Selection Criteria for ERP System (10 Important Key Criteria)

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Selection Criteria for ERP System

If you are in the market for an ERP system, it is essential to know what to look for. Unfortunately, there are many different ERP solutions on the market, each with its features. So it is not easy to know which one is right for your business.

In this blog post, we will discuss some of the key selection criteria for ERP systems. By understanding what to look for, you can make a more informed decision about which solution is best for your company.

First, let us see what an ERP system is.

What is ERP?

ERP is an abbreviation for Enterprise Resource Planning. Different industries use ERP software to manage and automate many core business processes, such as accounting, finance, HR, and operations.

As a result, ERP software can help businesses streamline their operations and improve efficiency by integrating these various business functions into a single system.

Selection Criteria for ERP System

Following is the ERP selection criteria checklist with checkpoints.

Infographic for 10 Selection Criteria For ERP System

1. Objectives and requirements 

The first step in ERP system selection criteria is requirements. Understand what you want to achieve with an ERP system and what specific features and functionality you need.

For example, what are your business objectives? What processes do you want to automate? What information do you need to track? Answering these questions will help you narrow down the field of options and choose a solution best suited for your needs.

For example, if you want to improve customer service, you will want a system that provides visibility into customer orders’ status and easy access to customer information.

Likewise, if you want to reduce inventory levels, you will need a system that can help you track inventory levels and reorder points.

2. Budget 

What is your budget for an ERP system? That will likely be one of the most critical factors in your decision.

The budget for an ERP system depends on the size of your company, the complexity of your business processes, and the features and functionality you need.

It would help if you also considered the system’s total cost of ownership (TCO). The TCO includes the initial purchase price and ongoing maintenance, support, upgrades, and training costs.

3. Technical aspects and user adoption rates

Technical aspects include the system architecture, platform, customization, and implementation requirements. 

  • Architecture: The system architecture is how the system is designed, for example, client-server or web-based.
  • Platform: The platform is the type of computer system, for example, Windows or Linux.
  • Customization: Customization requirements mean how much the system can be adapted to your specific business needs.
  • Implementation: This means how long and complex the installation process is.
  • User adoption rates: It refers to how quickly and easily users can learn and use the system.

You should consider things like the system’s usability and training requirements.

4. Integration

You must check how well the ERP system integrates with your existing systems. Integrating an ERP system is a critical component for the success of any business.

It allows different parts of the organization to share information and coordinate activities, improving the accuracy and timeliness of data transferred between systems.

The ERP system must be able to interface with the other systems in the organization, including the accounting system, the production system, and the human resources system.

The ERP system must also be able to interface with the outside world, including the suppliers and the customers.

5. Deployment options

On-premise systems are installed and run on your company’s servers. This option gives you more control over the system but requires a more significant upfront investment and ongoing maintenance costs.

Cloud-based systems are hosted by the ERP vendor and accessed through a web browser. This option is typically more affordable and easier to implement, but you will have less control over the system.

6. System requirements

The system requirements will depend on your company’s infrastructure and IT capabilities. If you have a robust IT infrastructure, you may be able to support an on-premise ERP system.

However, a cloud-based solution may be better if you don’t have the internal resources to support an on-premise system.

7. Future scalability

A company’s ERP system should be scalable to grow with the company. The provider of the ERP should have a good track record of keeping up with technological advances and be willing to continue developing the system to meet the company’s needs.

8. Support and training

Ensure that the vendor provides proper support for the initial implementation and training of employees. Find out what kind of supports are available and whether they’re appropriate to meet those requirements to prevent costly problems later on down the road.

9. Industry expertise of the vendor

Industry expertise is one of the most critical factors when selecting an ERP. A vendor familiar with your industry will be able to provide you with a system tailored to your specific needs.
In addition, they can offer you advice and support that can help you make the most of your ERP system. However, it is essential to remember that Industry expertise can also be a double-edged sword.
If a vendor is too specialized, they may not be able to provide you with a system that truly fits your purpose. As a result, it is crucial to strike a balance between specialization and versatility when assessing the industry expertise of your potential ERP vendor.

10. Vendor selection

Once you have determined your selection criteria, you can begin the vendor selection process. There are many ERP vendors to choose from, so it’s essential to research and select a vendor that is a good fit for your company.

ERP Vendor Selection Criteria

The selection process of an ERP vendor typically involves the following steps:

Infographic for Steps of Selecting an ERP  Vendor

1. Evaluation of business requirements

The first step is to evaluate the business requirements and determine the organization’s specific needs. That will help to focus the search for potential ERP vendors.

2. Shortlisting of vendors

Once the needs have been identified, a shortlist of potential ERP vendors is created based on factors such as reputation, experience, product features, and pricing.

3. Request for proposal (RFP)

Once the shortlist has been created, a request for proposal (RFP) is sent to all of the vendors on the list. This document outlines the specific needs of the organization and how the potential vendor can meet these needs.

4. Evaluation of proposals

Once the proposals have been received, they are evaluated by the evaluation team to determine which vendor best meets the organization’s needs.

5. Negotiation and selection

Once a vendor has been chosen, negotiations determine final pricing and contract terms. The selection process is finalized when both parties have agreed to the terms of the contract.

FAQs

What are the factors to consider when choosing a VENDOR?

Factors to consider while choosing a vendor include, but are not limited to:
The vendor’s reputation and experience
The vendor’s financial stability
The quality of the vendor’s products and services
The vendor’s customer references
The vendor’s support and maintenance offerings
The vendor’s implementation and training services.
The vendor’s pricing plan and cost of the ERP
You should also read online reviews and talk to other companies implementing an ERP system to get their feedback.

Conclusion

ERP system selection criteria is a critical process that can impact your business for years. This post has covered the essential selection criteria for ERP systems and the steps to select the vendor.

By following the steps we’ve outlined and using the ERP selection criteria checklist, you can feel confident and make the best decision for your company.