The problem isn’t with your ERP. The problem is with ERP.
ERPs came from an age of slow and expensive computers, ubiquitous paper, and simple business processes. ERPs were transformative during a time of information drought, allowing multiple people to view a sales order at the same time without having to find a typed piece of paper in a filing cabinet, performing the seemingly impossible with the magic of MRP and MPS to tell us what to buy and build months before we knew that we needed it, and storing purchasing information for 1000’s of parts, relieving us from constantly grabbing a printed vendor catalog. The 1990-era ERPs ran on huge computers, recoding and regurgitating business transactions to give managers more visibility than ever before. They were wonderful for the time.
But, while our phones have evolved from a mobile version of what hung on our kitchen walls to mobile versions of super computers, and our cars from hydrocarbon burning deathtraps to electrically powered machines that drive themselves while you nap, ERPs have evolved to become faster versions of the same recording and regurgitating programs of the 1990’s.
And now it’s time for you to pick a new one. Maybe it’s because the one that you’re using is so old that the software or hardware on which it runs is no longer maintainable. Perhaps the big evil company that bought the vendor of your ERP is increasing support rates to force you onto their latest and greatest ERP. You’ve grown and the small system that you started with can’t keep up with your data volume. Or maybe you truly need more from your ERP as your business processes have fallen out of your ERP and onto the bane of business managers thorough the world: the Excel Spreadsheet.
So you call a meeting of your ERP users and compile a list of requirements:
“We need an ERP that supports Breeder-BOMs so we can stop using all these spreadsheets.”
“We need an ERP that can store all of our receiving paperwork digitally so we wouldn’t waste time filing and trying to find paper copies.”
“We need an ERP that can track lot numbers of all our parts so we can track usage.”
“We need an ERP we can use with a mouse, or a tablet, or my phone, and we want to run it from the Cloud so we don’t need to maintain the hardware ourselves.”
Fair requirements, to be sure. Which of these is going to help your company grow? Which of these is going to make your company more competitive? This requirements certainly help out with the back office administration but if these are your only requirements of a new ERP, you’re better off hiring a couple more administrative employees or another IT guy and sticking with the ERP that you have.
Nonetheless, armed with an exhaustive list of must-haves and nice-to-haves, you start your search, or you hire an ERP selection consultant (the fact that such an expert exists, and they do for good reason, speaks to the mess that ERP has become), to find your next ERP. The ERP that will transform your business as much as your current ERP did so many years ago.
You’re doomed to failure. As diligent as you are, as far and wide as you look, if you’re looking for an ERP that’s all you’re going to find: a recording and regurgitating program, perhaps old, perhaps new, perhaps old with a new wrapper on it, but, all the same, just an ERP. Just something that really quickly records and regurgitates data, that, perhaps, offers a mobile interface and runs from the Cloud.
Let’s back up the whole decision process. There’s no question that you require certain functionality in your business software but if all you’re requiring from your business software is that it capture your existing business transactions how will you ever find software that transforms your business. Given this functionality first approach your dream system will only optimize your current business processes. Is that going to make a real difference in your company?
What if that same user meeting produced these requirements:
“We need to we reduce our inventory stock-outs, especially for those items that have longer lead times and bumpy consumption, without aimlessly spending on excess inventory.”
“We need to decrease the amount of time it takes us to produce our products and have a reliable way to estimate when we can ship an order.”
“We need to reduce our unplanned equipment outage with a system that passively monitors our equipment and tells us when we should maintain it.”
“We need to know how us how to price our products to undercut the competition but still deliver a profit, and we need to know which products we’re losing money on.”
Now we’re talking! You need a system that guides your procurement and production planners to ensure you don’t run out of important inventory, tells your production employees exactly what they should be working on in order to meet shipping demands, instantly advises your sales staff when you can have a product in your customers’ hands, constantly monitors your production equipment and warns your maintenance staff when it is approaching a failure, and offers advice to price your products competitively and profitably. Which of these improvements won’t increase your customer satisfaction and ability to compete?
So I’m asking you to turn the conversation around. Don’t lead with functionality requirements, lead with your goals of growth. Don’t ask a potential ERP vendor to check off a list of requirements, ask a solutions provider to show how his or her solution will improve the fundamentals of your company. The ERP vendor will recite stories of how your processes will be so automated and accurate that you’re bound to find growth and that you’ll be able to trim your administrative staff while your remaining workers will be more productive than ever. Maybe that’s true (plenty of published research says otherwise), but so what?
Your existing business processes aren’t holding your business back, it’s your ERP that is. Or, rather, your business is being held back by your expectations that an ERP will do more than you’ve asked of it; that a new ERP will magically show you the way to growth.
Once you start to insist upon growth instead of functionality you’ll find, quickly, that you’re not looking for a new ERP; you’re looking for an entirely new solution, a new class of technology. You’re looking for Agile Industrial Management system, an AIM.
Yes, I did it, I coined a new three letter acronym (with the help of some trusted colleagues). But we need a new category of software to separate the legacy ERPs for manufacturing companies from the new “ERP”s that are little more than order entry and purchasing systems from the truly innovative systems that are moving beyond simple MRP planning and 1990’s technology.
I’ll describe the difference between an ERP and an AIM in the next installment, but here’s a peek: