In the manufacturing industry more than 50% of mid market enterprises have legacy systems and outdated processes. The management teams in these companies continuously debate how and when they will replace a legacy system. One part of the debate is “do I improve my processes before I replace the old system, or after?”
On one side of the debate is to implement a business process improvement project before looking at new systems. This argument says you cannot select a new system until you have refined your process. Not until that point will you know what you need. You may find you do not need a new system.
The other side of the debate is to forget about current processes and go buy a new system. This argument says that my processes are bad. I am going to replace them with “best practices” from a popular ERP system. Why analyze bad processes I am going to implement the “best practice” in the package I select.
Let’s look at both sides:
Business Process Improvement (BPI) First
With this methodology, we identify a business process. Develop detail process flowcharts. Analyze each process step to determine if it adds value. Re-design the process by eliminating non value steps. Document the new system, educate users, and implement the new process.
The benefit is that we are eliminating waste now, and seeing a quick return on our efforts. The downside is that it takes a long time, and we are probably adding some IT investment in old technology. We still have not moved forward with plans to replace dying information technology.
Enterprise Resource Planning (ERP) Selection First
With this methodology, management team forms a selection team. The team defines requirements and publishes an RFP to potential vendors. The team selects the best responses and asks the vendors to demonstrate their software. The team selects the best product and implements the vendors “best practices”.
The benefit of this approach is that we have selected a new system, and hired an implementation partner to help implement their best practices. The downside is that it takes a long time to realize an ROI on a very large investment of time and money. It involves a high up front cost. The project causes a significant disruption to the business and has a high failure rate.
When presented with this debate, we advise our clients that neither methodology is the answer by itself. We counsel our clients to implement a process that includes elements of both:
- A culture for continuous process improvement
- Analysis of current processes
- Education for the team in industry best practices
- Development of a “to be” model that includes both short term and long term improvements
- A business case for each improvement project
- Prioritization and approval of process improvement projects based on what is best for the company
Improving information business processes is a journey not a destination.