3 reasons why an ERP is not enough to manage your operations

Nov 18, 2016 3:05:05 PM

Filipe Janela

Posted By Filipe Janela

Module-oriented, all-encompassing, large scale ERPs have been praised over the years as the solution to deliver the long awaited dream of managing every single aspect of any organization on one common platform. After billions of dollars invested in ERP implementations across the world, one thing seems clear: You better have a different strategy or you will either end up with Excel running your organization or your operational and IT costs as the single most important negative impact in your bottom line. So, why is an ERP such a poor fit to manage complex operations?

 

 


 

On a report delivered last year, Panorama Consulting has signaled quite an interesting trend: over 50% of all ERP implementations deliver less than half of the expected benefits outlined during the implementation business case and of those, over 60% fail due to operational and process issues that simply are not covered or aren’t properly handled by the ERP. It comes with no surprise that on that same report, over 75% of all ERP implementations reportedly engage in significant ERP customization to meet operational requirements. And you know what ERP customization means, right? A growing and hungry monster that consumes resources for the lifetime of the ERP. The same monster that often makes your ERP underperform on what it is supposed to deliver. And who is responsible for maintaining those customizations? The ERP vendor? Nope, you are. Brace yourself and make room for your IT budget, you’re going to need it.

 

So, why is it that the world’s biggest software products come up short in delivering this long awaited dream and fail to provide a sound solution for managing complex operations?

 

Well, first of all, ERPs have been designed and built around a very clear and precise concept: provide a common framework to map an organization back office, integrating all information based on a static financial view, in order to provide the required confidence and accountability. Indeed a very important principle, which requires a specific architecture and a very clear design. That’s why all ERPs are built around modules that map the corporate business functions and provide specific functionalities within those modules. It is true those modules integrate with one another at the financial level, but if one process requires several business functions, mapped in different modules, it means you have to perform several system activities to achieve one single process task. On the upper hand for the ERP, this assures accountability, data integrity and consistency. The downsides are that your operational costs just tripled (if you’re lucky) and forget about getting information in real time about what’s happening. This is the biggest problem nobody wants to talk about: ERPs have not been designed to handle processes, they have been designed to handle business functions. And processes, if you have a complex, high volume operation, span multiple business functions in one single process activity. If you want to keep costs low and information accurate, either you customize your ERP so that you have process views that bundle existing business functions (remember the hungry monster?) or you use a platform that allows you to map the processes and uses system integration to transparently map those processes in the required business functions.

 

 

Second, by the nature of its design, ERPs are static, repetitive and based on batch processing. This means they are not designed to handle information in real time and they are unable to provide dynamic, optimized responses based in information that spans multiple business functions. In complex, time-constrained, high volume operations, every second counts and you need rule-based, dynamic processing of vast amounts of information to deliver in time, with quality, the right stuff to the right spot. This means that you need mobile, agile, operations oriented interfaces to help users perform better. This means you need to connect to any kind of enabled device to collect information relevant for your process in real time. This means you need to deliver information onto any enabled device so that your process flows efficiently in the real world. This means you need to combine multiple sources of business, sensing and operational information and, depending on the instantaneous evaluation performed, deliver to the right spot the right information, so that your process remains efficient. ERPs are just not designed, no matter how much they claim they are, to be responsive. And you definitively need a responsive, rule based, real time platform to manage your processes if you want to outperform your competition and remain efficient.

 

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Finally, after mapping your organization in an ERP, the single most difficult thing to do is change the way it is mapped. And flexibility is, today, what makes you beat the odds and outperform your competition. New opportunities, better ways of doing the same thing, changes in corporate structure, faster and clearer integration with partners, all of this is required if you want to keep up with the pace of change. And ERPs are just not good at changing. What could be resolved with a new rule set to handle a new operational flow to cut costs by 40% suddenly becomes a nightmare of module functions and document mappings and customizations to be performed and what not. By the time you find the budget and finish the ERP configuration/customization process, your opportunity has faded and someone else beat you to the finish line. And, surprisingly, if you have a process oriented, operations management platform working, you don’t need to change the ERP. You just need to map the required business functions onto a new view of an existing process, letting process-based rules determine automatically what the ERP requires to keep its data consistency and accountability. Flexibility and agility are the key in the war against waste and cost, so you need to be able to change and adapt in order to be sustainable and efficient.

 

 

Bottom line, an ERP lacks the process-oriented design, the real time, dynamic information processing nature and the flexibility to be a viable, sustainable operations management platform. Insisting in making an ERP conform to the specific requirements of operations management means that you are expecting your organization to use a very important tool on a job it was not designed to do. The same way that driving a Ferrari on a rally is a waste of money, expecting the ERP to deliver a sustainable solution to efficiently manage operations is a very expensive strategic mistake.

 

 

Over the years, Processware has helped Fortune 500 companies use their ERPs better, reduce the ERP total cost of ownership, improve their bottom line and achieve remarkable efficiency levels by using a dynamic, agile, cloud platform to manage highly complex operations. This has provided a solid, repeatable, sustainable strategy to overcome ERP limitations and quite a track record in building sound, sustainable operational landscapes that are industry benchmarks. You can read some of the stories that make that success here

 

 

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