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 Simply
setting up an ERP solution isn’t enough. Businesses need to
realise that ERP is a ‘living’ system that needs to be constantly
optimised, says UDAY K
You’ve
made it into the ERP world. You’ve taken the difficult
decisions about organisation structure, process definitions,
data definitions and hierarchy, configuration, security and
training. This called for a lot of key changes such as setting
up new standards, retiring legacy systems, and above all,
changing a few practices in company policies/culture.
Through all this, as an organisation, you have laid a foundation
for future systems. It is an accomplishment. That’s the
positive part. But here’s what many users say about their
new ERP system:
“I
prepared the excise invoice of product X and then found that
the product is not physically available in stock.”
“No
matter what you do,
a few components are always short on the production line.”
“Demand
patterns have become so unpredictable that I am left with
non-moving stocks or am short on required stocks.”
“Can
we have a handle on the exact cost of our products. Can we
track our costing precisely?”
No matter what position you are in, you may have heard these
comments quite often. This is where organisations face the
real challenge: Optimising ERP.
ERP Maturity Model
 ERP
implementation is not the ‘be all’ and ‘end
all’ for any growing organisation. Though technology
dependent, it is a living system and passes through different
stages of development and maturity.
As the business grows, ERP should be adaptable to meet the
changing processes, organisation structure and demand patterns.
There are many challenges that a company which has set up
ERP encounters in its endeavour to achieve peak performance.
The most significant results require a lot of effort after
the ‘go-live.’ And this is where most companies
falter. As such, any ERP system is unique, but the stages
of maturity after go-live normally fall into one of the following
three stages:
Stage 1: Chaos
The implemented system needs to be streamlined to ensure that
all the components of the system are stabilised and work in
harmony.
After go-live, the company usually turns its attention to
gaining administrative and information stability. At this
stage, the focus areas for attention are redefinition of user
roles and responsibilities, establishment of new policies
to support the ERP infrastructure, and integration and utilisation
of the information generated from the new ERP system. The
maximum energy is however spent on handling the change in
the culture brought about by an ERP implementation.
Unfortunately, once through the deadlines of implementation,
organisations go back into old habits and routines. The alignment
of business processes and ERP definition is lost. Manual systems
and reports are created to work around perceived system constraints.
Exceptions, that are not mapped properly during implementation
will hinder regular processes time and again. Workarounds
that have been designed increase operations and steps in the
processes, thereby rendering them inefficient.
All this, coupled with transactional complexity, business
case exceptions and frustrated users often drives organisations
into their first post-ERP projects. Such organisations will
face a lot of problems after go-live till they streamline
their processes on the ERP system.
Stage 2: Stagnancy
Even after a successful implementation and streamlining of
new processes, organisations still do not get the expected
benefits from ERP. Such organisations are reasonably satisfied
with the implementation but they had hoped for a higher ROI.
Organisations in this stage need to refine and improve the
performance of the business. The improvement can be achieved
in two phases:
A) Incorporate unused functionalities of the ERP system into
the business process. This would help the business in one
of the following ways:
-
Manual activities would be eliminated and replaced with
automated ERP system driven transactions.
-
Activities mapped using system workarounds can be done away
with, thereby reducing transaction complexity and operation
cycle time.
B) Increase the intelligence of the system with advanced planning
engines, schedulers, etc.
ERP could thus be used as the base foundation on which several
other best-of-breed solutions can be built to provide extra
business intelligence to the ERP system.
Stage 3: Growth
At this highest stage of development after go-live, organisations
seek strategic support from the ERP system. This requires
the system to align with the corporate vision and business
strategies. The focus moves over to profit, working capital
management and people growth.
ERP plays a crucial role in improving the value chain, providing
for efficient capital management and optimising customer/product
mixes. The company is thus completely transformed into an
entity that is responsive to client needs, has a pulse on
market movements and hence can forecast and plan with a higher
degree of accuracy.
This calls for a comprehensive approach to the technological,
strategic and operational aspects of the ERP system wherein
IT forms the backbone of the infrastructure and supports,
facilitates and monitors the different resources across the
organisation at various levels.
Effective post-implementation
To help organisations get the maximum possible benefit from
ERP in the post-implementation stage, Ernst & Young recommends
a combination of optimisation approaches. Leveraging our rich
global experience in ERP implementation and reviews, these
approaches help bring the right perspective at any stage of
the post go-live environment.
ERP optimisation
ERP optimisation intends to provide an approach to extract
maximum benefits from ERP post-implementation.
It comprises three distinct approaches:
-
Streamlining of operations to help organisations that have
not achieved a stable operating environment post-ERP implementation.
There is a high possibility of companies slipping back at
this stage if issues are not addressed in time.
A short situational analysis would be done to establish causes
and help the company with solutions in stabilising and streamlining
processes.
-
Operational improvement by reviewing the existing ERP with
the key business drivers in mind. This helps to identify
unused functionalities of the ERP application, complex mapping
of transactions and neglect of ERP generated reports. The
system can then be optimised to improve efficiency.
-
Strategic transformation takes the CEO’s perspective
of the company’s business strategy. This considers
ERP as the backbone to transform organisational strategic
objectives into tactical, reliable and measurable goals
and monitor them on a continuous basis.
Business benefits
There are a lot of opportunities for companies desiring to
extract maximum value and competitive advantage from the existing
ERP system. The benefits to the companies would be:
-
Increased efficiencies through integrated processes.
-
A strong coherence between strategic objectives and tactical
plans and goals.
-
Strong alignment of people, processes and technology with
organisational goals.
The author is a consultant with Ernst &
Young’s Information Systems Assurance & Advisory
Services
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