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aberdeen logoAberdeen Research recently released a report entitled “Roll With The Punches: Select Flexible ERP and Be Prepared for Business Challenges.”  In it, they highlight key benefits they have documented in organizations deploying what they call “flexible” ERP systems.  Among the highlights…

  • “Best-in-Class” organizations are 83% more likely to have an ERP solution that can be quickly tailored to reflect business change.
  • Those organizations in turn are 59% more likely to be able to monitor regulatory compliance.
  • They are 3 times as likely to be able to tailor interfaces to reflect user preferences.
  • And they saw a 15% improvement in operational costs as a result of their solution.

Flexible here denotes a system that is “easily tailored to reflect business change.”  The concepts of customizable and modifiable come into play, along with the built-in flexibility accorded by today’s more modern ERP systems, which include features like drill-downs, dashboards and business intelligence, and triggers or alerts.

The firm looked at key reasons that companies replace their systems.  The two big ones:

  • Obsolete technology foundation or infrastructure of their current system
  • Lack of features

Aberdeen went on to list the ratios of improvement in operations that were seen by firms who implemented new systems, and their results are notable.  According to a table from their August, 2014 research results, they include the following results when companies deployed such “flexible” systems:

  • 45% improvement in inventory turns
  • 24% change in stock to sales ratio
  • 15% change in operational costs
  • 13% improvement in administrative costs
  • 20% improvement in complete and on-time delivery
  • 14% improvement in inventory levels
  • 16% improvement in internal schedule compliance
  • 19% improvement in cycle time of key business processes

As organizations grow, Aberdeen concludes, it is necessary to change their technology as well.  As they note in conclusion: “ERP is the key technology used to support an organization.  Ultimately, flexible ERP creates a flexible organization that can take on any new challenges.”

You can download a copy of the full Aberdeen report here.

 

 

 

 

risk mgmtOften in discussions about changing ERP systems the topic of “risk” will arise, as in the risk to the enterprise if the project is not well managed or implemented.  But risk is a critical success factor to a company’s entire supply chain, as we are reminded recently in an article from APICS Magazine (“Enterprise Risk Management in the Global Marketplace,” by Gregory L. Schlegel, CPIM).

And did you know that there are actually a set of seven steps that have been designed by the Casualty Actuarial Society “as a discipline by which an organization assesses, controls, exploits, finances, and monitors risk from all sources for the purpose of increasing short- and long-term value to shareholders”?

A risk management framework for the enterprise provides a structure, and a progression of seven foundational steps that help ensure a “wide-angle approach” to risk.  We list them below verbatim, as quoted in the Jul/Aug 2015 magazine issue:

  1. Define the business environment regarding how risk is viewed, the risk appetite and tolerance, and company philosophy.
  2. Insert risk management into strategic business processes so that risk objectives are consistent with the risk appetite, tolerance and mission.
  3. Identify internal and external events that could disrupt operations.
  4. Detail the probability of risk occurrence and the level of organizational impact.
  5. Develop a risk portfolio of responses to meet each risk type and its severity.
  6. Detail how event and response information are captured, communicated and monitored.
  7. Define how to measure the progress of risk response and time to recovery.

Granted, most of us in the smaller business environment can justly content that we’re just too busy to actively pursue the recommended framework.  But perhaps it’s worth taking a couple of hours with your team to consider your general responses to the guidelines above (at least number 3!).  It may help you sleep better tonight.

And by the way, thank you APICS, about whom you can learn more here.

 

procrastinationProcrastination in the selection and implementation of an ERP system is one of the most common events (actually, better termed a non-event perhaps) we see today.  And why not?  It’s easy to delay… and at first blush, it appears cheaper too.  But in fact, it actually costs more to delay a system than to move forward when that new system heralds the promise of big savings down the road, and the delays forestall those savings with each passing day.

So it’s timely that our friends at Panorama Consulting recently published an article under the title of our headline today.  Here’s what they had to say are the five reasons not to delay, starting with the most obvious one, with which we couldn’t agree more…

  1. You are leaving too much money on the table.  You are almost certainly wasting money today on inefficient processes, poor customer service, employee stress and redundancy, probably on many fronts.
  2. There are too many good ERP software options available.  Today, options abound, from industry-specific solutions to best-of-breed general ERP systems.  And today’s systems cost less than they did years ago.  And, we might add, they do way, way more.
  3. Your organization can’t grow or scale effectively without a new system.  Usually, the number one reason companies purchase or upgrade their ERP systems is because of growth, or the desire to grow.  Today’s ERP systems deliver the operational framework that allows companies to grow without adding lots of cost, staff and overhead.
  4. Your operational breaking point is probably just around the corner.  With most systems that have been around for ten years or more, companies have basically just “gotten by.”  Their systems do a fraction of what they could do for them, if they only moved into the 21st century.  But while you may have survived on it to this point, “you will eventually reach a breaking point where you simply can’t continue with the old system,” notes the Panorama researchers.  The real question becomes: do you want to pressure your people into a ‘panic’ implementation, or start planning now in order to do it right?
  5. Morale and productivity is suffering.  Your staff’s individual pain points are almost certainly also hurting your bottom line.  A new system makes people’s lives harder in the short run, but better in the long run.  It leads to happier, more productive employees who feel like their jobs mean something.  It takes careful planning, to be sure – and a healthy dose of organizational change management – but it can be done.  And the sooner you start, the sooner you and your entire team will reap those benefits.

pushvspullThere’s a long running debate about push versus pull planning in the manufacturing production environment, with push typically exemplified by MRP (material requirements planning) and lean exemplified by pull techniques.  A recent article in the Jul/Aug edition of APICS Magazine article (“New-Fashioned MRP”) by Dave Turbide, an APICS certified CFPIM boils it down as follows:

MRP is based on a forecast of expected demand.  A forecast is prepared… production and purchasing are scheduled to support demand, and work proceeds.  So, you’re pushing forward, to make your product.

In pull, nothing is made until there is demand.  Finished goods require a customer order.  Replacement materials and sub-assemblies are not bought until existing items have been used.  Lean emphasizes making and buying to demand, along with one-piece flow and physical replenishment triggers (kanban).

While some say that push is simply bad, and pull (lean) is good, both approaches, Turbide points out, have their advantages and disadvantages.  Push is recommended in fairly high-variety, complex manufacturing and MTO (make to order) situations.  Pull works best when demand is high for a “relatively” small range of products.  Many companies incorporate elements of both push and pull in their manufacturing environments.

Push is appropriate in conditions of long lead times and a lot of work-in-process inventory.  MRP can be difficult to use in these cases, generating multiple exception notices.  Required information can be difficult to maintain in these cases.  MRP is not demand driven, which is to say, parts and products are acquired to meet a forecast regardless of demand.  If – a big if – “the forecast is accurate and the demand actually occurs, then the company can be efficient and profitable.  But there is no guarantee…” and any differences between forecast and demand create either shortages or excesses in inventory.

Despite all this, MRP remains “the best tool for handling complexity and it has the flexibility required to deal with a wide product variety.  Smart business leaders thus are uniting lean manufacturing tools (kanban, flow production) with their MRP-driven organizations,” notes Turbide.

He goes on to note that some practitioners have taken to using Theory of Constraints to enhance throughput and reduce lead times, and using demand-driven MRP “as a way to pull material replenishment with an MRP-based system.”

As Turbide concludes… “MRP is not dead but traditional techniques are becoming irrelevant as markets shift and evolve.  MRP that incorporates the best of the old with the modern, demand-driven extensions is the tool we need today.”

You can learn lots more about APICS here.

 

 

steps to better erpA blog called Inside ERP posted a few cogent tips for those looking to improve the odds of success in their implementation efforts, in a post published at the IT Toolbox (here).  Their tips “start at the top” by reminding us to…

  1. Get support from the top. Remember, ERP is a business-wide project, so it requires executive buy-in at all key stages of the project.  As one provider noted: “Starting with senior leadership, there needs to be overwhelming support for a new way of doing things to encourage cooperation and adoption.”
  2. Assign a dedicated project lead. Whether internal or external, there needs to be an experienced project leader at the helm to safely guide implementation through the various political and technical challenges that the project will face. Look for someone that is persuasive, has good political skills, is an effective communicator and has enough domain experience in the matter to understand best practices. 
  3. Define organizational needs up front. At our firm, we include this as an integral part of our “Business Process Analysis.”  Define the business needs, and ensure that the software project is mapped to your firm’s required workflows and processes.  Create a list of requirements and desired outcomes at the start of the project.  You need to know at the outset “what success looks like.” 
  4. Plan for scope creep. Scope creep is usually feature creep.  It’s important to set realistic expectations at the start of the project.  Setting milestones and individual responsibilities will help.  Of course, you’ll have a process for change-orders and their approval in place, right?  Regular project meetings will greatly help to ensure that projects are staying on course. 
  5. Be ready to adjust business processes. Rather than taking the path of least resistance by avoiding “meddling with existing business processes,” recognize that an ERP implementation is the most ideal opportunity you will ever have to change and improve your processes and workflows.  Where possible, make the changes and the software work in synch.  If you only implement a new system in order to mimic the processes of the past, how are you really improving the business? 
  6. Give training its due. According to Gartner research teams, “75 percent of enterprise ERP implementation failures come from lack of end user adoption.”  Your staff needs to understand the new ERP system and how it benefits them and the company overall. They also need to know how to use the ERP system properly.  Training is overlooked or under-budgeted completely at the risk of the project.  Translation: don’t do it!  Don’t shortchange training.  It’s where the rubber meets the road, and it ensures your staff that you care about them – and about the success of your project!

it_challengesRecently, Panorama Consulting posted a piece we swear they must have written after overhearing some of the conversations we have among ourselves and with clients.  Their post concerns the need for companies today to leverage the availability of outside resources and expertise – so they don’t have to ‘go it alone’ when it comes to surmounting a few key IT strategy challenges.  The four they call into play include:

1. Creating an IT strategy and roadmap that fits your business. There is a bewildering array of choices in enterprise software and technology solutions.  SMBs have little room for error, given their modest budgets.  Thus it is critical to work with an outside consultant who can objectively assess your needs.  

The best of them can present two options: what at our firm like to call biased and unbiased.  An unbiased analysis will be largely software agnostic: just tell us what we need in tech and software by providing us with a roadmap, and we’ll seek out our own options. The biased approach says: You guys know the territory.  Apply your own filter or bias if you think you have a solution that fits, and we’ll factor your views into our thinking.

Either way, you want to end up with a ‘roadmap’ that has been vetted by external experts to give you that extra bit of assurance that you’re on the right track.

2. Organizational adoption of new systems. Whatever decision you reach about your IT future, it’s bound to stir up some change, both direct and indirect.  Never underestimate the need for organizational change management.  Tech firms often spend too much time on the “tech” and not enough on things like people, strategy, and the business.  Be sure you keep your eyes on the prize.  Good consultants can help ensure that you’re focused on all the right business objectives, and help you manage and direct the change within your organization.

3. Alignment between new technology and your current business processes. We can’t say it too often: your technology doesn’t mean much if it is not aligned with your business processes.  You need to define and chart your workflows, and work with your consultant or provider to ensure that your software and systems match that flow.  Be sure you’re thinking about future processes when you do this.  Focus on the pain points.  A consultant with Six Sigma experience can help greatly in ensuring that your technology is well aligned with your underlying needs and processes.

4. Realizing the ROI of enterprise technology investments.  New technology, as Panorama notes “may sound good in theory, but if it doesn’t deliver tangible business benefits, then it isn’t helping your organization.”

Panorama-Consulting-3We once again borrow from a relevant and smart post by Eric Kimberling, CEO of Panorama Consulting, adviser to large companies implementing ERP systems.  We think they do a nice job in a recent post of asserting why some people are afraid of the change that often accompanies a new system implementation.

  1. Fear of losing your job. While the fear may be unfounded, the perception will drive resistance “that may not have been apparent when everyone was praising the opportunities for improvement during the ERP selection process.” A simple reassurance that employees’ jobs are not at stake will usually resolve this issue.
  1. Fear of perceived diminished value to the organization. Says Kimberling, “Even if employees do not fear losing their jobs, they may fear that they will no longer add the same value to the organization they once did. The person spending half of their time gathering data and putting together fancy spreadsheets for analysis is undoubtedly going to feel threatened if the need for that role no longer exists. An effective organizational change management plan is critical in addressing these concerns and helping them understand that while their role may change, their value to the company is not being undermined.”
  1. Fear of not being in control of business processes and procedures. How often have you seen an employee that takes pride in “owning” certain business processes or being the only one that can perform those functions? “Assuming a new ERP system will diminish the reliance on that one person – and in many cases, it will – they are going to resist the change.”
  1. Dislike of standard, shared business processes. Some employees like improvising, or being seen as critical to the operation, rather than following standard processes. Or they just don’t like being told how to do their jobs. Whatever the cause, this dislike of common and shared business processes across the organization is a very real and common source of resistance to change.
  1. Inability or unwillingness to accept change. Some people are more difficult than others, right? Training can neutralize resistance for the employee without the abilities or skill set to embrace the change. “In the case of simple unwillingness to change, it is unlikely that the employee will ever accept or support the change, in which case it may come time to sever ties with the employee.” It’s important to understand the root cause for the resistance and build an organizational change management plan specific to those root causes.

 

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