Our team of independent ERP consultants regularly advises ERP project teams as they undergo ERP evaluation, selection and implementation.
Many project teams look to upgrade or select a new ERP system to obtain a single source of data, replace manual and stand-alone systems, and be in a better position to scale operations. Tools need to be put into place to allow the organization to grow the business without a commensurate growth in resources.
The current world of increasing energy and material costs and the drive to become “Lean” and stay competitive also come into play. These demands create unique requirements for special features for the ERP system to be used in a Best-in-Class performance.
Past research by Aberdeen finds that “best-in-class” companies typically achieve:
- 16% reduction in manufacturing operating costs
- 20% reduction in administrative costs
- 20% improvement in order cycle times
- 94% complete and on-time shipments
- 90% manufacturing schedule compliance
- 90% overall yield
Top Four Reasons to Implement an ERP System
When considering all of the reasons for implementing an ERP system, Aberdeen found that the top four pressures impacting the system and its use are:
- Cost Reduction
- Improvement of Customer Response Times
- Being Easier to Do Business With
- The Need to Manage Growth Expectations
Moving Beyond Features, Functions
Rather than looking at the ERP system and simply getting the features and functions of the system up and running, companies need to analyze the way their business is run before they determine how the system will be used.
They need to use business process analysis techniques to understand the needs of the business and then determine how the ERP system can satisfy these needs. By developing as-is business process flows and proposed business process flows, changes needed in the business processes will be identified and the tools of the system can then be matched to these revised needs. Instead of using the system to do things “the way we have always done them”, the business processes should be changed to improve how the business operates.
These proposed processes should include time tested best practice standards as much as possible (that is why it helps to have an outside expert involved in the analysis). Since ERP systems typically follow many of these best practice standards, the system should be able to match many of the business needs without modification. With this approach, the functions of the system that match the business will be implemented and those that don’t match will not be implemented.
Think carefully. Read white paper for 7 steps to organize an ERP project.
Linking to Lean
Continuous improvement teams that are used in Lean efforts can also be used to fully utilize the capabilities of the ERP system. By developing proposed ways of running the business and having small focused groups of involved people addressing the business needs and how the system can help will allow the system to be utilized such that the system serves the user, not the other way around.
In addition to the specific requirements that need to be satisfied, some overall issues that these teams can address include:
- The elimination of the dependence on spreadsheets and manual processes while still satisfying company and industry specific requirements.
- Integration of planning and execution processes
- The use of a single source of truth from a single data set to drive analytics and business intelligence
- The connection of the plant floor applications to the ERP system to increase visibility and control
- The use of automatic event management that can be used to monitor transactions and conditions as they occur.
- The storage and retrieval of documents within the system without the need for paper copies to be filed
- Concentration on one-time entry of information by those who generate it that is available to all who need it
First Ask Why: Reasons to Implement an ERP System and Lean
Not surprisingly, the top four pressures for utilizing an ERP system are very similar to the reasons for implementing Lean in an organization.
Sometimes an ERP implementation points out the need for Lean Enterprise initiatives and sometimes the Lean efforts point out the need for changes in the ERP system.
Although the contrary is argued by some, the two concepts of Lean and ERP do go together and must be complementary for the entire organization to be successful.
Contact Ultra to see why implementing both ERP and Lean together leads a company to become a truly Best-in-Class organization.