The Conflict in ERP Expectations

The Conflict in ERP Expectations

Many organisations we visit, post-ERP live running, express great disappointment in the results they have achieved with their ERP project. The expectations on the benefits the company can achieve from a correctly implemented ERP system, whilst being reasonable, are not achieved by the simple installation of the software.

The purchase and implementation of ERP software through the internal ERP project simply sets the foundation for the technology to achieve the results expected. The company must ensure all of the decision making is actually in place, the data is accurate, the training is complete, procedures written and everyone understands how to use the system to get the best from it. This is not the job of the ERP software integrators! They do not run the company and it was never intended that the results would be achieved by simply turning the technology on. Unfortunately the people selling the software do not emphasise that the business must change the way they operate to achieve the maximum results and that management must take a proactive role in the implementation and change process instead of just leaving it to the computer people and the users.

Most ERP projects generate an enormous amount of internal activity and together with the problems experienced during the implementation such as; insufficient resources to carry out the work, data clean-up, software modifications, additional software, budget over-runs and schedule over-runs tend to distract organisations from the task of running the business post-live running and as a consequence too little attention is given to how to use the software to achieve the results.

Our research over many years has shown that the understanding of what an ERP project is by top management and the systematic approach made to ERP projects driven by top management can have an enormously positive impact on ERP outcomes. Unfortunately many senior executives see ERP as a technology project and relegate the project to the computer people and have little further involvement until problems arise that consume vast amounts of money to resolve. In turn the people charged with implementing the technology do not have the mandate to make all of the necessary changes across departmental barriers and when senior management are approached to make difficult decisions impacting the ERP project, in the face of departmental resistance, baulk and delay critical decision making impacting the overall ERP project progress.

There is no end of ERP software houses and consultants that claim “Proven Paths” and other statements all designed to give a level comfort that their methods are fool-proof and ensure a successful outcome every time. The statistics on ERP failures and the increase in litigation from disgruntled ERP buyers suggest that the overblown hype on proven paths etc., is nothing but a sales pitch not matched by results on the ground.

The confusion between installation of ERP software and the implementation of the technology has been going on for many years with little change.

The huge dollars demanded by software houses and their integrators can seriously damage an organisation financially if not carefully controlled and managed. This management and control starts at the very concept stage of justifying an ERP system and ensuring a systematic approach to the overall ERP project is taken at each step of the way.

See article on the 26 steps developed over many years on managing an ERP project from concept to completion.

Atko Global

For further information on ERP go to http://www.atkoglobal.net.au

The Gap between ERP and Management

The Gap between ERP and Management

The tendency for corporations to view Enterprise resource Planning (ERP) as a technology project that the company is undergoing and that requires minimal attention by senior management, is a major impediment in the effective implementation and operation of ERP systems!

The rise of the IT profession has spawned a whole industry, in itself, that is cloaked in vagaries and shrouded jargon, all designed to promote the industry as being too hard for anyone but the specialists to understand. (Translate pay a lot of money for implementation services from third parties).

The difficulty in this technology evolution is that management at all levels need to get a more detailed understanding of the technology and the application and use of ERP as a core information tool for planning and control.

The ERP technology has now been around in one form or another for the past 40 years or so but the understanding of the potential of the technology, by senior management is, at best, poor. The full potential of the technology continues to elude organisations, particularly manufacturing and distribution industries due to their failure to fully utilise the business philosophy and make the necessary changes to the planning and control decision making that is enabled by a fully functional ERP.

The many organisation’s around the world, that have fully embraced ERP, have reaped enormous benefits in the areas of inventory reductions, purchase cost reductions, transport, production efficiency, reduced cost and improved customer service.

The competitive advantage of organisations that have successfully implemented ERP is significant and can only be brought about by senior management, IT and operational users all understanding what the potential of the technology is and how to achieve it.

The ERP software component of an ERP project accounts for about 25% of the success of the project but unfortunately, for most organisations, it is seen as the most important part of the project. The belief that implementing a set of software modules provides the benefits of ERP is reflected in the statistics on failure against expectations. Seventy five percent of implementations are seen as failure against original expectations and even those companies that believe they have successfully implemented an ERP system they report benefits against expectations of around fifty percent.

The failure here is separating the hype from the reality up-front when the project is being cost-justified. A realistic cost justification carried out by the company less the technology hype would go a long way in determining  a realistic expectation of benefits to be gained by implementing the ERP technology. This involves a greater understanding of what is possible and realistic and what isn’t by senior management at the concept and approval stage of the project.

The other seventy five percent of the project success includes:

  • Effective project management
  • Clear implementation objectives through a well- managed project plan and model
  • Education
  • Training
  • Data clean-up (Bills of materials, routings, inventory, work centres etc.)
  • Data conversion
  • Process reengineering
  • Procedures

The tendency for companies to believe the sales hype of proven path implementation methodologies (never matched by actual outcomes) needs to change so that organisations take control themselves to ensure that the technology and all the decision making processes that are needed to make it work are actually implemented as part of the overall ERP project.

By immersing themselves into the full ERP project and not just seeing it as a technology project management can bridge the gap and ensure the technology is implemented and operated to provide the best return on investment.

for further information on ERP go to http://www.atkoglobal.net.au

Atko Global

Experience worth listening to!

The Conference Room Pilot for ERP

Most ERP implementation plans include a conference room pilot whereby data

sets are transacted through the system to give everyone confidence that the

ERP system actually works. Successful conference room pilots are the basis for

the go-live decision to turn the system on in the real live operational

environment of the business. As the conference room pilot was a success there

is a high level of confidence in turning the system on ….. only to find that there

are massive problems with the system producing incorrect information,

creating chaos.

So what has gone wrong? The system was tested with some real data sets that

we chose for the pilot and the system worked during the pilot!

The conference room pilot was conducted in a lab type setting with limited

amount of carefully selected data.

Let’s go back a bit! Given the huge cost over-runs experienced in the majority

of ERP implementations a conscious decision was made to take shortcuts.

These shortcuts may well have been in the area of data clean-up and

migration, or structure of bills of materials, or not quite getting the inventory

accuracy issues sorted out.

There is no impact immediately in making the shortcut decision as no

processing is taking place during the implementation stage of the project.

Now that the system is turned on the implications of these shortcuts become

immediately obvious! The system is processing numbers that are incomplete,

wrong or simply not there because the decision was made to clean it up later.

The costs you thought you were saving by making the shortcuts has now come

back to bite you and the impact on the business operations, that are now

relying on the system for numbers, can be quite dramatic and cost you millions

in losses and confusion.

We visit many companies that complain that the conference room pilot was a

success but when the system was turned on it didn’t work. The system is

actually working but the data that it is processing was not cleaned up and the ERP system is generating correct numbers based on the data it is processing.

The problem is the data is wrong!

The conference room pilot may give you confidence the system works but this

does not guarantee a successful outcome if you haven’t cleaned up the data

during the implementation preparation stage.

If you have this situation there is no option but to clean-up the data and this

could be very disruptive and costly post-live running of the ERP system.

Ray Atkinson

Atko Global

for further information on ERP go to http://www.atkoglobal.net.au

Experience Worth Listening to!

The Business and ERP

The Business and ERP

ERP systems and their predecessor systems MRPII have been around since the late sixties and early seventies of the last century but we still see the majority of organisations struggle with getting the benefits from the technology.

Our analysis has shown that a major issue in the implementation and operation of ERP systems is in the practical fit of technology to the operating requirements of the business. This stems mainly from the perception that ERP a computer system and therefore you must have people skilled in IT degrees and ignoring the essential operational know-how that blends the computer systems and operations together. What may seem academically reasonable may not work in the real world environment of the day to day operations of the company.

Whether the ERP software works to provide the right information at the right time, or not, the day to day operations of the business must function. This may mean abandoning parts of the system and finding other ways to carry on the business. Too many organisations fail to realise the benefits of an ERP system due to parts of the system being non-functional and the operations being carried out using non-integrated means and undermining the fully integrated philosophy of ERP.

The areas being non- functional may be because shortcuts were taken in data clean-up during implementation or other steps not carried out to cut the costs of the project.

Operational knowledge and what is a practical application of the ERP technology must be a partnership between the people who have knowledge of the software and application experience from people who have worked hands-on in a business environment so that a workable solution is found.

This experience must be utilised during the specification stage of the project to produce a model and details of how the software must work in the specific organisation.

This does not mean duplicating poor and bad methods of operations but it means taking the technology and blending it into the organisation to take advantage of the technology in a way that is practical to the organisation. Change management and process reengineering are an essential part of this process!

The type of issues may be in the way that bills of materials are structured to facilitate the most effective way of planning and scheduling, The way purchasing of parts and components are organised from vendors employing other philosophies such as “vendor managed inventory”. Other practical considerations would be in the use of factory schedules or works orders to control the jobs going through the factory or in the way materials are handled from and into the factory to reduce the non-value adding time and maximising productive value adding time.

Until we can get the mix between software and application skills right in ERP projects we will continue to see ERP systems failing to achieve their full potential!

Atko Global

For further information on ERP goto http://www.atkoglobal.net.au

Experience worth listening to!