The Three Sins of ERP in Manufacturing
With more than 35 years’ experience deploying ERP solutions for manufacturers of automotive parts, medical devices, pharmaceuticals, food and beverage products and other consumer goods, we have developed approaches specifically tailored to manufacturing. When we see disappointing results or outright implementation disasters, we frequently attribute it to “the three sins of ERP in manufacturing.”
1. Lack of a continuous improvement approach
Manufacturing companies all have some form of a continuous improvement program, whether formal or informal. In an attempt to minimize defects and improve quality, many manufacturers adopt approaches such as Six Sigma or Lean Manufacturing. Unfortunately, not all ERP providers support the continuous improvement approach of their customers. When they do implementations, they often take a “big-bang” approach, trying to squeeze every possible requirement into the initial implementation. As a result, ERP projects can burden the customer with a complicated, clumsy and expensive undertaking that exhausts the organization. The implementation is slow and the benefits are elusive. The pain and cost impact the organization’s desire to take on additional future projects. This perpetuates a cycle of fewer, larger projects spread out over many years. During these years, the fit and benefits of the solution inevitably decline. This is not a continuous improvement approach!
The most successful ERP engagements result from an intense, ongoing focus on new opportunities for improvement, shared by both the manufacturer and the software provider. It’s a sin that all ERP providers don’t match the continuous improvement mentality that manufacturers live by.
2. A singular concentration on software
The second most common failure of an ERP project is the solution provider focusing solely on the software, not the effectiveness of the operations that the software supports. For operations to be effective, processes, systems and people must be aligned. Failure to adopt a holistic plan that ensures that processes, systems and people are aligned to build an effective enterprise inevitably delivers disappointing results.
It is a sin that such a narrow focus is commonplace with most ERP vendors.
3. Assuming the job is over when the solution is live
ERP projects are usually tied to anticipated business improvements. The mission isn’t accomplished when the software “goes live.” This is perhaps the greatest sin of all – considering the job “done” when the system is implemented without ensuring the customers’ business goals are met and revisiting how those goals change over time. ERP projects should have measurable objectives set at the start. The team needs to stay focused on delivering these benefits throughout the project and, even more importantly, measure the results over time once the project is complete. Such pre/post benchmarking is what allows an organization to measure the impact of its investment and make any necessary corrections if the target is missed.
It is a sin that some ERP vendors don’t focus on measurable business benefits from their projects.
The Common Manufacturer/ERP Provider Disconnect
Each of these sins illustrates a potential disconnect between manufacturers and ERP providers that can lead to misalignment and, more importantly, a failure to deliver anticipated results.
Manufacturers can avoid the trap of the three sins by approaching the development and execution of ERP projects much the same way they approach manufacturing processes:
- Ensure the ERP project is not seen as a one-off project, but the beginning of an ongoing improvement program.
- Avoid big bang implementations - don't try to do everything in the first project. This is true even if you're rolling out a regional or global standard model. These should not be frozen in time.
- Focus on the business processes that drive operational improvement. No need to reinvent the wheel; utilize Key Performance Indicators (KPI) to keep your eye on the metrics that are known to directly impact your success.
- Share how the effectiveness of the solution is measured with your ERP partners and involve them in determining how to improve existing processes for additional benefits.
- Define quantifiable and achievable business objectives for all projects. If your team doesn’t know what the goals are, they certainly won’t achieve them.
When ERP companies approach their business processes with the same mindset as manufacturers, a positive outcome is the result.
Paul Henderson is senior vice president, QAD Asia Pacific. He is a passionate champion for maintaining a customer-focused culture. For more information, visit www.qad.com.
