Business Process Improvement Delivers ERP ROI

When your ERP project teams prioritize business process improvement (BPI), your odds of success improve significantly. Here's why BPI is important: at the most basic level, the primary function of an ERP solution is to help your organization efficiently and effectively execute core business processes.

It's easy to lose sight of that fact and get distracted by complex software comparisons, deployment strategy discussions, implementation planning meetings and budget negotiations. But when you can get management, project teams and stakeholders to concentrate on streamlining and integrating your processes, you virtually ensure that you will realize improved productivity, accelerated workflows and lower operational costs, benefits that drive higher business performance.

75% of organizations say business process improvement initiatives helped their organizations accomplish their goals. (BPTrends, "The State of the BPM Market 2020")

Build a foundation for your transformation by:

1. Identifying your unique requirements
2. Assessing your current state
3. Knowing what's possible with today's sophisticated solutions
4. Determining a desired future state
5. Optimizing your core processes

Why Begin With BPI?

Experience tells us that the most successful ERP projects start by optimizing operational performance. Because a detailed analysis of your business processes, practices and technical environment pinpoints opportunities for improvement, it informs the software selection process, accelerates time-to-benefit and boosts your ROI.

Smart, forward-looking manufacturers and distributors work continuously to improve their operations. They know that business process improvement is not just about technology. They understand that to realize the full value of their ERP investment, they need to analyze and optimize their processes and then, only then, select and implement a solution to automate those processes. And they believe, correctly, that it makes no sense to throw money, people, time and technology at incorrect, bad or broken processes.

The efficiency of most business processes declines over time unless a conscious and continuous effort is made to re-examine, re-imagine, re-engineer and improve them. A business transformation project is the perfect opportunity to take a close look at how your organization performs its strategic processes, to document the current state, to determine the opportunities to apply best practices, and to streamline and improve these processes.

There's no secret to it. It's about doing the work to know and understand your important processes such as order-to-cash, procure-to-pay, design-to-deploy and others.

3 Questions

Evaluating and improving your business processes is essential. To successfully change how your business works, your organization needs to answer three questions.

Where are we now?

Here's how this critical phase is done:

• Core business processes are analyzed in depth and in detail.
• All inputs, processes and outputs are documented for core processes.
• A process flow visualization is developed for each process.
• Process flows are used to identify inefficiencies and waste.

The view of your current state clearly exposes any problems that exist. While many executives are aware of inefficiencies in their business, they are often surprised by the extent of the inefficiencies, waste or problems in core processes.

What is possible?

Once the current state is reviewed (and inefficiencies and waste revealed), your business process owners need to be shown what can be changed, enabled and accelerated using today's technologies.

As you would expect, most managers and users are not up to date on the capabilities of modern ERP solutions and current industry best practices. They know your current system, and they may have some insight from a past position and solution, but that is not the in-depth knowledge required. Which is why it's important to educate business process owners on what is possible.

Here's how to build a curriculum:

• Leverage guidance, insight, workshops and online resources from outside resources (such as independent consultants) and third-party organizations.
• Acquire solution capability, functionality and product strategy information from ERP software vendors and industry analysts.
• Focus on the capabilities and functionalities that address your unique process challenges.

Intelligent, optimized processes deliver real, bottom-line benefits and maximize the ROI of your ERP project.

As mentioned, outside parties can offer wide-ranging knowledge about solutions and capabilities during this phase. Independent experts understand the process improvements enabled by today's technologies, know how modern toolsets eliminate inefficiencies in core processes, and offer insight that will enhance your organization's awareness of best practices and software capabilities.

Through a shared understanding of the possibilities and problem areas, your entire organization can develop an appreciation of potential process improvements and opportunities for new efficiencies. Your "Education Plan" will unlock your team's thinking and give you the roadmap your organization needs to explore the substantial opportunities for improvement.

BPI Delivers ROI

Optimized processes deliver new efficiencies and the biggest share of ERP ROI. Here are 11 core process areas for ROI realization:

• E-commerce
• Financial management
• Forecasting
• Inventory management
• Pricing and margin management
• Product management
• Production management
• Quality management
• Sales management
• Supply chain management
• Warehouse management

Where do we want to be?

With the current state determined and documented, and with possibilities and best practices known, a vision for improved processes and workflows (the future state) can be developed.

This effort starts with a review of your current processes and their inefficiencies, applicable best practices, future requirements and technological capabilities, and ends with your desired improvements and plans for future processes. The primary question to answer: What do you need to do that you can't do now?

These workshops also should evaluate the impact of the new processes on business performance in these areas:

• What you can do now, before implementation of a new ERP solution, to improve your existing systems
• The strategic mid-term improvements that will require IT investments
• The longer-term improvements that will be required to get your organization to the future state

A last thought: the vision of your future state will help smooth your implementation. It's common for organizations to experience resistance to change, even when your existing processes are limited by inefficient practices and outdated technology. The value to be delivered by a new ERP solution, the future state, will motivate your teams, gain buy-in and help them stay focused on the end goal.

The difficult part of BPI isn't knowing what to do. It's knowing how to do it.

2 Experts: Talking About Processes, People & ROI

We asked two of our expert senior consultants, Dave Lechleitner and David Saunders, to tell us why business process improvement is critical for ERP solution success. And this is what they had to say.

At Ultra, we start every project with an analysis of the client's current state, and then work with their leadership and teams to develop a vision of their future state. Why is this important to do?

Dave Lechleitner (DL): How can you know where you're going if you don't know where you are? It's important to start with BPI because you need to determine how the business operates today so you can then define how you want it to operate tomorrow. When you have that information, you can decide which new processes, practices and tools are required to make more efficient and optimized processes possible.

David Saunders (DS): We tell clients that business process improvement is the foundation of ERP success. Because it is. To get the most out of your ERP investment, you'll need to have efficient business processes.

We focus first on operational performance because a detailed analysis of a client's processes, practices and structure identifies areas for improvement, accelerates time-to-benefit and informs the software selection process. To ensure our clients get the maximum benefit from their investment in ERP technology, the hard work of BPI is necessary.

BPI is about change. And change is hard. We often see resistance to redesigning, re-engineering and optimizing established processes. What are the keys to avoiding that kind of trouble?

DS: The answer is effective change management. Poor change management is probably the most avoidable cause of project problems and failure. We get it: resistance to change, even positive change, is normal and expected human behavior. So plans must be made to minimize it and mitigate its impact.

DL: Exactly. And it's important to understand that change management is not a discrete phase of a project. It should be woven throughout the project, embedded in the methodology and infused in the culture of the project and its teams.

Here's how we go about change management: we work with our clients to analyze the impact of every change, help them communicate often, and ensure that every person at every level of the company understands why it is vital to remake processes and implement an ERP solution.

DS: It comes down to communication, really. Like Dave said, the key to effective change management is communicating project scope, rollout strategy and schedule, and clearly and persuasively articulating the case for change. Then repeat and reinforce this messaging often to ensure every level of the organization stays focused on the benefits that will come with the future state, and not on the disruptions and uncomfortable changes that come with process improvement and a new ERP solution.

Where's the ROI in BPI? What do you say when clients want to go straight to implementation?

DL: The first thing I say is that it doesn't make much sense to invest in an ERP when the underlying processes are inefficient. They'll just end up with faster bad and broken processes.

There are many direct and indirect benefits. Most of the return on BPI, and on a new ERP solution, comes from more efficient production and the resulting reductions in operating, inventory and labor costs. And optimized processes streamline ordering, eliminate physical inventory, improve production quality and enable more efficient scheduling, among other things.

There also are other important efficiencies that are the result of improved access to operational data, including more accurate materials planning, streamlined reporting, new dashboards and better, data-supported decisions. And there will be ROI achieved from increased customer satisfaction, enhanced supply chain communication and delivery performance.

DS: It's really important to determine the ROI as accurately as possible. It provides the justification for the project, informs the software selection process, sets up areas of focus and measurement, and is the basis for determining whether a project is a success.

Dave Lechleitner is a Senior Consultant for Ultra Consultants, with more than 25 years of experience helping mid-market manufacturing companies leverage technology to optimize processes, increase efficiency, maximize throughput and boost productivity.

David Saunders is a Senior Consultant for Ultra Consultants, with 20-plus years of experience managing information technology projects for manufacturing and distribution organizations, projects designed to improve process efficiency, productivity and overall performance.

5 Phases: Ultra's Proven BPI Methodology

Many organizations think of their business process challenges as an IT problem. But technology usually is not the cause of inefficiencies.

1. Project Organization: critical structure

Your project, and every project we do, starts with the basics. Project Organization includes a number of important first steps: setting up the project team structure; selecting the people from across your organization who will play important roles on the Steering, Core, Workstream and Extended Teams; and determining the cadence and content of project status reporting. Clients often ask how to determine who should be on the project team. If you are considering an individual but think they are too important to the ongoing operations to pull them out even part time to work on the project, then that is who you need on the project team.

2. Current State: essential discovery

The successful transformation of your business requires, first, a thorough assessment of your Current State. This critically important, Lean-influenced analysis gathers key performance metrics, maps core business processes and functions, and produces documentation and visualizations that make it easy to identify inefficient, wasteful and redundant effort.

When completed, the current state analysis offers an exploration and evaluation of business operations, business processes, IT strategy and software systems, as well as master data and information flow, and identifies and prioritizes problems and opportunities.

3. Visioning & Education: necessary foundation

An underappreciated but key component of the BPI process, Visioning & Education brings you up to date on the capabilities of today's ERP technologies (and the possibilities and opportunities they offer), educates you on current best practices, helps you imagine your processes transformed, and creates a platform to define a future state.

4. Future State: valuable vision

The development and definition of your organization's Future State is critically important. Knowing the endpoint improves project focus, shortens the implementation timeframe, prevents detours and wasted energy and expense, and shortens time-to-benefit. And defining the end goal informs and guides the software demonstration process.

Future state visioning begins with collaborative business process re-engineering workshops, problem resolution, gap analysis and opportunity determination. It continues with a deep dive into your future requirements and technology landscape. It concludes with the delivery of a detailed vision of your remade processes, a transformation roadmap and a project charter.

5. Business Case for Change: required rationale

We answer your most important question, why, by establishing the goals of your project and validating the improvements offered by your redesigned business processes. The foundation of the Business Case for Change is a thorough analysis of the gap between your Current State and Future State. Its building blocks are a quantification of the efficiencies delivered by streamlined processes, a transformational roadmap and the identification of high-value opportunities.

Top BPI goals: accelerate processes, identify waste, eliminate friction, reduce errors, meet regulations and maximize ERP ROI.

Measuring Up: Business Process Maturity

A significant factor in business process evaluation is maturity. Are your processes capable of continuous improvement? How efficient, automated and reliable are your most important functions?

• Level 5, Optimizing: Process performance is continually improved through incremental and innovative technological improvements.
• Level 4, Quantitatively Managed: Processes are controlled using statistical and other quantitative techniques.
• Level 3, Defined: Processes are well-characterized and understood. Processes, standards, procedures, tools, etc. are defined at the organizational level.
• Level 2, Managed: Processes are planned, documented, performed, monitored and controlled at the individual process level.
• Level 1, Ad-Hoc: Processes are unpredictable, poorly controlled and reactive.

4 Success Stories

Plumbing Supply Distributor

Legacy platform limitations and time-consuming manual workarounds slowed operations and opened the door for a business transformation. Focus areas: procurement, warehouse management, mobile access, e-commerce, financial management and manual processes.

Waste Handling Equipment Manufacturer

A merger resulted in operational redundancies, and disparate systems and processes. A current state analysis and future state vision set the foundation for new efficiencies. Focus areas: costs, customer response, manual processes, IT management and vendor management.

Indoor & Outdoor Fireplace Manufacturer

Growth and inefficient processes across the organization drove broad business process improvements and the application of industry best practices. Focus areas: inventory management, cost tracking, customer support, forecasting/planning, order allocation, analytics and manual processes.

Electronics Manufacturer

An in-depth assessment of the maturity of core business processes led to a business process optimization initiative and a business transformation plan. Focus areas: shipment processing, shipment accuracy, manual inventory processes and inventory accuracy.

5 Reasons BPI Projects Fail

Manufacturing and distribution organizations initiate BPI projects to streamline key processes, identify areas where efficiency can be improved, and enable better, more effective utilization of resources and assets. But, experts say, one-third to one-half of BPI projects do not achieve their goals. Why do so many much-needed BPI efforts fail?

1. Poor alignment with business goals

Every BPI project needs to be linked to business goals. If the right metrics aren't being identified for the project, or if the project scoping doesn't include a variety of functions across the company, it's unlikely to meet the overall objectives of the business. If the business goals aren't clear, or the goals conflict at different levels in the business, the project likely won't have any clear direction.

To avoid this, make sure that the business process improvement project is focused on meeting business goals. If the goals are muddled, it's important to stop and define what the business wants to achieve before launch.

2. Failure to accurately and comprehensively assess current state

Before any real change can be made, and before goals can be set, it is critical to know and understand the current state of the business. This involves gathering key performance metrics, then mapping business processes to identify where improvements will make a significant difference.

3. Insufficient focus on overall business objectives

The saying, "Can't see the forest for the trees" often applies to BPI projects. If the organization typically operates in silos, so will the project, with different functions and teams lobbying for what they need without understanding the overall goal.

A good way to avoid this problem is to prioritize pieces of the project linked to the overall business goals, to shift the focus to moving the entire organization forward. Every BPI project needs to benefit the organization as a whole, without detracting from another function.

4. Flawed project team composition

The BPI project team must represent the entire organization. Ideally, the team will consist of six to 10 representatives from different departments affected by the changes, super-users and management. Some team members will be driving change, and some will be in supporting roles. It's critical to choose people from multiple levels who know and understand the processes and support the initiative.

5. Weak support from upper management

Without a champion at the top, a BPI project is doomed. What's more, getting upper management on board is absolutely critical for success because, without their commitment, the plug can be pulled prematurely.

Obtaining support from upper management should be done in multiple ways. Make the case for how this project will improve the bottom line, which will make them less likely to question the business value of the project. An orientation session can help them understand the why and the how. And including them in regular briefings and updates will let them see progress.

Why Ultra?

It's critically important to choose an ERP consulting partner with experience in your industry, expertise in your ERP solution, and people who have worked in businesses like yours. And you will want to work with a firm that is independent, flexible and able to build a solution to meet your organization's unique needs.

Since 1994, Ultra Consultants has utilized its proven methodology, ERP knowledge and industry intelligence to deliver measurable business performance improvements to manufacturers and distributors in virtually every vertical.

• Our services are built for your industry. We understand your processes and requirements.
• Our solutions leverage our expertise. We help you choose software to meet your unique needs.
• Our results reflect our ERP experience. We maximize benefits and minimize risk, and deliver success.