ERP systems and some alternative approaches

Enterprise Resource Planning (ERP) systems have one underlying purpose: integration of all the departments and functions in a company into a single IT system. The table above shows some of the areas that ERP systems for manufacturers typically include.

Successfully implemented, an ERP system can deliver tremendous benefits. Key amongst those benefits are (1) providing a “single version of the truth” – avoids discrepancies between reported figures because everyone is using the same system and seeing the same information; (2) improved sharing of information and communication between departments – eliminates the “islands of information” caused by using different systems in different areas of the company; (3) improved efficiency and standardization of business processes by providing ways to automate key processes.

That’s the positive side of ERP systems. Unfortunately, almost every major study on the impact of ERP systems has concluded that half of all implementations fail to deliver the expected benefits. There is no question that the decision to implement an ERP system is not for the faint-hearted: it takes time and a significant investment of both dollars and resources. Most of all, to be successful, it requires a readiness for change in the way the business is organized and how people do their jobs. That can be a painful process if change was not anticipated – but if you don’t change, the advantages will be lost and the result will be little or no value at all.

A successful implementation requires:

• careful selection – the system must fit your business requirements; this is critical for ETO manufacturers

• pre-planning – ERP implementations are major projects and must be properly planned and managed

• concentration on what needs to be done to get the greatest benefits from the system in terms of improved business processes

• willingness to change the way you do things and planning the changes before the ‘go-live” date; this can involve changes in job roles and organization structure

• employee involvement in the implementation process, and proper training in the new system

• management support from start to finish + adequate resources for the pre-implementation process

Despite the somewhat daunting scope of the tasks involved in implementing an ERP system, if it’s done right, the benefits can be substantial and can provide an important competitive advantage.

There are alternatives, however, for businesses that feel they are not yet ready to take the plunge into a full ERP system, but do need to improve their existing systems.

Some companies take the approach of implementing only certain segments of an ERP system, such as the Manufacturing or Finance modules – typically driven by the need for improved MRP, costing and estimating functions. This can work if it’s part of a larger plan to implement the full system over time, but the downside is that part implementation does not provide the most important benefit – company-wide system integration. This approach also tends to extend the time to complete the overall implementation process. If the purpose is only to improve one or two segments of the company’s existing systems, the only result may be a rather expensive accounting or MRP/manufacturing system.

A more practical alternative, especially for companies that have yet to fully automate their manufacturing and materials management processes, can be to implement a simpler and less costly system that will provide improved materials management and MRP functions. The best of these systems will interface with a number of well-known accounting systems, and do this at a very reasonable cost. This can be a stepping-stone towards a later ERP implementation, yet can provide significant benefits in the short-term over manual systems.

BW&A can assist in your decision about the approach that is best suited for your company and in the system selection process. Call us to discuss your needs and to find out more about how we can help.

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