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How to Know It’s Time for an ERP Upgrade

In most industries, even the best ERP systems become rigid and inflexible over time.  An ERP upgrade is often set aside in lieu of more higher priority initiatives. Instead of realizing the functionality available within the upgrade, companies make customizations and small enhancements until so much time elapses and your ERP system is no longer supported. The core system doesn’t function as well as it once did. With new and pending regulations within life sciences, remaining compliant has now become much more complex.

For many distributors, the decision about whether to proceed with an ERP upgrade is even more complex. Existing processes are already customized to align with significant business strategy decisions, including horizontal growth into additional services offerings. Many times, legacy technologies can get in the way of such advancements. As new go-to-market strategies are put into place, an increasing amount of new customized processes are introduced. Proliferation of acquisitions and integration efforts continue to occur as part of the growth initiative in the wholesale industry requiring further customization to support differentiating processes, integrate disparate systems and enable the requirement for a scalable solution.

Within wholesale distribution, serialized and tracking data will be coming into and out of your system. The inordinate amount of data will need to be reportable and searchable as part of standard business processes.  As pharmaceutical, biotech, and medical device manufacturers continue to expand into new products, including those requiring environmentally-controlled distribution, wholesalers must control the cold chain distribution capability while tracking the product through the supply chain and logistic channels. Big data based on the digital revolution requires distributors to be capable of conducting big data analytics and supporting the data volumes required to remain relevant. The ability to integrate and process the large amounts data, and share and track those data elements across business processes, will become critical.

The cost associated with maintaining your outdated legacy IT infrastructure and operating systems, responding to defects and process irregularities, and addressing compliance failures provides a strong offset to exploring the implementation of a new, stable, and scalable solution which supports the current and future technology vision along with the aspirations set by the corporate strategy. It is essential to include an ERP upgrade on the IT roadmap and begin the systems evaluation and business case preparation now.

How do you know when it’s time for an ERP upgrade?

Business Processes

As the business continues to grow and expand into new services or via acquisitions, new business requirements are introduced.  In 2017, McKesson Pharmacy Systems (MPS) announced the integration of medication synchronization and mobile delivery into its pharmacy management systems. These types of new business offerings require systems to support the introduction of new solutions without creating impacts, or worse, downtime, for upstream or downstream processes.

Customer Impacts

System defects and the inability to further scale due to customization begins to impact the customer. Complex pricing routines are no longer able to support new sales contracts, discounted pricing, or marketing campaigns. Documents begin to reflect incorrect data or calculations. Items are not transferred from order entry to the warehouse accurately resulting in incorrect shipments. Or warehouse operations and logistics no longer accurately reflects inventory or its associated bin locations. Digital connectivity cannot synchronize and therefore displays incorrect data.

Master Data

Governance rules and standards can no longer be supported or maintained due to challenges resulting from smart numbering introduced years ago which no longer seems so smart. Or so many exceptions to the rules and standards exist, or those “one-off scenarios” have become more frequent, that they are no longer the exception but the rule.  The ability to de-duplicate key data such as customer master becomes impossible.

System Performance

System outages become less of an anomaly and more of a routine.  Even though databases can be updated or even virtualized, processing speed can be increased, but the applications nevertheless can no longer handle another integration or process change.  System monitors are constantly in red.  Concepts of high availability and disaster recovery become critical due to instability within the system.

Support

Outdated systems which can no longer support an upgrade are likely no longer supported by the application vendor.  The outdated system cannot maintain the company’s competitive edge and can no longer allow new innovations to be introduced to maintain the company’s relevance in a highly competitive market.

Why is the time now?

The primary goal of any IT department is to support the business processes and demands by maintaining existing systems and by providing the strategic technical roadmap to assure continued innovation and industry leadership.  In wholesale distribution, the inability to remain compliant, to compete in a fast-moving market, and to respond to market demands provides a quick exit to remaining relevant.   When the existing system creates greater impacts to business continuity than an upgrade or implementation, the IT roadmap must lead to retiring the old ERP and beginning an ERP upgrade or implementation.

Continuing to limp along with a system which is approaching a state of being no longer scalable has consistent and increasing defects and results in negative customer experience. Just being able to maintain system stability doesn’t provide the nimbleness required to react to changing trends and advanced technology necessary to remain relevant in today’s market.

A new ERP implementation is now more simplified and the methodologies are well-defined.  The total cost of ownership is reduced and can be offset by the financial pain of constant outages and the focus on support instead of build.

How do you begin?

Making the decision to upgrade or implement a new ERP system is the first hurdle; a simple business case will be valuable in driving the decision without irrefutable concerns.  After that, your organization should be:

  • strategically laying the groundwork and understanding the investment and resulting benefits,
  • conducting a thorough vendor selection to evaluate the different ERP applications and installation editions,
  • understanding the key business scope and requirements and evaluating these against available ERP systems and best practices,  and
  • determining resource and skill requirements to implement and support for near and long-term success.

Don’t continue making your ERP system last past its prime.  Allow the old system to retire and be put out to pasture. Provide your business with a stable and scalable application with a system which allows them to be productive and meet the needs of the current business landscape. Provide your shareholders with the ability to compete in the industry and drive new innovations. Provide your customers transaction accuracy and integrated capabilities which increase their desire to continue to conduct business with you.

 

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