Fair warning: 10 signs your ERP system is killing your business

Most manufacturers look to their enterprise resources planning (ERP) system to enhance the organization’s overall performance. But in so many cases, the systems fall short of anticipated benefits. This checklist sets up 10 warning signs that will help you determine if your ERP system is killing your business.<br/>

11/14/2008



Most manufacturers look to their enterprise resources planning (ERP) system to enhance the organization’s overall performance. In many cases, the original drivers that led to an ERP selection were to streamline and simplify business processes for a sustainable competitive advantage.



So why do so many ERP systems fall short of these goals?



In case after case, implementations miss the mark, and instead of delivering promised cost reductions, business agility and performance improvements, ERP systems create complexity, duplication of effort, and in the worst cases, poor quality and customer service and a dangerous lack of visibility into the business.



Likewise, legacy ERP systems don’t keep pace with change. The manufacturing sector faces continually changing business processes, data, and requirements which make it nearly impossible for a typical, inflexible ERP system to keep pace with what the business really needs.



Customers are reducing the number of suppliers with which they do business. They are choosing the best and strongest. Will your ERP system prohibit you from being deemed the best?



The usual suspects

Check these 10 warning signs to see if your ERP system is killing your business.



1. The ERP system can’t integrate mission-critical business data.
Your data is “locked up” within your outdated ERP system and is difficult to access. You can’t easily analyze it for decision-making. Worse yet, quality management, engineering and design, EDI, customer orders, and release accounting all reside in “silos” of information that exist independently of each other. This silo environment increases complexity, and ensures duplication of effort with different versions of the truth, which compromises the quality, reliability, and accessibility of vital information.



2. Changes to the system are costly and time-consuming.

The software vendor issues releases every 24 months and rarely provides the new features you need on a timely basis. Any change coming from the vendor seems to cost you six figures and many months to complete. Nor can you find skilled resources to help with these updates at an affordable rate, so you are stuck using an outdated system and face the costs.



3. Your disaster-recovery plan involves tapes.

If your servers or data center burned, you would have to buy new equipment, configure it, and then reload your data from tapes. Recovery Time Objective (RTO) is the time it takes to get back up and running after a disaster, and you’re in a precarious position when it comes to this metric. The Recovery Point Objective—or how much data you would lose in the event of a failure—is significantly lacking with back-up tape methods.



4. Beefy PCs or “fat clients” are needed to run the system.

Sure PCs are getting cheaper, but running less memory and disk is always less expensive. If you need to install and maintain fat clients—that is, a networked computer with most resources installed locally rather than distributed over a network—you run into IT management difficulties, security risks, and high maintenance and licensing costs.



5. Maintenance fees are high.

With rising ERP solution maintenance fees, you’re not in control of IT expenditures. Some of the biggest ERP vendors consistently raise maintenance fees, which increases total cost of ownership over time. Technical differences among a range of applications also require hiring experts to implement and maintain the various applications.



6. You can’t access the data easily if you are traveling.

It’s obvious that business doesn’t stop when you are traveling. Smart phones help you stay in touch, but it is tough to do much from such a tiny device. Wireless connectivity is everywhere, yet you’re limited because you can’t stay in touch with business operations.



7. Upgrades are disruptive to the business.
As previously noted, software upgrades from vendors usually come out every 12 to 24 months. They often require updates to the operating system, database management system, disk space, hardware, and more. Upgrades take time to plan and to execute. You’re in trouble if the business has to be “down” for a period of time to do the conversion.



8. Trading partners can’t easily interact with the system.

In today’s manufacturing sector, the value stream is highly interconnected. More just-in-time replenishment is being done, and suppliers need easy access to your orders and inventory levels. Do your suppliers need to load special software to connect? Can they quickly and easily get the information they need?



9. New employees need time to learn the system.

Many older ERP systems are difficult to learn and workers are easily frustrated when they are instructed to “Press F1 to inquire” or “Press Enter to accept.” If you have staff turnover, you are losing money while the new people learn the shortcuts to get up and running.



10. Globalization is too difficult.
Many legacy systems require you to run a different version to support China, Eastern Europe, or other countries. Changes to the translation are difficult if possible at all. Rollups of localized, unique financial data are done via cumbersome spreadsheets. This is not acceptable in today’s global marketplace.



The next step
Chances are, some or all of the issues described above ring true for your business. So what’s your next step? Fortunately, a new breed of Software as a Service (SaaS) ERP resolves these challenges so manufacturers can thrive by doing what they do best—designing and building products—rather than writing and maintaining software.




About the author:

Mark Symonds is CEO of Plexus Systems, a vendor of Software-as-a-Service (SaaS)-based ERP vendor.





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