stakeholders involved.

It is also essential to categorize the different requirements into three primary groups, i.e. mandatory, nice to have, and value-add as the categorization will help in phasing the vendor selection implementation according to Altamony et al. (2016, p. 67). For instance, the organization can focus on the mandatory requirements at the beginning to ensure the normal operation is maintained before introducing the value-add items phrase for the process of optimization. Since most of the stakeholders and employees are still learning on the use of the software, it is essential that the optimization process is undertaken in stages. Fulmer and Gerard (2014) also point out that a step-by-step accounting of tasks that are executed both outsides and inside of the ERP system along with the stakeholder’s responsibility and the time frame. The strategy is essential in uncovering pain points such as the poor visibility into key data that are essential for the strategic management and success of the whole vendor selection process. However, the requirements that are related to the ability to automate the workflows or visibility provision into certain sources of data tend to available widely across the brands. 

Vendor Search

Conclusion

ERP software often made up of different enterprise software modules that can be individually purchased on the basis of what best suits the technical performance and particular needs of the organization. Every module often focuses on a particular facet of the business process like marketing or development of product among others. Among the denoted modules include inventory control, finance and HR, material purchase, distribution, accounting, and marketing. A business hence typically adopts a combination of different modules in managing tasks and back office activities such as managing the supply chain, distribution processes, configuration, pricing, financial data accuracy improvement, better project planning facilitation, and automating the lifecycle of employees. The modules are as well essential in the standardization of the critical business procedures, redundant tasks, lowering of purchase costs, and the management of human resources payrolls among other duties. However, the deployment of the ERP system can at times be a time-consuming and expensive process; it is necessary that a business makes the right choice in deciding on the vendor selection factors that are most vital for the organization.

List of References

Altamony, H., Tarhini, A., Al-Salti, Z., Gharaibeh, A. H., &Elyas, T, 2016,‘The Relationship between Change Management Strategy and Successful Enterprise Resource Planning (ERP) Implementations: A Theoretical Perspective’ International Journal Of Business Management & Economic Research, 7(4), 690-703.Source Premier, EBSCOhost, viewed 18 January 2017.

Bucki, J 2016, ‘The Successful Vendor Selection Process: Five steps to vendor selection process’ Retrieved from https://www.thebalance.com/the-successful-vendor-selection-process-2533820

Choudhury, D. K. (2016). Vendor Selection Model for a Manufacturing Company: An Analytical Research Approach. IUP Journal Of Operations Management, 15(2), 34-52.Source Premier, EBSCOhost, viewed 14Feb 2017.

Fulmer, B. P., & Gerard, G. J. 2014,‘Selecting an Enterprise Resource Planning System: An Active Learning Simulation’ Journal Of Emerging Technologies In Accounting, 11(1), 71-82. Source Premier, EBSCOhost, viewed 18 March 2016.

 Malde, A. 2015, ‘Role of Information Technology and Communication Systems in Implementing Enterprise Resource Planning Systems in Indian Industries’ Global Journal Of Enterprise Information System, 7(4), 18-22.Source Premier, EBSCOhost, viewed 10 January 2016.

Neves, D., Fenn, D., &Sulcas, P. 2014,‘Selection of enterprise resource planning (ERP) systems’, South African Journal Of Business Management, 35(1), 45-52.Source Premier, EBSCOhost, viewed 27Dec 2016.

Peri, T. 2014, Multiproduct vendor selection with volume discounts as the fuzzy multi-objective programming problem, International Journal Of Production Research, 52(14), 4315-4331. Source Premier, EBSCOhost, viewed 27Dec 2016.

Sahling, F. 2016,‘Integration of vendor selection into production and remanufacturing planning subject to emission constraints’,  International Journal Of Production Research, 54(13), 3822-Source Premier, EBSCOhost, viewed 2January 2017.

Walter, Z 2016,‘Critical Success Factors for Integrated Library System Implementation in Academic Libraries: A Qualitative Study’. Information Technology & Libraries, 35(3), 27-42.Source Premier, EBSCOhost, viewed 27Dec 2016.