The selection and implementation of an Enterprise Resource Planning (ERP) system represent one of the most critical, high-impact projects for any modern organization. A successful ERP rollout requires a meticulously defined set of requirements, acting as the blueprint for both evaluating potential solutions and guiding the ultimate implementation. This detailed guide breaks down the three essential pillars of requirements: Functional, Non-Functional, and Implementation & Vendor.
1. Functional Requirements: The Core Business Engine
Functional requirements define what the ERP system must do to support and automate the day-to-day operations of your business. These are often module-specific and form the bulk of the initial requirements gathering process.
1.1. Financial and Accounting Management
This module is the bedrock of the entire system, requiring robust and compliant capabilities.
- General Ledger (GL) & Chart of Accounts (COA):
- Requirement: Support for a flexible, multi-segmented Chart of Accounts structure to accommodate future growth and detailed reporting needs.
- Detail: Real-time reconciliation, intercompany transaction management, automated journal entries, and the ability to define specific posting rules for various business events.
- Accounts Payable (AP) & Accounts Receivable (AR):
- Requirement: Automated three-way matching (Purchase Order, Receipt, Invoice), digital vendor and customer invoice processing, and workflow-driven approval processes.
- Detail: Capability for automated payment runs, electronic fund transfers (EFT), integrated dunning/collections management, and multi-currency transaction handling.
- Asset Management:
- Requirement: Comprehensive tracking of fixed assets from acquisition to disposal, supporting multiple depreciation schedules (e.g., GAAP, Tax).
- Detail: Automated calculation of depreciation, asset transfer tracking across locations/departments, and seamless integration with the GL.
- Budgeting, Planning, and Forecasting (BPF):
- Requirement: Integrated BPF tools that allow for departmental and corporate budget creation, variance analysis against actuals, and scenario modeling.
- Detail: Support for rolling forecasts, drill-down capability from summary budgets to transactional detail, and integration with external planning tools (e.g., spreadsheets).
1.2. Supply Chain and Inventory Management (SCM & IM)
This area focuses on optimizing the flow of goods, from procurement to delivery.
- Inventory Control:
- Requirement: Real-time, multi-location inventory tracking, supporting various costing methods (e.g., FIFO, LIFO, Standard Costing, Moving Average).
- Detail: Support for batch and lot tracking, serial number management, expiration date tracking, cycle counting capabilities, and automated low-stock alerts.
- Procurement/Purchasing:
- Requirement: Full Purchase-to-Pay cycle management, including automated requisition workflows, bid management, and electronic Purchase Order (PO) creation.
- Detail: Vendor performance management (on-time delivery, quality), contract management, catalog management, and seamless integration with AP.
- Order Management and Sales:
- Requirement: Efficient Order-to-Cash process flow, supporting complex pricing rules, discounts, and customer-specific catalogs.
- Detail: Integrated sales tax/VAT calculation, back-order management, sales commission tracking, and real-time inventory commitment upon order entry.
- Warehouse Management (WMS):
- Requirement: Optimization of picking, packing, and shipping processes, often requiring mobile/handheld device support.
- Detail: Directed putaway logic, wave planning, carrier integration for label generation, and support for complex kitting/assembly processes within the warehouse.
1.3. Manufacturing and Production Management (If Applicable)
For manufacturing organizations, these requirements are mission-critical.
- Bill of Materials (BOM) and Routing:
- Requirement: Multi-level BOM support, engineering change order (ECO) management, and detailed work center/resource routing definitions.
- Detail: Phantom BOMs, co-product/by-product management, and version control for production masters.
- Material Requirements Planning (MRP):
- Requirement: Accurate, net-change MRP functionality that generates time-phased recommendations for purchasing and production orders.
- Detail: Capacity Requirements Planning (CRP), what-if analysis, and the ability to quickly firm or modify planned orders.
- Shop Floor Control:
- Requirement: Real-time data capture from the shop floor (e.g., machine utilization, labor tracking) via integrations or dedicated terminals.
- Detail: Work order management and scheduling, tracking of material issues and completions, and quality assurance checkpoint enforcement.
2. Non-Functional Requirements: The System’s Quality Attributes
Non-Functional Requirements (NFRs) define how the ERP system performs, its constraints, and its quality attributes. These are crucial for long-term user adoption, stability, and data protection.
2.1. Technical and Performance
- Scalability:
- Requirement: The system must be capable of handling anticipated growth in user volume (e.g., scaling from 100 to 500 concurrent users over five years) and data volume (e.g., processing $X million in transactions annually).
- Metric: Define specific stress test results (e.g., 90th percentile transaction time must be $\le$ 3 seconds during peak load).
- Availability and Disaster Recovery (DR):
- Requirement: Guaranteed uptime (e.g., 99.9% availability, excluding planned maintenance).
- Metric: Clearly defined Recovery Time Objective (RTO – how quickly the system is restored after a failure) and Recovery Point Objective (RPO – the maximum amount of data loss tolerable).
- Deployment Model:
- Requirement: Clear decision on Cloud (SaaS), On-Premise, or Hybrid deployment, based on specific control, cost, and IT staffing needs.
2.2. Security and Compliance
- Access Control:
- Requirement: Granular, Role-Based Access Control (RBAC) to ensure users only see the data and functions necessary for their job (Least Privilege Principle).
- Detail: Support for Multi-Factor Authentication (MFA), strong password policies, and automatic session timeouts.
- Data Security:
- Requirement: Data must be encrypted both at rest (database/storage) and in transit (network communication, e.g., TLS 1.3).
- Detail: Comprehensive audit trails for all critical data changes and regulatory compliance checks (e.g., GDPR, CCPA, HIPAA, Sarbanes-Oxley (SOX) controls).
- Network and Application Security:
- Requirement: Evidence of regular third-party penetration testing, vulnerability scanning, and adherence to security best practices (e.g., ISO 27001, SOC 2 Type II certification for Cloud vendors).
2.3. Integration and Interoperability
- API Capabilities:
- Requirement: A robust, modern API (Application Programming Interface) for real-time and batch data exchange with existing systems.
- Detail: Clear documentation, RESTful services, support for various authentication methods, and proven ability to integrate with third-party systems (e.g., CRM, e-commerce, legacy systems).
- Data Migration:
- Requirement: Proven tools and methodologies for extracting, transforming, and loading (ETL) data from legacy systems.
- Detail: A defined strategy for migrating historical data (e.g., two years of transactional data, all open POs/SOs, master data).
2.4. Usability and User Experience (UX)
- User Interface (UI):
- Requirement: An intuitive, modern, and consistent UI that minimizes the learning curve and reduces data entry errors.
- Detail: Customizable dashboards and home pages based on user roles, multi-language support, and accessibility features.
- Mobile Access:
- Requirement: Native mobile applications or a fully responsive web interface for critical functions (e.g., expense approval, mobile reporting, warehouse scanning).
3. Implementation and Vendor Requirements
These requirements govern the ERP selection process, project execution, and long-term partnership with the vendor or implementation partner.
3.1. Implementation Methodology and Support
- Project Governance:
- Requirement: The vendor must propose a clear project plan, including key milestones, resource allocation, and a proven project management methodology (e.g., phased vs. “big-bang” approach).
- Change Management:
- Requirement: A structured change management plan to drive user adoption, including communication strategies, stakeholder analysis, and resistance mitigation tactics.
- Training and Documentation:
- Requirement: Comprehensive, role-specific training programs for end-users, super-users, and IT administrators.
- Detail: Availability of a knowledge base, video tutorials, and up-to-date user manuals accessible within the system.
3.2. Vendor and Commercial Viability
- Total Cost of Ownership (TCO):
- Requirement: A clear breakdown of all costs over a defined period (e.g., five years), including licensing/subscription, implementation fees, hardware/hosting, customization, maintenance, and training.
- Vendor Viability and Roadmap:
- Requirement: The vendor must demonstrate long-term financial stability and a clear product roadmap showing future investments in emerging technologies (e.g., AI, IoT, automation) and compliance updates.
- Support Level Agreements (SLAs):
- Requirement: Defined SLAs for issue resolution, outlining response times and resolution times for critical, high, medium, and low-priority issues, including 24/7 support availability.
3.3. Customization vs. Configuration
- Configuration Flexibility:
- Requirement: The system must be highly configurable to adapt business processes (e.g., changing workflows, adding custom fields) without requiring code modifications.
- Customization Policy:
- Requirement: Clear understanding of how code-level customizations are handled, maintained, and updated during system upgrades to prevent technical debt. The preference is always to prioritize configuration over customization.
🔑 Key Steps for Requirements Prioritization
To manage a requirements list of this magnitude, all items must be prioritized by cross-functional stakeholders (C-level sponsors, department heads, and end-users). A common prioritization framework is MoSCoW:
| Priority | Definition | Impact |
| Must Have | Critical to system viability; without it, the project fails. | Direct impact on core operations/legal compliance. |
| Should Have | Important, high-value, but a workaround is possible in the short term. | Streamlines daily workflows and improves efficiency. |
| Could Have | Desirable, adds value, but non-essential; often a “nice-to-have.” | Supports future growth or marginal operational gains. |
| Won’t Have | Out of scope for the current project phase. | Reserved for future phases or dismissed entirely. |
By meticulously defining, documenting, and prioritizing these Functional, Non-Functional, and Vendor requirements, an organization lays the indispensable foundation for selecting an ERP system that will not only meet its current needs but also drive strategic growth and digital transformation for years to come.