ERP

Companies that install ERP do not have an easy time of it. Don’t be fooled when ERP vendors tell you about a three- or six-month average implementation time. Those short (that’s right, six months is short) implementations all have a catch of one kind or another: The company was small, or the implementation was limited to a small area of the company, or the company used only the financial pieces of the ERP system (in which case the ERP system is nothing more than a very expensive accounting system). To do ERP right, the ways you do business will need to change and the ways people do their jobs will need to change too. And that kind of change doesn’t come without pain. Unless, of course, your ways of doing business are working extremely well (orders all shipped on time, productivity higher than all your competitors, customers completely satisfied), in which case there is no reason to even consider ERP.

Before the checks are signed and the implementation begins, it’s critical for companies to figure out if their ways of doing business will fit within a standard ERP package. The most common reason that companies walk away from multimillion-dollar ERP projects is that they discover the software does not support one of their important business processes. At that point there are two things they can do: They can change the business process to accommodate the software, which will mean deep changes in long-established ways of doing business (that often provide competitive advantage) and shake up important people’s roles and responsibilities (something that few companies have the stomach for). Or they can modify the software to fit the process, which will slow down the project, introduce dangerous bugs into the system and make upgrading the software to the ERP vendor’s next release excruciatingly difficult because the customizations will need to be torn apart and rewritten to fit with the new version.

No. It seems almost quaint to think of it today, but back in the days before Y2K, enterprise software vendors, and, more forcefully, the management consultants who installed the stuff, sold ERP as a magic bullet that companies could use to escape the coming Y2K apocalypse, create seamless technology integration across the company and force your silos of isolated, sociopathic bureaucrats to start working together. It was an irresistible sell to businesspeople.

ERP’s best hope for demonstrating value is as a sort of battering ram for improving the way your company takes a customer order and processes that into an invoice and revenue—otherwise known as the order fulfillment process. That is why ERP is often referred to as back-office software. It doesn’t handle the up-front selling process (although most ERP vendors have recently developed CRM software to do this); rather, ERP takes a customer order and provides a software road map for automating the different steps along the path to fulfilling the order. When a customer service representative enters a customer order into an ERP system, he has all the information necessary to complete the order (the customer’s credit rating and order history from the finance module, the company’s inventory levels from the warehouse module and the shipping dock’s trucking schedule from the logistics module, for example).

What is ERP – really?

In a nutshell, Enterprise Resource Planning (ERP) attempts to integrate all departments and functions across a company to create a single software program that runs off one database. It allows a company to automate and integrate the majority of its business processes. By sharing common data and practices across the entire enterprise, and producing and accessing information in a real-time environment, a good ERP system strives to make an enterprise more streamlined, more effective and more profitable.