How-To: Get More out of your ERP
Studies show that most companies get 50%, or less, of the benefits they anticipated. Why does this happen, and more importantly, how can you get more out of your ERP? How long has it been since you installed or upgraded your ERP? If the answer is 18 months or longer, you have probably wondered why you aren’t getting all the benefits you expected. If it has been 5 years or more, you are probably thinking it is time to consider replacing it.
Understanding why the benefits were not achieved is key to avoid repeating the same mistakes. The root cause could be the method of implementation, execution of the implementation, or even the original expectation of benefits. In all three, business process design is typically at the heart of the issue. A shortfall in the business process design is the most common root cause we see during a project review or Business Process Tune-Up.
The most common reason this happens is when the company moves directly into the ERP selection process without first truly understanding the current business processes. Between what each employee knows as “second nature” and the “tribal knowledge” of the company, critical gaps and errors make their way into the list of requirements for selecting the new ERP, especially where processes cross from one department to another. Remember, “Ready, Aim, Fire!” won’t be accurate if you don’t know where you are standing when you “Aim”.
Another reason is an inherent flaw in the ERP implementation process. When you start selecting and implementing a new ERP system, you are very familiar with your organization (especially because you mapped your current business processes, right?). However, you are not familiar with the new system. Conversely, the ERP vendor is very familiar with their system and not very familiar with your company. This is true even if they did several days of “discovery”. Think of an employee you hired a week ago – are they an expert in you company? This is not necessarily anyone’s fault, although choosing an experienced and unbiased partner to help select the right system can greatly reduce the risk.
Key Benefits:
- Facilitator with experience in asking the right questions and keeping things on track (faster time to return and less of your employees’ time)
- Proprietary color-coded flowcharting system – speeds flowcharting and visually identifies inefficiencies (faster time to return and better improvements)
- External viewpoint to see beyond what’s being done today (incorporates best practices for better improvements)
Somewhat surprisingly, basic terminology can be a factor. In every project we’ve seen, our client has one or two key words that mean something special, and the ERP vendor has one or two key words or concepts that are critical to understanding how the system works (or its limitations). For example, one company was looking to replace a very old home-grown system. In their company, when a customer called in to buy something they would ask “what’s that going to cost?” And when company buyers called a vendor they asked “what’s my price on that?” So, for this company what they sold something for, they called “cost” and what they bought it for was called “price” – exactly opposite of the common business definitions. So when they started to look at screens and reports from the leading ERP candidate, nothing made sense! Fortunately the terminology issue surfaced during the business process design, helping them avoid needless confusion and customization (although we did need to address this in training).
So now that you have uncovered the reasons, how do you get more out of your ERP? The most effective way is to follow the old adage “How do you eat an elephant? One bite at a time”. We recommend that you start with a targeted business process review, focusing on one business process at a time, and work on it from beginning to end. This might be Quote to Cash or Procure to Pay or RMA, etc. The key is to work on one process at a time and to follow the process from the start all the way to the finish, including from person to person and department to department. We also recommend you start with a business process that is not too complex; ideally one with some low-hanging fruit. Your team will have an easier time learning of how to do the steps and initial success will build momentum and buy-in throughout your company. As an example, by choosing the invoice processing cycle for their first business process, one of our clients was able to reduce the cycle time by 3 days and reduce cost by 1 FTE.
Basic steps to map and improve a business process:
- Pick the business process to work on
- Identify the team. This should include: Subject matter experts, Faciliator/mapping expert
- Map the business process by creating a flowchart with chart paper and flowchart symbols
- Post the flowcharts and ask involved parties to view and comment
- Incorporate any additions or corrections
- Validate the flowchart, using a printout of the flowchart to follow real transactions
- Incorporate any additions or corrections from validation
- Team analyzes validated flowchart for systemic issues, like repetitive actions and non-value-added steps
- Revise the flowchart for improvements
- Determine changes in ERP or manual steps
- Test improvements by following real transactions using improved flow
- Test improvements by following real transactions using improved flow
This is the core of our Business Process Tune-Up service. While some businesses do this on their own, most small and mid-sized companies benefit from bringing in an outside expert to help, especially for mapping and improving the first business process.
Benefits include:
- Facilitator with experience in asking the right questions and keeping things on track (faster time to return and less of your employees’ time)
- Proprietary color-coded flowcharting system – speeds flowcharting and visually identifies inefficiencies (faster time to return and better improvements)
- External viewpoint to see beyond what’s being done today (incorporates best practices for better improvements)
Ready to get the rest of those ERP benefits? Contact us today - (206) 876-9229 or Click Here