How to implement a smart ERP system
Well-planned enterprise resource planning (ERP) starts with keeping the goals of transforming the business and optimizing operations.
Smart use of enterprise resource planning (ERP) is based on a philosophy of integration, continuous improvement, the simplification and standardization of business processes, and the elimination of waste throughout the organization. Implementing ERP techniques can help companies improve their operational performance, customer responsiveness, and drive positive results to a company’s bottom line. The most important thing to remember is smart use of ERP should not be about implementing software; it should be about the transformation of the business.
Focus on business process improvement with ERP
The key to smart use of ERP is leveraging proven methodologies that are based an understanding of the enterprise processes and business requirements to identify areas of improvement and the reduction of waste. In a business process improvement project, smart use of ERP puts the focus on five areas:
1. Project organization. An ERP project begins with a thorough organization of the project-including organization of business process owners to design the project scope, objectives, and measurements for the engagement.
2. Current state analysis. To fully understand what’s needed, the approach then turns to an analysis of the current processes by gathering key performance metrics and analyzing their value, such as productivity, quality, overtime, and inventory. The team develops business process mapping at a functional level for such operations as quote to order, order to cash, and procure to pay.
3. Visioning and education. To arrive at the definition of the desired future state, the next step is to look at what is possible with a new or upgraded technology solution. Business process education brings industry best practices to construct the future state.
4. Future state development. Transformation follows with a laser focus on designing a future state that takes advantage of the new processes and opportunities afforded by new technology. This type of business process reengineering is specific to each business process flow and identifies gaps between the current state and industry best practices.
5. A business case for change – As the future state vision is honed and perfected, the team then takes this vision and translates it into a credible business case for change.
Smart use of ERP needs buy-in
Engaging top management is vital to facilitate to intelligently adopt ERP. A common risk in failed implementations is the lack of top management commitment and support. In order to get and sustain buy-in from top management, it is important to make them realize adopting ERP tools and concepts will help assure the company’s viability in the long term. Benefits of a well-planned ERP implementation effort include:
- Alignment of operations and corporate strategy
- Clear enterprise-wide communication
- Increased throughput on the shop floor and front office
- Reduced costs by the elimination of wastes
- Increased flexibility in satisfying changing customer demands.
Companies face challenges in implementing ERP concepts. Having a systemic approach to the implementation, incorporating education at all levels along the way and focusing on change management will help assure success in the adoption of ERP concepts and the changes required be successful.
Brad Staats is a senior consultant at Ultra Consultants, a CFE Media content partner. Staats has broad-based manufacturing and operations experience with more than 30 years of helping companies increase productivity, efficiency, quality, throughput, revenues and profitability. Brad has experience in ERP, supply chain/materials management, lean manufacturing, project management and integrating business and process systems in highly automated manufacturing environments. Staats holds a BS in administrative management from the University of Arkansas and an MBA in operations management from DePaul University. Early in his career, he earned the CPIM certification from APICS. He currently serves on the advisory board for the NE Indiana Lean Network.