99% of the companies that bring us on board for consulting projects can accelerate bottom line business results by better utilizing their ERP system. The typical 80/20 equation holds true – at least 80% of companies underutilize their ERP system by a significant amount. Even the 20% that utilize their ERP system to a better degree than most have opportunities.

In almost 20 years of consulting, we have found only 1 client that couldn’t utilize their ERP system to a greater degree as their manual work around processes would fall apart. They required an ERP upgrade before they could utilize their system to a greater degree. Every other client could make progress (improve customer service levels such as OTIF on-time-in-full, reduce lead times, increase efficiencies, reduce waste, automate manual functions, reduce inventory, etc.) by better utilizing their ERP system. It didn’t matter if they had a tier 1 ERP system such as SAP or Oracle, or a tier 2 or 3 system such as Epicor, SAP Business One, Microsoft Business Central, Sage 100 etc. It didn’t matter the industry – aerospace, building products, life sciences/ healthcare products, or food and beverage. These statistics apply across the board. To learn more about how to better utilize ERP, read our article, The MacGyver Approach: Leveraging Your Underutilized Asset.

Building Products Manufacturer Case Study

A building products manufacturer struggled to get the “right” inventory to the “right” distribution center at the “right” time to service customers successfully. There were four production facilities supplying around 12 distribution centers across North America. Each production facility also functioned as a distribution center for their region. This consulting client used SAP, and although they were on an older version of the software, the system could support a complex distribution network. However, they were underutilizing the ERP system.

There were various levels of expertise at the production facilities, different processes at different facilities, and different use of the ERP system and different data integrity at different sites. This is not uncommon. In 80% of clients, the employees using the ERP system are NOT resistant to change once they understand how it works, how it will help, and how what they do fits into the big picture. Until they understand how to perform their daily tasks to successfully serve customers and accomplish their goals, they will do whatever it takes to do what’s needed including developing manual processes, updating spreadsheets, etc. That is exactly the situation as we entered this client.

We started by understanding the current business processes and use of the ERP system. By documenting the high-level processes, we could identify gaps and opportunities. We quickly addressed quick wins. There are typically a few quick wins at every client; however, to make sustainable progress, the key is to review how the business processes connect with and interface with each other. Once a full view of the business processes and interfaces emerges, the current use of ERP will also become apparent. Finally, the use of data, integrity of the data, and reliability of the data for decision-making will also emerge during the process review.

In this client situation, we started by sharing best practices among production facilities. One production site had a more advanced use of planning functionality, and so we worked with the second priority site to set up the appropriate system settings, update data, and roll out upgraded planning processes. This use of SAP in conjunction with upgraded planning processes and coordination with Sales and Operations propelled service levels to jump from low 60%’s into the 80%’s within a few months. Next, there was additional SAP functionality that could upgrade the planning process across both sites, and so we worked with SAP experts to test and roll out additional SAP functionality to further automate what made sense. This resulted in a solid production plan.

From a replenishment standpoint, it started with a solid production plan. Beyond a solid production plan, the replenishment process to supply the distribution centers with the appropriate product to satisfy customers required a directionally correct forecast. The forecast was the trigger to supply the distribution centers. Thus, we worked to better utilize the advanced planning module of SAP to whatever degree feasible on an accelerated timeline in addition to upgrading the business process for reviewing the demand plan with the Sales Team. This step was incorporated into the monthly SIOP (Sales Inventory Operations Planning) process to gain executive alignment and to ensure the forecasts passed the smell test.

In addition, we reviewed the current replenishment process including the MRP and replenishment or transfer order settings. We performed inventory analysis to determine optimal settings for safety stock, minimum orders, etc., and rolled out process improvements in conjunction with SAP functionality. These process and ERP utilization improvements allowed us to improve our service levels greatly and rectify relationships with customers. As the process smoothed out, we started to look at ways to optimize inventory levels while maintaining higher levels of service.

Results with Better Utilization of ERP

Results followed the rollout of improved utilization of SAP in combination with process upgrades and associated education. Most importantly, service levels improved from around 40% to the 90%’s. Lead times were also shortened in a critical site that produced a core product line. This made a dramatic impact on customers’ perception and and turned unhappy customers into customers looking for opportunities to expand business with our client.

In addition, the critical site increased output and capacity as manufacturing got in front of what was needed to support customer requirements. Manufacturing efficiencies improved as the production schedule transitioned from reactive to proactive.

From a replenishment standpoint, as upgraded replenishment planning was rolled out, service levels improved. And, as MRP settings were updated with optimized variables, inventory levels were reduced without impacting service levels negatively.

Finally, as the process and system upgrades were rolled out, the team was educated and gained confidence with their core tasks. Additionally, as processes were automated, the team could spend more time on exceptions and less time performing mundane tasks. This freed up time for additional improvements to grow revenue and profitability.

The Bottom Line

Pay attention to your business processes in conjunction with your use of ERP. The better you utilize ERP in a smart way to accomplish your goals, the more focus will go to exceptions, bottlenecks, and additional process and technological upgrades. If you are interested in talking about how to better utilize your ERP system to drive superior customer service, customer growth, profitability and cash flow, contact us.

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Better Utilize Your ERP System

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Why Modernize Your ERP System?

There might not be a need. Since it is one of the largest expenses your company will undertake, and, more importantly, it will impact customer performance and profitability (positively or negatively), there is no reason to jump into the deep end of the pool before understanding the value to your growth and success. Upgrading your ERP system is not for the faint of heart as it will consume resources (financial and people), and 80% of ERP upgrades fail to achieve the intended results. Thus, you must ensure you will be part of the 20%!

With that said, if you do not have a modern ERP system, you will constantly struggle to meet customer expectations, grow profitability, and achieve cash flow goals. Our clients with old systems try to incorporate add-on software, but it becomes a house of cards. Orders slip through the cracks. Duplicate transactions confuse and annoy employees. Archaic screens discourage teams. Key business nuances cannot be incorporated into the system. And down-the-line impacts are lost.

Additionally, archaic systems typically cannot support modern customer expectations (e-commerce, CRM, business intelligence, AI, etc.), and so clients create work arounds to try to meet the needs. Soon, there are elaborate subsystems required to support the business, and the solutions are not scalable.

Although in every client situation we found opportunities to better utilize the system, the effort required to limp along with an old ERP system and avoid the upgrade will not be worth the value over the medium to long-term. Instead, focus attention on when to upgrade and plan your upgrade to ensure success.

Why ERP Upgrades Fail

Most ERP upgrade projects fail. The most frequent reason cited is lack of training; however, we find that is RARELY the cause. The root cause is that the people do not know how to use the system to perform the business processes required to achieve the day-to-day business objectives For example, the ERP team might have provided training on how the system plans production; however, the planner does not know how to use the system to get production schedules for what he/she knows is required to meet the #1 customer’s needs and/or how to get the schedule to show the correct number of pieces per day (instead of showing an unrealistic output that would require double the resources he/she knows is available).

Unfortunately, the ERP team typically says, “Use the best practice process. You are being resistant to change.” And the planner says, “The ERP system is not working, but provides no details as to what is wrong.”. Neither side is happy with the other, and the planner puts together a work around, and the ERP team requests a change consultant. It is no wonder 80% of implementations fail.

What can you do to turn failure on its head?

The good news is that it is not difficult to know what to do to succeed with ERP upgrades. The bad news is that companies don’t want to accept what needs to be done to succeed. The critical priorities are as follows:

• ERP Software Selection: Focus upfront to make sure you select the best-fit system for your business requirements. For example, if your business requirements dictate a job shop software, your options will be limited. If you need a configurator or service module, your options will be further limited for the best software to support your needs. Focus on business requirements, and especially those requirements that differentiate the company in the marketplace or those that are unique to your industry. Our clients have found that the best way to be software agnostic and not get sucked into a slick sales presentation is to bring on neutral experts to focus on requirements, fit, and facts, and they arm the team with pitfalls to avoid.
• ERP Selection example: For example, a manufacturing client was hesitant to spend the money on consultants to perform an ERP selection. Their CPA convinced them to give it a go. After working with them for several months, we agreed on the best fit software and partner; however, the client decided to postpone the ERP upgrade for a few years. The CPA provided feedback that even though they didn’t follow the recommendations, the client felt like the process itself was well worth the investment because they understood what was needed to be successful and could prepare to ensure success. Fast-forward a few years, and they did just that. We went through a new selection process as requirements change, ERP software capabilities change, ERP positioning changes, and suppliers areas of focus and expertise change. We selected a new best fit software and partner, and they were prepared for the ERP journey.
• ERP Supplier selection: Just as important as the system is the selection of your implementation partner. Plans rarely fail in formulation. They fail in execution. This means that the partner you choose has to fill in gaps of your weaknesses, supplement your strengths, and align with your path forward (agile vs process-oriented, focused on quick wins or looking at the long term, knows how to work with small and medium size company resources or is focused on larger company issues, focused on saving money or return on investment). In the ERP software selection example, the supplier of choice from the first selection process evolved with changing market conditions and no longer focused on medium size clients in their sweet spot. Thus, a different partner made more sense.
• ERP Team: As difficult as it is, you need to put your best and brightest on your ERP team. This team will be designing processes, working through roadblocks, driving change, providing training, listening to feedback, and will drive your success or failure. You will have to invest in people, ensure career paths for top talent, and provide tools, support and supplemental resources to ensure success.
• Project Management: The fundamentals or project management and change management are bedrock to ERP success. These are not rocket science yet essential to success.
• Business/ Systems Analysis: Beyond being proficient in project management, you will need business process and system analysis capabilities. You need to visualize down-the-line impacts, pivot as appropriate, know when to keep looking for ways to resolve issues and when to stop at success (and not pursue perfection). Incorporating cross-functional business process expertise is critical as the connections between processes and modules will make or break success. Unfortunately, ERP partners typically have experts in each module. This leaves a gap in cross-module processes. Supplement with these experts if you want to succeed.
• Pilot: Design a pilot to test the end-to-end life cycle of your processes. The most successful clients utilize an agile approach to pilot a segment of the business or a sub-process, incorporate changes and expand your pilot. This iterative approach will rapidly incorporate business feedback instead of waiting until the end to see if everything works as desired. By then, no one wants to be the one to postpone the go-live, and so critical updates will not be uncovered.
• Testing & Cutover: Each ERP supplier will have proven implementation processes. Unfortunately, methodologies are only as good as the people executing them. Don’t skimp where it counts. Resolve key issues before they impact customers and daily profitability. You’ll need strong organization and orchestration to coordinate successfully.
• Ongoing Support: Planning a week of go-live support will not cut it. If the supplier has one foot out the door because they have committed to another project so that they can fund operations, they will not be focused on what your team needs to succeed.

A Final Thought

Do not leave your ERP upgrade to your IT team, your CFO, or an ERP leader. It is a transformative process to build scalability and sustainability into your business processes. You will need a visionary. You will need leaders to drive change. Not change for the sake of change or to implement best practices. Instead, you will need to drive change and improvement to your business processes. It might make sense to bring on a business consultant to bridge the gap between process, ERP, and technical specs. Last but not least, execution, collaboration and partnership will be key to success.

If you are interested in discussing whether you need an ERP upgrade or you are interested in discussing an unbiased ERP selection, review our ERP resources and/or contact us to discuss your situation.

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Managing Increased Complexity with High OTIF & Efficiencies Using Technology

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Should You Upgrade Your Systems?

It depends. Being the first to upgrade for each new fad is a waste of resources for little, if any, benefit. On the other hand, if the upgrade supports your ability to serve customers and grow profitably, it will become a “must”.

Inaction Isn’t an Option: The Southwest Airlines Debacle

Let’s take the Southwest Airlines debacle as an example. Although there were some extenuating circumstances (weather events and an infrastructure that supports point-to-point flights), the crux of the problem was that their systems failed. Weather caused delays and cancellations. Next, because Southwest doesn’t use the hub and spoke system, they do not have resources gathered in hubs throughout the country. Thus, when a flight was cancelled, they didn’t have their equipment (planes) and resources (pilots, crews, etc.) in the “right” place at the “right” time to quickly pivot.

They could have moved resources to the correct places; however, their systems were not upgraded to handle these ever-changing conditions and so flights came to a screeching halt. Southwest had insurmountable challenges resulting in cancellations to OVER 90% of their flights and countless unhappy passengers. Clearly, in hindsight, a systems upgrade would have been worth it!

How to Know If You Should Upgrade Your ERP System

How do you know if you should upgrade your ERP system? Of course, there is not a magical answer; however, there are several questions to consider:

• Does your ERP system support your customer needs? Customer needs are constantly evolving. Do you have high levels of service? OTIF (on-time-in-full) or OTD (on-time-delivery). Can you quickly pivot to changing customer conditions? Are you aware of these changes? Can you provide the visibility customers need?
• Will your ERP system support your FUTURE customer needs? Too many clients are running on the hamster wheel to keep up with current conditions and don’t have time to look to the future. Focus on where your customers are going and whether your systems will support their future needs.
• Does your ERP system support process upgrades? For example, if you would like to have inventory in the “right” place at the “right” time to achieve high service levels yet you could reduce your inventory levels to free up cash flow, does your system support this type of upgrade?
• Will your system support automation and digitization? For example, could you collect information about your machines with IoT capabilities and feed back to your systems so that you can use AI (artificial intelligence) to predict your machinery needs instead of focusing on preventative maintenance? Or could you simply attach a robot or automate a mundane process?
• Will your system connect with customers & suppliers? Viewing just one link of a supply chain is useless. You are only as strong as your weakest link. For example, to provide visibility of order status, you should connect with your suppliers, your suppliers’ suppliers and so on.
• Does your ERP system support your data needs? The only route to success is to be able to collect and analyze data so that you can stay ahead of changing conditions to make directionally correct strategic decisions. Business intelligence, predictive analytics, what if scenarios and more.
• Is your ERP system a hodge-podge of functionality or will it work like a well-oiled machine? It is fine to have add-on software so long as it works seamless together and as issues occur, the parts work together to resolve rapidly without finger pointing and wasted time. If not, you need to upgrade your system.
• Will your system keep up with modern functionality needs? For example, if your system doesn’t have a strong CRM (customer relationship management) system, it is doubtful you will keep up with customer needs. Does it have a forecasting system, an e-commerce system, an MES (manufacturing execution) system, and a WMS system (warehousing management) that acts as part of your ERP system? These are often separate systems or modules but they must seamlessly integrate.

If Your Answer is Yes, Perform a Selection Process

Clients frequently call to ask for help in selecting an ERP system. Unfortunately, it is not for the faint of heart. If there is one thing that is a certainty, it is that ERP salespeople are sharks. Some are likeable, friendly sharks, but sharks nonetheless. They easily sell ice to an eskimo.

Review our ERP category on our blog for several articles on ERP selection, but a few of the key steps include:

• Assess business requirements: Determine what your system needs to do in detail to support your needs.
• Document business requirements: Although we’ve tried to find a way to minimize the workload associated with this step, it is vital to keeping the sharks at bay.
• Source potential ERP suppliers: Narrow the list to ones that support your type of business and customer needs effectively.
• Develop an RFP & Scoring Method: Even for small selection projects, it is good to document at least the key points to further narrow your list of potential ERP suppliers.
• Demo the software: It is important to visualize how you can use the software.
• Ask second-level questions &/or perform deep dive demos: The devil is in the details. The software can look amazing yet not support your business. It happens frequently. The key is in asking the underlying questions and seeing how the software handles your specific needs. Will it handle the 80/20 or only 70/30? It will make a huge difference to your success – and resources invested to achieve success.
• Pricing comparisons: There is no doubt that software suppliers must sit at a bar and find ways to make pricing apples to oranges so they are impossible to compare because after 100+ projects, there are still curve balls to work through every time. You must get it to “apples to apples” to understand if your likely investment and comparison.
• Partner comparisons: The 80/20 of success will be implementation (assuming you get a decent fit for functionality). This will boil down to your partner and the capabilities of the specific resources you will work with on the project. Even with the best of partners, you can go down the “wrong” path easily and waste countless hours before pivoting. In fact, it is only the better partners that will tell you when they discover it is the wrong path because they don’t want to tell you that time has been wasted. The better your partner, the better your success.
• Summary comparison of functionality, partner and implementation which results in a final selection.

If Your Answer is No, Don’t Do It!

It is often easier to blame process issues on the system. Or, it could be for a lack of knowledge of how to expand the use of your system. Refer to our recent article, The MacGyver Approach: Leveraging Your Under Utilized Asset to find ways to upgrade your results without upgrading your system. Or ask experts to evaluate your situation. Don’t pursue an upgrade if it isn’t needed! Upgrading your system unnecessarily could be the quickest route to insolvency or customer debacles.

If you are interested in discussing whether you need an ERP upgrade, review our ERP resources and/or contact us to discuss further.

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In today’s Amazonian environment, customers expect rapid delivery, over and beyond from cradle to grave, collaborative service, 24/7 accessibility and last-minute changes. Executives are realizing they must upgrade their technology infrastructure to meet and exceed these customer expectations while driving bottom line improvement.

Your ERP decision will be one of the most significant investments your company will undertake, and these projects are wrought with risk. 80% fail to achieve the expected results yet waiting “too long” can put you out of business.

Selecting an ERP System is a Strategic Priority

Because of the significant customer and bottom-line benefit and steep, unintended consequences associated with these projects, the most successful clients realize they must be a strategic priority. By no means should the decision by relegated to a technical expert or project manager. Involve your best and brightest on the team and ensure your executive team is on top of preparation, progress, and the inevitable pitfalls. Beginning with preparation:

• Understand business processes: Start by understanding what occurs on a day-to-day basis. One of the top failure points is to assume that people can make the leap from current processes to what every ERP provider claims to be “best practices” on day 1 with no roadmap.
• Gain strategic and cross-functional input– Since all systems will perform the basics well, success will boil down to what drives your strategy and supports your cross-functional and cross-organization collaboration.
• Identify critical requirements– Countless hours wasted on typical business requirements (which all systems generally cover); instead, focus 80% of your attention on the requirements unique to your business, industry, and company. Think customer differentiation & profit drivers.
• Prepare data and be realistic evaluating your process disciplines– No matter how well you prepare, your system will only be as good as your data and process disciplines.
• Dedicate appropriate resources – Be an exception. Supplement your resources, bring on appropriate expertise early on and be willing to invest in what will ensure success and mitigate your risk.

5 Critical Factors in Selecting ERP Software

As complicated as most companies seem to make it, the critical factors in software selection boil down to a select few:

1. Your business objectives – Don’t worry about everything required in every module to run your business. Instead, take a step back and focus on what you need to meet your grow and profit plans.
2. Cloud or not? It depends. Dig into the details. Develop your own spreadsheets with paybacks. Consider your technical resources, adeptness with topics like cyber security and the latest technology, and your ability to navigate disruption and risk.
3. Understand your culture – what are your cultural norms when it comes to change? Do your employees have an entrepreneurial spirit or do they require strict procedures? These answers will be integral to aligning culture and technology.
4. Think about design upfront – Not thinking through down-the-line implications will derail the best of projects. Incorporate design and a holistic systems-view upfront.
5. Ballpark estimates and ranges – Get a ballpark upfront, and never accept the first estimate. It’s typically too low! Worse yet, two suppliers that should be within 10% of one another can be 100% different. Ensure you are comparing apples to apples, and remember implementation, not software, is the 80-pound gorilla of ERP success.

ERP is a tough topic! Clients worry they are “too small” or it will be “too expensive”, and in the interim, the competition passes them by since having the technology that supports a superior customer experience without breaking the bank is a “must”, no matter your size or industry. With that said, we have seen clients ready to “throw out” a perfectly suitable ERP system as they think it is the system, not the process or people that is the issue when it isn’t. If you’d like an expert to assess your situation to partner with you to achieve these types of results, contact us. 

The post ERP Selection: Why It Has Become a Strategic Priority appeared first on LMA-Consulting Group, a supply chain consulting firm.

Since I’ve been working on several ERP selection and design projects lately, it has reminded me of how challenging these projects can be. It is no wonder 80% of them fail! There are countless details, complex designs, cross-functional and cross-organizational collaboration required and varying skills and leadership styles required to survive, let alone thrive.

Thus, it made me think about ERP system goals. When should you upgrade/ implement an ERP system?

• Support growth: No matter how lovely QuickBooks reports look and how easy it is to use, it will not support profitable and rapid growth in manufacturing over the long haul. QuickBooks is not alone; there are many examples of other ERP systems with limiting factors that will no longer support growth. If you aren’t growing, you are declining. Thus, you must think about the infrastructure required to support growth before the decision is made for you.
• High levels of customization: Unfortunately, the more you customize with older systems, the harder it will become to upgrade yet the more important it will become to upgrade. The sooner you tear off the bandage, the better. Otherwise you could wind up super glued to an anchor weight on a sinking ship. Who wants that?
• M&A: If your company is running multiple systems due to mergers and acquisitions (or for other reasons), it is time to consider an upgrade. In order to grow and to prosper, you’ll need to be able to see across your facilities, companies and the like.
• For the Customer : Customers are requesting higher and higher levels of service. Business models are changing. For example, in some industries, e-commerce functionality has become a must. In other cases, large customers are dictating programs and requirements which bring the need for upgraded systems. Are you thinking about where your customers are headed?
• Leverage: One of the keys to success in any business is leverage. Can you deliver faster? Can you turn a 10-person job into a 1-person job? Can you grow quicker than your competition while providing exceptional customer service? You’ll need leverage.

For as challenging as upgrading and implementing a new system can be, you should be crystal clear on your reasons WHY. However, once you have your reasons identified, do not delay. Throw out the idea unless it’s compelling. However, if your reason is compelling, MOVE! It can be overwhelming to think about a new system; however, it is also easy to get passed up by your competitors who aren’t bogged down with outdated infrastructure.

There is no “right time”; unfortunately upgrading your systems infrastructure is always painful; the question is whether you spend a lot of money, resources and time when it’s too late to turn it into an advantage. In essence don’t wait for it to become a survival project; move when it is still a project that will accelerate your success.

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I’ve been talking with an increasing number of manufacturers and distributors who are beginning to think about upgrading technology and specifically their ERP (Enterprise Resource Planning) system.

Selecting and implementing a new ERP system is no small endeavor; however, it can yield vast results in the right situation. A few reasons to consider an upgrade include:

1. Service: Your customers are more comfortable with your ability to service them. For example, one of my clients has a key customer who requires an ERP system to assure them that this start-up company will have the proper business processes and systems in place to succeed.
2. Platform for sales growth: How do you grow your business successfully and at a quick pace with already overloaded resources? Leverage systems.
3. Customer need: In order to satisfy your customer’s needs without ballooning in size and increasing error rates, technology is required. For example, in today’s environment, e-commerce must be an assumption. Does your system handle it well?
4. Cash flow: Typically upgrading your ERP system will provide enhanced tools for inventory management. By implementing this best practice functionality, you have the opportunity to decrease inventory levels while maintaining/ improving service levels.
5. Margins: ERP systems allow for numerous opportunities to improve efficiency. Additionally, there are robust reporting capabilities to slice and dice key data for management decision-making. Wouldn’t it be helpful to know which customer is most profitable or which item is least profitable?

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