A Single Instance of ERP?

Is ERP Serving Its True Purpose?

It has been over three decades since "ERP" was introduced to the Japanese market. Since then, many enterprises have attempted to implement various components of ERP across business functions such as materials management, manufacturing, logistics, sales & distribution, and, of course, accounting, etc. However, I must admit that many of these ERP implementations of Japanese manufactures have not yielded the benefits that ERP is supposed to deliver. It is not surprising to see many CIOs in our country reluctantly agreeing with my assessment.

Floor Productivity vs. ERP Benefits

Many ERP implementations have required extensive customizations due to the so-called "unique operations and practices" that were once deemed essential in many organizations but could not be supported by standard ERP packages. Maintaining the productivity of staff employees who handle day-to-day operations on the floors or at manufacturing sites was often the top priority, which led to the proliferation of custom objects and add-ons to compensate the lack of functionalities within the standard ERP package. We have seen various campaigns advocating for keeping ERP systems "clean." Many IT veterans might recall the term "vanilla systems" from the early '90s, which has recently been rephrased as "clean core." One of the key growth drivers for Japanese manufacturers in the past was operational excellence, epitomized by the famous KAIZEN philosophy. This is why we were so cautious about not disrupting floor productivity during new system implementations. As a result, ERP packages in many Japanese enterprises have become "expensive tools" for transaction processing, failing to provide the real-time business management capabilities we dreamed for during sales pitches by package vendors and consulting firms.

Some Japanese Enterprises Are Waking Up

Time has passed, and our competitive landscape has drastically changed. While floor operations remain important, some of our competitors outside Japan have successfully created mechanisms that provide real-time visibility into business performance metrics beyond just "P&L and B/S after closing" which are merely historical data. Some advanced enterprises have integrated their core transactional systems and, in many cases, migrated to a single ERP instance. The true benefit of ERP packages lies not in day-to-day operational productivity but in the speed of decision-making enabled by real-time market visibility. Many Japanese enterprises have already recognized this dilemma, and some are sounding the wake-up alarm throughout their organizations. Advanced companies like Fujitsu are working to integrate fragmented information systems into a well-architected IT landscape, incorporating critical elements such as a single instance of SAP, standardized and integrated master data, and a unified data lake.

Easy to Say but Hard to Do

Many Japanese multinational manufacturers, however, are entangled in legacy systems within their business, operational, and technology landscapes. For example, many operate with fragmented master data, such as customer, supplier, and product information. They maintain a wide variety of work processes across business functions and may have multiple ERP instances implemented separately across their global operations. The reality is even more challenging. Due to these obstacles, most cannot abandon their current fragmented ERP landscapes, integrate them into a single instance, and enjoy the true benefits of agile business management. This, of course, results in low profit margins and diminished competitiveness.

Master Data – The Minimum Requirement

So, what should we do then? As the CIO of a Japanese manufacturer with a global footprint, I have been contemplating potential solutions. It is unrealistic for me to envision a "single instance" scenario, given that we have more than a dozen SAP production instances, not only from past implementations but also from acquisitions, in addition to numerous Oracle suites worldwide. However, I believe we can still enhance decision-making speed by standardizing some master data sets with creativity and determination. Emerging technologies can also help. While we may not be able to close consolidated books within a day or so, I firmly believe that we can achieve reasonably good real-time visibility into critical business metrics if we establish a minimum set of master data standards and well-architected data analytics solutions. My priorities for master data standardization in a multinational conglomerate like ours are: #1 materials (not finished products) and #2 suppliers. Customer data is also important, but integration should generally occur within a market or country, except for a few global B2B customers. Employee data is crucial as well, but this should be addressed alongside harmonizing HR practices across different entities.

The average profit margin of top Japanese manufacturers lags behind that of our US, European, and Korean counterparts. Our average ROE is also at the lowest level.

The clock is ticking. We have no time to waste.