Fixing ERP System Erosion to Unlock Business Value

Implementing an Enterprise Resource Planning  (ERP) system, such as SAP, JD Edwards or Oracle Netsuite, is a significant financial investment, particularly if the implementation is global in scale and involves multiple business units. While the benefits of an effective ERP system can outweigh the high cost of implementation, challenges invariably arise when companies grow via mergers or acquisitions or into new markets. In such situations, achieving short-term commercial goals is often prioritized over ERP considerations.. This can lead to system customizations and process workarounds that meet short-term objectives but that erode the original benefits of the ERP implementation by adding additional costs and complexity. These workarounds eventually become codified in standard operating procedures, additional technology is built upon the existing foundation, and the technical debt compounds rapidly, eventually outstripping any efficiency gained by the ERP system in the first place. 

Companies end up with complicated, disparate product, customer and vendor master data that result in complex or ineffective offline operational and financial reporting.  This may also result in “data silos" by business unit, further undermining the benefits of an integrated ERP. So, how do companies maximize their investment in these large ERP systems, while realizing the commercial benefit of new business integrations?  How do companies unravel established workarounds and system customizations without risking a negative impact on the business?

In order to undo this “system erosion” of poorly executed integration projects, companies must adopt an approach built on Lean and Continuous Improvement principles that consider both process requirements and installed ERP system capabilities. This approach is supported by a measured, phased program methodology focused on delivering business value by considering ERP system capabilities - integrated across all (new and existing) business units of the company.

Continuous Improvement is a management / operational framework whereby organizations, business units, and individual teams methodically and routinely analyze and refine their respective operations to ensure that they align with and support the overarching strategic objective of the organization to the greatest degree possible.

Lean is a formal Continuous Improvement practice that focuses on eliminating waste and maximizing efficiency in business processes. Some of the specific Lean principles that apply to this approach are:

• Value: Identifying and focusing on the value that the ERP system can bring in simplifying and standardizing processes and data across the organization. Examples: Rationalizing master data to reduce duplication; automating workflow to simplify processes across functions.

• Flow:  Identifying and eliminating any bottlenecks or delays that impede the flow of information and processes across the organization Example: Ensuring all data have a single system of record; application interfaces with the ERP are seamlessly integrated.

• Pull:  Prioritizing and implementing changes based on the needs and priorities of the business and customers. Understand business rules and ensure these are configured in the ERP.

• Perfection: Continuously identifying and addressing inefficiencies in processes and ERP technologies. Continually assess system performance against business objectives.

The Lean model for ERP improvement projects is built on these 3 key steps:

1. Define Areas of Improvement
• Gather information from process experts to understand the problem to be solved
• Understand business requirements in terms of functional specifications and business rules
• Understand the ERP capabilities related to these requirements so that technical requirements are specified
2. Execute Improvement Projects
• Prioritize the identified opportunities with defined business objectives
• Create a program plan for delivering sustainable improvements
• Ensure agreed targets are met
3. Create Culture of Continuous Improvement
• Obtain executive sponsorship and leadership around these projects
• Dedicate the necessary resources to deliver improvements
• Organize around value creation from existing system capabilities

Fixing ERP system erosion cannot be addressed by fixing one-off issues based on the loudest voice pushing support tickets through the IT Support group.  Fixing ERP system erosion sustainably relies on following the approach of Lean / Continuous Improvement described above.  This approach guarantees that fixes are permanent and that business value is front and center of prioritizing system improvements.  Over time, your ERP system will become fully utilized to drive the business benefits that were promised when it was first implemented! 

SAP for Small to Medium Sized Businesses

SAP Business One is a simple yet powerful integrated ERP solution provided by the world's largest ERP solution provider specifically for small and medium-sized businesses.

SAP aquired this suite of applications from Israeli company Top Manage in 2002. As of 2006 it is sold in at least 40 countries and SAP claims 9000+ installations.

SAP Business One consists of applications for Financial, Distribution, CRM, Manufacturing, MRP, HR and Services.
SAP provides optional add-ons at no extra charge for applications such as fixed assets, synchronisation with MS Outlook and advanced forms design. Perhaps the most exciting add-on in this category is the XL Reporter reporting tool which came about as a result of SAP's acquisition of iLytix in 2005. With preset metadata, a drag and drop design and over 80 starter reports, it is extremely easy to learn and use. It uses MS Excel for formatting and comes with a choice of ready-to-use templates or you can put your knowledge of Excel to work to create your own.
The scope of the product is further extended by over 100 third party add-ons. Some are developed using SAP's Software Development Kit which results in a consistent 'look and feel' to Business One. Some add-ons have their integration with Business One certified by SAP.

The product has a relatively modern and 2-tier architecture. It has won a design award for its user interface. It offers users a high level of flexibility with the ability to create a virtually unlimited number of user-defined fields and tables, user-configurable alerts and workflow processes. Users can control to a significant extent the display of data on transaction screens, configure look-up windows and set data access security. Most of this tailoring can be achieved with no formal IT skills.

Any company looking for integrated and real-time solution with a secure future should consider SAP Business One seriously. As it is supported by SAP, it benefits from the commitment and experience of the world's largest and most successful ERP software company.

While Business One is quick to implement and is affordable, because it is designed for small to medium sized businesses, it does not offer the same level of functionality of the high-end SAP products or even many tier-2 products. In most cases, though, the inherent flexibility of Business One allows a more acceptable work-around than may be expected if you are prepared to invest a bit more in customising the product.

As an example, the standard Business One Financial module does not provide a ready-to-use approval process for supplier payments i.e. a user who has access to creating a payment does not need to get another's approval before paying a supplier. Using SQL scripts and the built-in Alerts function, though, it is possible to provide a measure of control for this process.

Another example is that the Purchasing module of Business One does not formally support prior stages to a purchase order e.g. purchase indent, nor tracking. It starts directly from "Purchase Order". However the approval process provided for purchase orders means that an unpproved "purchase order" can be created. This can function as a "requisition" until it has been approved. Changes made to the "Purchase Order" during the process are fully tracked. Further work can be also be done with MRP and the Planning Data in the Inventory module to manage purchasing requirements.

You can define a catalogue that matches item codes to part numbers used by suppliers and customers but there is no link between Items and Business partners directly out of the box. Again such links can be defined using the customisation tools.

Some releases have been error prone, especially when compared with older or legacy products that are having far less development than Business One. But stability is as good or better than for comparable, new generation, offerings. A good general policy for any product is not to be the first to upgrade to the new version - leave this to others.

Third party add-ons should be added carefully. Apart from the cost, they will require additional system resources to maintain an acceptable performance level.

In short, don't expect Business One to do everything. But speak to a SAP Business One consultant before ruling it out and you may be pleasantly surprised to find there is a workable solution to your perceived gaps.

RELATED LINKS

• SAP Business One Brochures & Whitepapers

The Top 3 Myths about Business Intelligence

Myth 1. BI is a technology solution.
Myth 2. BI is all about data warehousing.
Myth 3. The IT function can take care of BI.

The July edition of the PMI Network magazine carries an article entitled Get Smart. In the article, Malcolm Wheatley outlines some good case studies that dispel the above myths around Business Intelligence.

The example that caught my eye (mainly because it is close to my heart) is that of Coca-Cola Amatil in Australia, and what they have done with BI to drive improvement. By using good business intelligence, they were able to avoid investing in additional production capacity by improving their existing line capacities. I'll let you read the details of this case, but the basic steps of BI were followed:

• Collect data. At Amatil, they collected highly granular, second-by-second data off their line PLC's.
• Store it. Warehouse your data.
• Carry out that Analysis. Look and data trends and patterns over time or compare what is happening in one location over another. Those of you who have read some of my Six Sigma posts will see the relevance on BI in analysing processes to get to the root cause of problems.

Dispelling those Myths:

1. BI is a technology solution. No, it is not. BI is a management initiative powered by data.
2. BI is all about data warehousing. No, it is not. The analytics and reporting are at least as important. (Good to know when you are chosing a BI solution or vendor).
3. The IT function can take care of BI. Yes, BUT - if you want measures that are 100% focused on the objectives of the business, the business better have total ownership of the BI solution. IT should certainly take care of the data warehousing.

RELATED ITEMS

• Data Rich, Information Poor?
• The 5 Questions for Better Business Reports

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SMALL BUSINESS VIEW

What information do you need to run your business?
Understand what data your business processes generate. Capture and store it.
Make the time to analyze this data. Look for trends over time; for patterns that point to problems in your business.
Improve your business!

The 5 Questions for Better Business Reports

As with most system implementations, there are several approaches for developing effective business reporting solutions. However, here is an approach that I like to use, as it provides a 'checklist' to develop the action items in a project to ensure that the reporting solution supports the business objectives of the project.

The 5 Key Questions for Better Information Delivery:

1. What are all of the 'as-is' and 'to-be' reports that the business wants? [END SOLUTION VIEW]
2. Which of these reports are in scope (and budget) of the project at hand? [SCOPE DEFINITION]
3. What INFORMATION does each of these reports provide? [MOVE MINDSET FROM REPORTING SOLUTIONS TO INFORMATION REQUIREMENTS]
4. What are the future data sources to support these information requirements? [INFORMATION MODEL]
5. How does the business want this information to be presented to users in the future? [INFORMATION DELIVERY]

These 5 questions should get you to developing an approach for getting to a Reporting Solution Design which will support the business information requirements which will be supported through the implementation of the new system.

How does this apply to your industry? Does this help to focus on why you are developing reports? Does this ensure that a system implementation will include reports that users can use?

The full article can be found at Egoli Solutions Publications website. The article was also published on Techlinks.

RELATED BLOG ITEM:- Data Rich, Information Poor?

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SMALL BUSINESS VIEW

• What information do you need to run your business?
• Understand what data your business systems generate.
• Align this data with your information requirements
• Formalize the creation of this information for your use in a timely and accurate manner

Data Rich, Information Poor?

Ask any Project Manager or business owner about the objectives of an ERP project, and they will probably include better business information and improved reporting in the list. However, talk to any Project Manager about the area of the greatest project scope creep, or any business owner for the area that is most neglected in any ERP implementation, and they will probably say ... you guessed it ... Reporting! Why is this? Is there not enough attention given to planning the development of reports? Is the definition of reporting requirements not clear enough? Are project teams not structured with the right resources to address reporting effectively during solution design & development? Yes.

For many companies that are already too "data rich, information poor", the implementation of new systems will worsen this situation if this issue is not addressed.

So, if the objective of most sytem implementations is to make better information available to the business, why is this generally so badly done? I have found that very often the answer is that most system implementation projects are too 'systems-centric'; too focused on getting the technical solution design and developed; and not focused enough on the user interface. The user interface is where the end-user 'meets' the system. This will be done via a transaction screen, a display of some sort or a report. THIS is where the success of the system implementation is determined.

When reporting is addressed as part of the system implementation project, implementation tasks include determining what the current (as-is) reports are, and then trying to develop solutions in the new system to replicate these. From a business owner's perspective, does this result in better reporting, or better information for improved decision making? If so, this is generally only an incremental improvement. Normally this just gives you the reports that you have always used, but now sourced from the new system. Normally this also results in incremental development costs in the project, as generally these reports are not standard, and need to be custom developed.

Have you seen this in system implementation projects? If so, how has resporting development and implementation been done? Was it successful?

The full article can be found at Egoli Solutions Publications website. The article was also published on Techlinks.

RELATED BLOG ITEM:- 5 Questions for Better Business Reports

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SMALL BUSINESS VIEW

As a small business owner, you should consider the following:

• What information do you need to operate your business?
• What business purpose does this information support?
• Can you formalize reporting to deliver this information in a timely manner?