Undertaking an Enterprise Resource Planning (ERP) implementation is most likely one of the single most expensive and, when done correctly, most transformative event a company can ever undertake. However, the value derived through the implementation is fundamentally not a result of the technology. The value comes from the transformative event. From the change in processes. The harmonization of data. Beginning your with a Corporate Performance Management (CPM) implementation is a major step to ensuring you don’t become an ERP horror story and you realize the return on both your ERP and CPM investments.
ERP Implementation Journey
Let’s take a leap forward in time. You’ve spent the time and the money on a new ERP system. You went live with the first wave of deployments 3-6 months ago. It went as well as can be expected and operationally things are starting to settle down. Based on your defined success criteria, you should begin to see the operational improvements you expected. Perhaps orders are no longer being released without inventory available to fulfill them. System managed accounts help with the Accounts Receivable/Accounts Payable/Fixed Asset ledger to subledger reconciliations. You have visibility to the margin generated at the order/line item level. This is great stuff, but for the entire company is the close any faster? Is the forecast any more accurate? Can the finance organization deliver more value or does it continue to be 3+ weeks every month just getting the basics done?
You’ve got 2 to 3 more years until the ERP is completely rolled out, but you also have new acquisitions in the works and the reality is your ERP journey will never be completed. Let that sink in…. your ERP journey is never done.
Implementing large new systems like ERPs are intentionally disruptive. A key objective is to maximize automation to improve operational effectiveness across the board – sales, purchasing, finance, etc. The first several weeks after a go-live, the focus is ensuring the individual transactions are running through the system appropriately and everything is operating as intended. As the volume of transactions grows and time goes by, you can shift your focus away from how individual transactions flow and toward more analytical or managerial questions. How do I see my sales by region, by sales office, by salesman? What is my profitability by product line? How do I get this specific slice of information?
If three to four months post-implementation your people are extracting data out of the ERP into excel, adding VLOOKUP’s, running pivots and manipulating data, then you may have achieved a good portion of your objective regarding operational efficiency, but you have completely missed the boat in terms of analytical and managerial efficiency. Excel is great for ad hoc analysis. But when do we begin to admit that not all requirements for management reporting/analysis are ad hoc? It is an on-going, business-critical capability that needs to be given the same level as attention we give the operational side of the business. How often do you ask a question and then the following month, quarter or year ask the same question again where it consumes weeks of resource time to generate the analysis?
This loop is often repeated for the same question quarter after quarter or year after year. Just like any other area of your business, efficiency is critical. You need to take out non-value activities. Repeatedly asking the same questions indicates you must establish standard processes and capabilities to provide the answers. Excel is likely the best solution for the first or only time a question will be asked, but once the same question surfaces multiples times – excel is no longer the answer.
Before your ERP go-live, it is important to determine HOW you are going to use the information to manage your business. Identify key questions your solution should assist you in answering. You want to be in a position where you can process millions of transactions a second without missing a beat. Plus, remove the days or weeks pulling data together to answer more strategic type questions. If an overall objective is to increase the “nimbleness” of your business, ensure the implementation of best practice transaction processing gets you there. Only when you can ensure operational and analytical/managerial efficiency evolve hand in hand can you maximize the value within your ERP investments. To do this you have to start with the end in mind. An obvious answer, but how do you do this?
After the ERP implementation or re-implementation leap, you probably engaged with various ERP providers and were completely overwhelmed with the scale of the offerings. In general, software companies are fantastic at selling all the potential problems their technology will solve. This leaves businesses to determine which part of the sales pitch will be applicable to their environment. All major ERP software providers will have success stories with companies very similar to your own and with a little research you will find failed implementations for all of them. The short answer is – they can all do the job. The real question is what job do they do?
Software evolves over time but generally begins with very a specific core set of capabilities that expands over time. But that does not mean these additional capabilities are natural fits to the software or applicable to every company. Just because you can make software perform a task does, not mean you should! We often tend to see the software as a solution rather than simply a tool. We also tend to want to have as few different technologies as possible, making them do as much as possible. Too narrow a focus regarding software can lead us to only have a hammer and see everything as a nail.
Up next, the differences between an ERP and a CPM solution.