Brand or business adherence?

Often, when ERP systems are deployed at most companies they are viewed solely from a technological perspective and not as a tool for strategic management that affects the entire organization. Even in organizations that already have a systemic process support structure, updates and re-deployments can generate conflicts and problems related to the changes necessary in organizational processes. There is no point in having stock control procedures configured in the ERP if the sales area continues carrying out its activities without recording transactions in the system and without a verified and trustworthy inventory control system, putting in doubt the investment in the ERP system itself by the Board of Directors.

At most companies, ERP system adherence rarely exceeds 45%, due primarily to not meeting the criteria outlined above during implementation. In fact, this is one of the major reasons that companies change from one ERP system to another, erroneously replacing one ERP system due to low system adherence with another, then repeating the same mistake by treating it solely as a technological project, ending up with a different brand but the same low level of business adherence.

The best examples of ERP implementation success can be found in the vertical segments of the automobile industry which have adherence levels exceeding 75%. But why do we only find this level of adherence in the automobile and auto-parts industry?

The automobile industry is the driving force behind process improvements and employs the most modern practices related to complex demand planning, distribution and factory floor processes. And in this sector if a company does not have rigid standards for its processes and systematic discipline in their execution it simply will not survive in the highly competitive and technological environment and marketplace.

Conditions necessary for the automobile industry and supplier networks to be highly competitive in their ERP use:

1. Just-in-time – complex processes in which suppliers must deliver raw materials and/or parts and assemblies to meet production demands in a pre-determined, orderly and regularly repeating fashion.

2. Milk Run – repeated delivery processes tailored to the client’s production processes, in the shortest timeframe possible.

3. Zero stock – Simplification and outsourcing of production processes for speeding up the cycle and delivery of products with reduced costs.

4. Necessity and distribution planning – Create a production and distribution plan in line with company strategy, including knowledge and input from the production and supply chain, for achieving quick response and reduced costs. It will be necessary to plan for a minimum timeframe of 15 days for firm orders without changes to meet conditions 1 – 3.

5. Commitment by everyone involved in the Supply Chain to meet the strategic targets and objectives.

6. Mitigation, and if possible total elimination (zero) of any disruption in Management of Supply Chain planning. The greatest challenge for companies is to avoid and prevent disruptions in materials and production planning.

Based on these concepts, implementation of an ERP system should be viewed not as a technological project for the company, but as an organizational project for the entire corporation, and if necessary, one involving supplier partners and Tier One clients as well.

In order to achieve efficient planning and high performance execution, it will be necessary to involve clients since they are the ones that will provide the majority of the inputs from their own systems and these are crucial to achieving highly reliable indicators and results.

Another recommendation is to adopt a strategy of deployment in packages. The traditional model of a single project with a 9-month duration is not recommendable in today’s business environment. During 9 months financial and economic conditions can change significantly, and they could introduce the risk of Go Live on a project with low business adherence, since they could reflect the vision from 9 months previously. By deploying partially and gradually, the project gains flexibility and is more motivational for the team involved and more effective for the overall business, since the real value of the ERP system starts becoming a part of the day to day experience of the company during and throughout the project.

During my journey in implement ERP environment in the last 21 years, I created the methodology 3R:

Running > Total focus on migrating legacy systems to the new version, eliminating obsolete development in complexity, and qualifying data to prevent the introduction of garbage into the new version;

Review > After six months of using the new version, initiate the process of implementing new modules. In this way internal experience from key users gained in the first phase can be leveraged, increasing business process adherence by the organization;

Reliability > This is one of the phases that I like the most. With the system implemented in its latest version, new modules functioning, and key users up-to-speed, we can turn to process automation, making the system more intelligent and finally making the ERP work for the organization.

The consideration that should be raised at the end of the project is this: Is your business working for the ERP or is the ERP working for your business? If the second statement is true, congratulations, your Implementation has been successful. If, however, the first one is the reality, review the entire project.

Paulo Borba

Managing Director

Borba&Lewis is an Infor Global Alliance & Delivery Partner, specialized in PREMIUM BUSINESS consulting.

borbaandlewis.com