ERP: Enterprise Requirements Planning or Expense Regret Pain
For over 20 years, Meaden & Moore’s consulting division has been helping clients through the maze of choices and difficulties in implementing ERP software. In that period, ERP has evolved and now includes quote-to-cash, requisition-to-pay, plan-to-produce, record-to-report, lead-to-return, call-to-resolution, and virtually every other business process an industrial company might perform. As a result, while software has grown more “user friendly” and reliable since the days of DOS and green screens, it has also grown increasingly more complex. With comprehensiveness comes complexity.
This article cites several avoidable mistakes we’re seeing among industrial companies.
The client manufactures 75% of its products to stock based on a demand forecast. For whatever reason, however, the client did not purchase the ERP system’s forecasting module, thus rendering the entire Material Requirements Planning (MRP) module worthless.
2. Purchasing unnecessary modules – Similarly, another client who didn’t use our Package Selection services purchased the Business Intelligence (BI) module because it enabled them to perform multi-dimensional analysis of their sales history. No problem there, except the company isn’t converting its sales history from the old system to the new system and, therefore, won’t have history to analyze with the BI module which will be useless “shelfware” until new history is accumulated.
3. Not implementing purchased and needed modules – We offer a Package Suitability and Utilization Assessment service for companies interested in knowing if its ERP package fits its needs and if its level of utilization meets industry best practices.
One business owner recently commented that “I can see when my people are using the machines we purchase, but I have no idea if they’re using the software we purchase.”
Our studies confirm his suspicion that ERP systems are often under-utilized assets. Employees instead, resort to comfortable spreadsheets, standalone databases, and manual workarounds. Ineffective change management, not buggy software, creates this state.
We have found that most companies use only 20-50% of the capabilities that they agree they need to be using. For example, a current client is using 21% of its ERP system’s features that fit 93% of its needs. We recently found another client to be using just 40% of its ERP system’s features that fit 86% of its needs. This latter client had planned to spend $500,000 to replace its supposedly ineffective system, but we convinced them to buy a few extra modules and licenses and perform a re-implementation, avoiding about $350,000 in planned expenses.
ERP software utilization remains a challenge because many companies forget the 5Ps: Proper Planning Prevents Poor Performance.