Author: Yogi Schulz
Summary: Explore the various ERP value categories to identify opportunities to add value your company. Then design an implementation plan to achieve lasting business value from ERP systems.
Is your management team encountering some of these issues as you implement a new ERP system?
- Implementation costs are increasing faster than your perception of benefits
- Disruption to operations is creating a drop in customer satisfaction
- Staff is resistant to adopting business process changes
- Expected data analysis and reporting improvements are being hampered by data quality shortfalls
- Application integration issues are taking longer to resolve than expected
- ERP system availability is not what was hoped for
- Building a consensus on needed organizational change is becoming painful
Successful ERP implementations deliver operational value when business process changes are revised to reduce cycle time and employees are empowered to make decisions. But how do organizations arrive at delivering lasting business value from their ERP investments?
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A common problem in ERP implementations occurs when the rank-and-file resist change. Then project costs balloon. When management vocally supports adopting the business processes incorporated into the software package, the system project will accelerate and project costs will be contained.
Many companies can improve labor productivity and margins through fewer rush jobs, less rework and less overtime by making operational data available in near real-time.
Often added operational value occurs when the organization discovers that the business processes incorporated into the software package are actually superior to pre-existing processes.
It’s not unusual to have data inaccuracies appear on initial reports when a new ERP system is implemented. ERP implementations deliver managerial value when management reporting is improved to deliver a single, reliable view of the key performance indicators (KPI).
For example, British Columbia sales might suddenly appear in the Eastern Canada region of the sales summary report. In fact, most companies can produce consistent reporting across product lines, customers and time by setting a unified reporting schedule that applies to all divisions using a single ERP system.
This problem occurs because the data in the source system is rarely as clean as one might like. The migration of this data to the new ERP system suddenly highlights this long-hidden problem. This lack of data cleanliness merits attention to ensure that the managerial value of the new ERP system is in fact realized. It’s prudent to plan for some data cleanup in the scope and cost of the new ERP system implementation.
ERP implementations deliver strategic value when the company implements data integration with partners or is able to see new opportunities to expand business with its customers.
When companies, for instance, are able to analyze richer product performance and warranty data, then quality improvements can be made to reduce warranty expense and marginal suppliers can be held to account. In these cases, strategic value is achieved through higher quality products.
Trying to protect local fiefdoms, the not-invented-here syndrome and distrust can be hurdles on the road to achieving strategic value. Achieving strategic value often requires h3 senior management leadership.
ERP implementations deliver IT infrastructure value when the company is able to install most applications on a single application architecture.
For example, when companies standardize on a single supplier for IT infrastructure components such as servers, data storage, network and desktop, then IT operations costs tend to go down while overall availability goes up.
When the new ERP system operates on an adequate computing infrastructure, higher system performance expectations will be met. The IT infrastructure value is typically improved customer service and more consistent production performance.
ERP implementations deliver organizational value when the company is able to re-organize around the improved business processes.
For example, automated workflow that is integral to the new ERP system will reduce required administrative staff. The reduced staff count typically triggers an organizational realignment.
When the organizational change is resisted, the benefit of the improved coordination is typically dissipated. Strong senior management leadership is typically required to realize the organizational value.
Yogi Schulz is a Calgary, Alberta-based contributing writer to the Microsoft Midsize Business Center. His work has appeared in Computing Canada, EDGE, The Calgary Herald and Microsoft Ideas. He typically consults with CIO’s in the energy, government and real estate industries.