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The ERP fever is moving from large organisations to small and medium businesses. The sheer number of SMBs can very comfortably accommodate all the players.

The same product that the large organisations are trying to conquer is now being offered to SMBs under a different label and more importantly, at an attractive price.

A few years ago, the horror stories of ERP fiascos were attributed to implementation failures or the poor maturity levels of the organisation.

The truth is slowly dawning - the culprit is the complexities and multi fold master data requirements, which many organisations could not comply with.

Is the position any different now?

Here are some questions to answer, if your organisation has implemented any ERP.

Were your quantified ERP objectives, which were set before the launch of the ERP implementation, met within a year of go live?

Do you run your planning engines such as MPS, DRP, MRP daily?

Have you been able to act as per the information generated by the planning engines for Production or Procurement, without any modifications?

Can the Top Management or the senior executives log into the ERP on their own and generate reports or get the information that they are looking for?

Are you happy with the internal controls that exist within the ERP?

Can you confidently confirm that the P&L account generated from the ERP can be considered for any decision-making?

Can you start your negotiations for a price increase with your customer with the product cost generated out of the ERP Costing System?

Are the materials procured for a particular Customer Order being issued for the same Production Order?

If most of the answers are "no", which seems to be so in a majority of the cases, these are the reasons.

The so-called Tier 1 ERPs are designed to accommodate any type of industry or organisation and as a result have features far more than what is required for a single organisation. Most times, the ERP selected is an overkill to the organisation. Only 30-40 per cent of the features are used.

The business requirements are so dynamic these days that one cannot specify any defined parameters. On the other hand, unless these parameters are defined, it would not be possible for the planning engines in ERP to give you the desired results.

There is a big mismatch between the information required for master data in ERP and what is available in the organisation. The requirements are far too many than you normally require. Due to pressure to go live, on most occasions, the accuracy and completeness of master data is overlooked.

The business processes have not been aligned with the ERP. Logically, this should have been done much before the implementation started.

ERP moves on processes (Customer Order to Cash, Procure to Pay, etc) but most organisations are still based on functions (Purchase, Sales, Accounts, Production, etc), creating gaps between functions and processes.

The result

The Inventory goes out of control since the Purchase Department has no clue as to why they need to buy the materials as stated by the ERP.

Production stoppages happen or materials pile up before a process. The reason is evident — the Purchase Department acted on their own instead of following ERP suggestions, as they thought it was not correct.

The Sales Plan of the Marketing Department does not match with Production Plan and there is a constant tussle between the Sales Head and Production Head on account of `On Time Deliveries'.

Decision-making is still based on a certain gut feeling of the individual and not based on facts as projected by the ERP.

Most of the information that the users want is not readily available in the ERP.

The way forward

The question one should ask at the outset is, `Why ERP?' Establish why your organisation needs it.

And then: Is the organisation ready in terms of size and maturity? Will it use the ERP for planning or is it a glorified data-capturing tool? What are the quantifiable objectives that the organisation wishes to achieve within a period of one year after going live?

Are these objectives worth the ERP investment? Can the organisation afford the resources in terms of manpower, material and finance?

Selecting the right product for the organisation is very crucial. It should not be an overkill. Most ERPs do have subtle differences, which impacts the organisation to a major extent.

Business Process Reengineering exercises aligned toward any ERP should be undertaken much before the implementation starts.

Change management

Change management is the key for a successful ERP implementation. Change Management Workshops should be initiated across the organisation.

Sufficient time should be allocated for Master data gathering and verifying its accuracy before going live.

There should be an MRP Controller in the organisation in close liaison with the Sales, Production and Material departments with authority to decide what is to be produced. His/Her word should be final.

As we see, extreme care and caution has to be taken before, during and after an ERP implementation.

The main objective of an ERP solution is to aid planning and not just data capturing and reporting, which, as most of us are aware, any normal business application can address.

ERP is one area of major investment where monitoring return on investment (ROI) has not got the attention it should.

To me, ERP still remains a wild animal, much to be tamed.

(The author is Director, Astral Consulting. Ltd.)

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