ERP in Production – Benefits Realization

This article is the conclusion of our ERP Pyramid series where we explore the building blocks critical to a successful implementation of an Enterprise Resource Planning (ERP) system. In Chapter 10 the many benefits of the ERP start to become realized for the business.

Benefits Realization (Block 10) is the final building block of the ERP at Level 4.

The bulk of all the technology work has been completed and the focus now becomes on adoption, compliance and performance measurement of the business improvements enabled by the Go-Live of the ERP in the Deployment Phase of Level 3. The question now becomes:

How do we see benefits from the ERP?"

ERP Benefits

Depending on the key business drivers from the ERP business case, typical benefits that emerge in Block 10 include:

• Reduced mistakes in delivered services or goods from reliable information and now from a single source of truth – e.g. correct shipping addresses, price books, schedules, raw materials inventory, final invoices, etc.
• Improved forecasting of materials and resource for production teams to deliver or manufacture
• Improved management of materials to reduce stock inventory to optimal levels
• Improved quality from the automation of repeatable procedures or processes
• Measurable KPIs for regulatory or business performance

Less tangible benefits such as more engaged employees with a clearer understanding of their role in the organization are common after ERP implementations. Many organizations also report less friction and improved collaboration between functions that form the company’s value chain.

At the point of Go-Live, the ERP only provides the business with the capability to realize these benefits. Implementation and sustainment teams are accountable for measuring and driving these benefits.

Adoption Success

Benefits from the ERP will not all be seen at once nor will they necessarily be easy. Key success factors of the adoption and benefits boil down to elapsed time and the efforts of leadership to have staff adapt to the new way.

Time

Not all staff will adapt to the changes at the same rate. Complex business changes (e.g. building a Sales proposal) and those that occur less frequently (think month-end inventory reconciliation) may require special attention. Training delivered during Block 8 (Business Readiness) most likely will need to be tweaked or repeated. People generally need repetition to get proficient at a new task or process, so leaders need to coach and support staff.

Technology related issues with the ERP (e.g. security, workflow, functionality or master data (from Block 9 - Technology Readiness) will certainly impact the length of time to see benefits. Often called the warranty period, there could potentially be technology re-work, re-testing and then re-deployment.

Care should be taken to manage any fixes or changes that ripple across stakeholder functions and threaten a clean closure of the project. The goal should be to stabilize the ERP and get the entire organization in line with the new world. Thresholds should be in place to measure what is good enough and what is still needed.

Standards & Process Compliance

Key Performance Indicators (KPI) should have been defined in line with the expected benefits at Level 1 and were further refined prior to Go-Live. Sustainment groups (From Block 9) need to measure the following:

• Control points in the process to measure compliance (e.g. how many work orders were scheduled without supervisor approval)
• Performance of processes – (e.g. How long it takes from an approval of a work order to scheduling of the work.

Variances from an expected or target KPI should be tracked, analyzed and remediated with corrective actions to resolve.Trend analysis is key here to see improvements go in the right direction.

Business Process Ownership needs to be clear so they drive to close gaps. Balanced scorecards and other Process Analytic tools that pull from the ERP data make results more visible to stakeholders and trend analysis easier.

Once the results are in-line with expectations, the bar should be raised for improving both compliance and performance. Periodic measurement should continue by audit or assessment teams. While the process changes are being smoothed out, there will undoubtedly be many suggestions from stakeholders on what they like, don’t like or what they want changed. Business Process Owners need to make a serious and ongoing effort to capture and address these “improvements”.

Continuous Improvement

No change is ever perfect and business stakeholders need to continue looking for ways to improve the performance of business functions to support the larger organization goals. As an example if quality is JOB 1, then the business must ensure that there is monitoring, corrective and preventive measures in place. If there are more efficient ways to monitor and close the gap on defects then perhaps focus on tools and organization changes. In any case, business stakeholders should acknowledge positive results from the ERP, but recognize that there are still more opportunity possible.

Many organizations collect, evaluate and then package these opportunities for the next iteration of the ERP. The next iteration will be easier than the initial deployment of the ERP as business stakeholders now have a better understanding of their processes and interdependencies with functions.

ERP Pyramid Completion

Block 10 now completes the ERP Pyramid at Level 4 with realization of the benefits that were needed by the business

Level 4 realizes the ERP benefits

Level 3 deployed the ERP

Level 2 developed the ERP solution

Level 1 established the ERP opportunity

Every level contained a number of blocks that relied on the completion of the lower level to build the pyramid. Blocks at the same level can start to be built at any time but they must all be complete and placed together before the next level is started. Best practices in Project, Program and Organizational Change Management principles are the levers to build and move these blocks into place.  

People, Technology, Processes & Governance are the mortar to hold the blocks together and provide ongoing value to the business.  

With experienced resources and organization focus, the ERP Pyramid Implementation method will greatly increase the promised benefits and performance of any ERP system. 

How successful was your last ERP Implementation or Upgrade?.. How about your next?...."

Allen Miko is a Senior Partner at Chrysylys responsible for the planning and delivery of business improvement initiatives.