In most companies, Enterprise Resource Planning (ERP) provides the informational backbone needed to manage day-to-day tasks and processes. The system connects programs from business functions (Finance, Marketing etc.) into one program that runs off one centralized database. In short, it connects different areas of a business, allowing for sharing of information, faster processes and crucially, centralized decision making. The result? Cost savings, improved forecasting in supply chain and superior strategic decision making.
ERP allows for integrated planning across the functional areas in an organization, allowing us to better meet demand with supply
ERP Is Designed To Support Modern Business Management
To understand what ERP is and does requires an understanding of how business management has evolved. Managing a large company can be done in one of two ways. One approach is to essentially decentralize the company around autonomous units. This way, each entity operates as a satellite, working independently from a sales and manufacturing standpoint and sharing products developed by the research centers. These units are not coordinated operationally or strategically. This is largely the way the companies operated prior to the standardizing initiatives that began the 1990s. The other approach to managing a large company is based on integration and coordination so that different parts of the business act as one whole, regardless of geographic location. The benefits of this are significant, but achieving it relies on successful implementation of ERP and effective change management.
Enterprise Resource Planning Software
ERP systems vary according to the vendor but typically they are intended to support functions in Finance, Manufacturing, Logistics, Sales and Marketing, and Human Resources. As demand planners, forecasters and S&OP professionals, we are interested in ERP because it allows for integrated planning across the functional areas in an organization, allowing us to better meet demand with supply. By working to the same information and having a system that allows for effective collaboration on a global scale, we can serve customer needs faster and more cost effectively. If implemented properly, ERP can:
- Reduce inventory
- Standardize manufacturing processes
- Improve visibility in order flow
- Integrate financial information and customer information
- Speed up the whole order fulfillment process
I see the evolution of ERP systems in much the same way as car models evolve. Automobile manufacturers introduce new models every year or two, making minor changes and refinements. Major changes are much less frequent, perhaps every 5 to 8 years and the same is true of ERP software. ERP vendors are constantly looking for ways to improve the functionality of their new software, so new features are often added. Many of these minor changes are designed to improve the usability of the software through a better user interface, or added features that correspond to the ‘hot’ idea of the time. Major software revisions that involve changes to the structure of the database, changes to the network, or computer hardware technologies, are made only every 3 to 5 years
Process reengineering is more difficult to achieve than the implementation of ERP computer hardware and software
Implementing ERP On A Global Scale
I was part of a multinational company with 35,000 staff and several manufacturing plants across different countries. An ERP system was implemented to manage the coordination of the manufacturing, sales and research facilities around the globe as new products were developed and introduced. Developing and deploying a new product is a complex process, requiring marketing plans and manufacturing coordination, and an ERP system facilitates this, coordinating different areas of the business to make the process as smooth as possible.
ERP Software Is Only The Start
The decision to move to an ERP system is only one part of true enterprise integration. Reengineering processes to fully utilize the integrated information support is essential. In practice, process reengineering is more difficult to achieve than the implementation of ERP computer hardware and software. Moreover, if processes are not changed to support the software, the ERP system will create additional work for people rather than less.
Global Policies For Implementing ERP Systems Are Crucial For Success
I highly recommend adopting a set of global polices that are documented and included in users’ handbooks. Create a common set of measures to guide change management across each function and location. This should contain a comprehensive set of policy activities, measures, and goals that define how manufacturing, planning and control system activities are evaluated.
Deployment of this common set of policies to all manufacturing units provides a shared vision of manufacturing excellence around the world and allows you to see which areas are doing what is required, and which need improvement. Further, processes as well as measurements and goals are also commonly based on the those defined in the policies.
Implementing new technology is straightforward compared to getting people to adapt to new roles
Golden Rules For ERP Implementation
- Ensure top management visibly supports the project at Kickoff, status meetings etc.
- Hold firm on project scope and management expectations.
- Assign ownership of deliverables to business leaders.
- Effective change management and user training is imperative.
- Have a solid, integrated project plan down to the people/task level so everyone understands their responsibilities.
- Work to critical path delivery dates and make timely decisions.
- Develop management performance objectives that are tied to savings and deliverables from the start.
- Avoid interfaces wherever possible.
- Always challenge consultants to do better than the timeline and set high expectations for the entire project team.
- Ensure knowledge transfer from consultants to internal employees.
- Document procedures and ensure they are part of end-user employee tasks.
- Whenever possible, change process before technology.
- Do not underestimate the “people change” side of the equation. Implementing new technology is straightforward compared to getting people to adapt to new roles, responsibilities and measurement systems.
How Much Can You Improve Demand Planning, Forecasting and S&OP Through ERP?
The value of ERP to a company depends to a great extent on the potential savings that can be derived from the ability to centralize information and decision making, and the synergies obtained from quick access to information from multiple functions in the company. Everything thing you do throughout this process must contribute to these fundamental ideas.
When it comes to improvements in operational performance, results vary greatly since much depends on how well the company handles the implementation process. But benefits should be gained from the elimination of redundant process, increased accuracy in information, superior processes and improved speed in responding to customers’ requirements.