Steps to Take Before Implementing a New ERP System

5 Steps to Take Before Implementing a New ERP System

Your pharmaceutical or biotech company’s successful enterprise resource planning (ERP) implementation must begin months before you purchase the new software — or even choose an ERP vendor or implementation partner. The preparations you make in advance will have a significant effect on your timeline and determine how smoothly (or not) your ERP implementation goes.

Here are five steps your company can take now, using your existing systems, to help ensure a smooth and successful ERP implementation down the road.

1. Establish a Transition Team

I've recently written about recognizing the signs that it's time for a growing pharma or biotech company to start thinking about ERP. Frequently, members of a company's leadership team start anticipating the need for ERP a year or two in advance. That is the time for executives to start taking concrete steps to prepare the organization.

A successful transition starts with the right people. The most important early step is to appoint a transition team to lead the transition to ERP. This team should include the people who will be doing the work — both leading the implementation and using the new ERP system.

The transition team will be responsible for identifying your organization's requirements and interviewing vendors, and it should include a single project manager to lead the team. This person should have the technical skills to lead the implementation and the organizational clout to hold internal stakeholders accountable for meeting your company's deadlines in the implementation process.

It's also a good idea to make sure the company's purchasing/procurement department is represented on the team, to ensure a professional procurement process in accordance with company policies.

2. Determine What Systems Will Be Upgraded

Scoping is an often-misunderstood aspect of transitioning to an ERP system. There's a notion that moving to an ERP has to be a wholesale affair, but that's not the case. Most companies don't move all of their systems into their first ERP tool.

The transition team should consider all the company's enterprise systems — accounting, purchasing, HR, compliance, etc. — and make a case for what should be rolled-up into the new ERP system. The idea is to avoid redundant systems and functions, decommission what isn't working, and make plans to replace those systems with more effective options in the ERP tool.

Don't forget about Excel! Many growing companies rely heavily on Excel sheets to document critical niche processes. The transition team should definitely look for opportunities to modernize those processes within the ERP system for increased efficiency, controls, and integration.

Knowing what systems and processes will be replaced will have an immediate impact on the procurement process. With a clear scope in mind, the transition team can provide the same requirements to all potential vendors, which will facilitate "apples-to-apples" quotes that are more efficiently evaluated.

3. Clean Up Your Data

One phrase that resonates with people who have led companies through rapid growth is: "I didn't know what I didn't know." This is particularly true with respect to choices around processes and infrastructure.

For example, maybe a company started out with four-digit general ledger (GL) codes because that was the default setting for the original accounting software. But then, two years in, it was clear that five-digit GL codes would eventually be required. The GL code nomenclature was changed to a more robust structure, and the company ended up with accounts having both four and five digits.

Other common clean-up opportunities include removing or inactivating unused vendors and removing unapproved or closing old purchase orders, clearing out unapproved vendor invoices, and generally removing or cleaning up data that will create headaches later.

Transitioning to a new ERP is the perfect opportunity to clean up inconsistencies of this nature, and companies should definitely take the opportunity before the ERP provider or implementation contractor is involved. It's faster — and less expensive — to clean up these little issues in advance. And by performing this type of clean-up first, you minimize the possibility of data problems popping up later and slowing down implementation.

4. Add New Levels of Detail for Key Accounts

Once the existing data has been cleaned up, companies should think about ways to improve granularity and reporting going forward. This is a chance to maximize the ROI for the new ERP system by making it excel at managing the accounts and processes that will be the most important to the company in the future.

Accounts related to research and development (R&D) are often a great place to start for pharma and biotech companies. As clinical trials progress and grow in complexity, involving more people, locations, and cost centers, R&D costs grow by leaps and bounds. As the R&D bucket gets bigger, leaders will need to see more details to make sound decisions and plans.

Audit visibility is another related concern. Auditors will understandably focus on the largest accounts — so it makes sense to invest in an ERP solution that will further break down those accounts and provide robust controls and reporting capabilities.

5. Revisit Delegation of Authority

The transition team should make sure the company's leaders understand the corporate delegation of authority and how it will transfer into the new ERP system.

Delegations for essential processes such as purchasing, hiring, and contracting are often written into organization policies and approved or adopted by executives or boards of directors. Based on such delegations, approval processes are typically "wired" into software tools that facilitate and document approval processes that comply with corporate policies.

Depending on the particular setup and whether approvals are automatic or manual, this can potentially be a much larger business discussion that has to be handled at the C level or higher. It can be time-consuming to sort out changes to delegations, so companies should start these discussions very early in the process to avoid the potential for delays later.

The goal should be to figure out exactly what the delegations are, how they overlay into the existing approval systems, and how those approvals should be built into the new ERP system. The transition team should have this crystalized up front, so they can tell implementation partners exactly what the new system needs to do before quotes are provided.

A Long Runway Equals a Smooth Lift-Off

Whether your company is six months, a year, or two years from needing an ERP system, it will never be easier (or less expensive) to start preparing than right now. Getting a head start on the transition will pay dividends many times over.

My company, AdaptaLogix, specializes in technology solutions for pharma and biotech companies. We provide proven, pharma-specific financial, supply chain, and manufacturing software solutions. If it's time for your company to start preparing for an ERP system, feel free to reach out to me through LinkedIn or at jneal@adaptalogix.com. I would be happy to elaborate on any of the points above and help you get started moving in the right direction.