by Tom Gordon, CFPIM, Missouri Enterprise Project Manager
The Ancient Mariner thought it a good idea to shoot the albatross; many organizations approach an ERP implementation in the same manner: - looking for a solution to their problems and growth in exactly the wrong way. According to research conducted by the American Production and Inventory Control Society [APICS] only 5% of organizations achieve their expectations and return on investment [ROI] from their ERP implementations.
There are well established, but oft ignored, reasons for this dismal record but it might be worthwhile to initially consider the true benefits of a ‘CRM through to SRM’ ERP system. The total integration of an organization’s algorithmic activities will relieve the personnel of much disconnected, boring and manual activities; the use of an accurate database will support the heuristic decision requirements at all levels. Why, then, are these much to be desired benefits not generally forthcoming?
An effectively implemented ERP system will mirror, in virtual space, the physical organization; decisions can be made using the virtual ‘world’ which can be tested before being implemented in the real ‘world’. This is the first problem – without accurate data nothing can be achieved. Data cleansing, whether it be inventory records, Customer records, BOM, supplier details, bookings etc. is an essential early step.
Following on from this is the idea that an ERP system is an IT system. It is not, it is a User Tool and Users should be intimately involved in its selection, training and implementation. Forgetting this basic fact and getting fascinated by technique is another major cause of failure. Coupled with this is the institutionalization of waste.
The Phases of a sensible project plan will include:
- Education of Top Management to ensure understanding and commitment. Without Top Management commitment and understanding nothing can be achieved. APICS offers an Introduction to ERP for exactly these purposes.
- A Value Stream Map to identify wasteful practices and then using the VSM to create robust procedures before any implementation is considered.
- Remembering that the Customer is the primary concern of the business and that the focus of staff effort should, primarily, be upon Customer satisfaction - propose a sensible timescale for the project that does not require herculean efforts from the employees.
- Training and education – if you think that the cost of training is too high sit down and calculate the cost of ignorance. Training is not a ‘one off’ activity. A company should encourage a ‘learning environment’, one practical benefit to that is when people leave or get promoted their knowledge does not leave with them.
- Unreal expectations. Iron pyrites is not gold though many computer salespeople will let you think otherwise. No ERP system will fit an existing company system exactly, but customization is not the direction to go. Customization is expensive, rarely meeting the requirements and creating an annuity for the software company. Chose the system that most closely meets your processes and, if its parameters cannot accommodate, then change the processes.
In conclusion, the selection and implementation of an ERP system is a basic building block in the organization’s long term strategy. Like any marriage, it should not be entered into lightly, especially if the organization does not want to be lumbered with an albatross around the corporate neck!