Thinking About ERP? An Overview By SYSPRO Business Solutions

Transcription

1 Thinking About ERP? An Overview By SYSPRO Business Solutions Manufacturing Insights 2011 Now that your foot s off the break, which route will you take?

2 Presentation Agenda What we re discussing today ERP What does it stand for, what is it, why do you care? How does it relate to business requirements? Could your company benefit? ERP Business value and return on investment Stories from Steve Thinking about ERP the book What strategic business objectives could ERP help you achieve, and how. Different ERP system implementation methodologies to consider Where to now?

3 What is Enterprise Resource Planning? From Wikipedia: Enterprise Resource Planning (ERP) integrates internal and external management information across an entire organization, embracing finance, accounting, procurement, inventory, HR, manufacturing, sales and service. ERP systems automate this activity with an integrated software application. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders.

4 What is Enterprise Resource Planning? ERP systems typically include the following characteristics: An integrated system that operates in (next to) real time, without relying on periodic updates. A common database that supports all applications. A consistent look and feel throughout each module. Installation of the system without elaborate application/data integration by the Information Technology (IT) department.

5 The Business Reasons for ERP Compliance Government, lender, customer, supplier ISO, SOX, IFRS, CSOX, CFIA, FDA, 21 CFR Part 11, HAACP etc. Current and / or Expected Company Growth Forecasting and Reporting Demand, Cash flow, Sales Risk of Obsolescence New hardware does not support aged software

6 The Business Reasons for ERP Islands of data Multiple systems / software with same data Change of senior financial person Merger or Acquisition

7 Symptoms that your business may benefit from an ERP solution: You are using legacy systems Your current system is becoming obsolete and the existing systems in the organization are no longer efficiently supporting the day-to-day processes, are negatively impacting the organization s growth or are not supported on modern computer hardware. You lack sufficient and accurate corporate performance information The right information is not accessible at the right time, you are not able to access accurate data on stock in inventory, month-end sales figures, orders in transit and other required information on time

8 Symptoms that your business may benefit from an ERP solution: You are undergoing uncontrolled growth Is the organization growing at a very fast pace, recently opened multiple operational units/offices in multiple locations or there is significant increase in volumes of production, processes, and work force Consistent mismatch between inventories and production management There is a lack of coordination between sales order processing, inventory management, purchasing and production planning in the organization

9 Symptoms that your business may benefit from an ERP solution: Duplication of effort Multiple departments, finance, HR, purchasing, sales store and maintain the same information separately Timeliness of closing Month and year end closing procedures require an extended amount of time due to manual calculation and reporting requirements Lack of sufficient and accurate information on company performance You are facing problems in capturing exact figures or are receiving mismatched data on the company s performance indicators

10 Symptoms that your business could benefit from an ERP solution: Abundance of manual processes Proliferation of spreadsheets, forced workarounds of the current system, manual processes to manage consolidations, asset information, multicurrency balances, bank reconciliations, etc. Little or no ability to forecast and plan The organization s strategic and planning division is not equipped to forecast and often relies on manual or gut feel methods for future projections and planning Fines / Fees paid for non compliance Companies in many industries must comply with specific regulations. Just a few of these regulations include IFRS, 21 CFR Part 11 for medical device manufacturers HACCP for food and beverage producers and ISO certifications and several others

11 ERP Business Value and Return on Investment Based on input from over 920 SMBs, the Aberdeen Group reported in it s most recent analysis whitepaper titled Measuring the ROI of ERP in SMB, which used 5 key performance criteria to report the results. While the implementation of ERP produced a reduction in costs and improvements in scheduling across all companies, top performing companies achieved significantly better results: 22% reduction in levels of inventory 93% inventory accuracy 19% reduction in operational costs 22% reduction in administrative costs 94% on-time and complete delivery

12 Presentation Recap We talked about: What Enterprise Resource Planning Software is Why companies use it Where it may benefit your company Typical return on investment

13 Introducing: Steve Bassaw Before his current position with a Canadian software distributor, Steve Bassaw was an ERP software user at a manufacturing company in the role of production planner and materials manager. To paraphrase a well-known TV commercial, Steve says he liked the software so much he joined the company." Steve is here today to share some stories of his personal experiences while working with ERP as an end user.

14 Software is Just a Tool Most companies use <40% of the capabilities of their ERP system Most ERP packages offer similar functionality that is based on industry best practices Realize ERP Software is not a do my job button

15 Executive Buy-In is Critical Don t expect your staff to get on board by themselves, they have a day job to do. And this is your vision to start with, not theirs. Human nature is that people are naturally resistant to change The main cause of ERP implementation project failure is lack of executive commitment and direction

16 Executive Buy In, Part 2 Champions Find and support internal champions, you are the General leading the charge, champions are your lieutenants, leading the charge of your strategic vision. Champions are people who get it ; they are not satisfied with status quo, driven to improve, and they see your vision. Champions are contagious!

17 Same people, new processes Changing the software is not the hard part Changing the business process is not the hard part Changing people s behaviour is the biggest challenge. Goal: accurate inventory. Challenge: Plant workers not used to reporting production, wastage, etc. Goal: need forecasts to feed manufacturing planning. Challenge: Sales department members view forecasts as a non-value-add burden.

18 Industry education increases value from systems Education on industry and operational concepts can be more valuable than training on how to use the software tool ERP systems are modeled on industry best practices and concepts using industry standard terminology Encourage education, e.g. APICS (CPIM etc.), PMAC, Project Management, etc.

19 Not Every Business Process Needs to be Modelled inside the ERP system Know when not to use the tool Sometimes it s overkill Sometimes the value returned is less than the cost in dollars and effort for the same result

20 Steve s ERP results: Increased inventory accuracy Ramped up the plant production from 5 to 7 days per week, while achieving a 20% overall reduction in inventory Order fill rate increased Raw materials arrived just in time, sometimes we used them before paying supplier, this provided increased cash flow. We gained preferred customer status with suppliers because we were able to forecast requirements

21 Steve s ERP results: We could finally do planned proactive plant shutdown for maintenance Warehouse no longer so crowded President nostalgic for excitement of the old chaotic days Sales department started to understand the importance of forecasting. For instance, production helps them achieve higher order fill rate if they provide forecasts (even rough) Senior lead hand in plant said he finally trusts the published schedule, doesn t allow anyone (not even President or Sales Manager) to override it like in the chaotic bad old days

22 Steve s Recap: Better value out of your current system If you are buying a new system, important thoughts, insights and considerations

23 Thinking About ERP? A collaboration between SYSPRO and iplan Industrial Engineers. The premise of the book is straightforward: The business objective you are trying to achieve determines the strategy you should follow when selecting, implementing and operating ERP.

24 What strategic business objective will be served with ERP? If you don t know the what and the why of your proposed ERP initiative, you are likely to wander down an inappropriate road of selecting, implementing and operating ERP. You may blunder upon success, but you are more likely to be dissatisfied with the results. This is the task of strategy. Define the objective, decide on the approach, assemble the resources, and establish the measure for determining success or failure.

25 What, how much and when will ERP contribute to the business objectives? Making a case for ERP can be quite challenging; no doubt due to the strategic nature of ERP and the difficulty in quantifying it s benefits. Some typical non-quantifiable benefits: Improved alignment of business operations with the business strategy Reduced business risk Improved financial management and corporate governance Increased information visibility

26 What, how much and when will ERP contribute to the business objective? Eli Goldratt, who developed the Theory of Constraints, states: A business benefit is only real if it does at least one of three things: Increases throughput (the rate at which the business generates money) Reduces Inventory (the money tied up in business operations) Reduces operating expenses

27 What are you trying to achieve with ERP and why do you want to do it? What strategic business objective will be served with ERP? What, how much and when will ERP contribute to this particular objective? The answers to these two questions should drive the strategy for selecting, implementing and operating ERP successfully.

28 Thinking About ERP Do you need to streamline your operations to improve productivity and profitability? To survive in today s competitive environment, organizations must continuously improve their operations and streamline their business processes to increase productivity and reduce costs. Manual processes can be time consuming and siloed systems lead to inaccuracies due to the need to rekey information into multiple systems. Do you need to enhance your decision-making capabilities? In today s competitive marketplace, you need every available edge to ensure your company s success. That means having the right information to help guide your strategic decisions. When data is spread through separate spreadsheets and other siloed systems, it is difficult and time consuming to create reports that support key decisions.

29 Thinking About ERP Do you need to collaborate with partners? As market conditions fluctuate and competitive pressures increase, to successfully meet customer expectations and maintain loyalty, you will need swift and efficient communications with your partners Do your processes and systems adapt and scale with your business? You want your technology solutions to provide the flexible support your business needs today; and those technology solutions should grow and accommodate your needs in the future. Are you planning to grow your business globally? Are you planning to operate your business outside Canada or North America?

30 The Degrees of Freedom Framework There are three dimensions of change systems, business processes and people organized into functions all are always present in any ERP project. One Degree of Freedom ERP Project The focus is solely on changing the ERP system with little or no change to business process or organization. lowest complexity lowest risk quickest completion replace a failing system legacy systems will not run on newer hardware consolidate multiple stand alone systems

31 The Degrees of Freedom Framework Two Degree of Freedom ERP Project The focus is on changing the ERP system and business processes with little or no change to the organization. substantially more risk than One Degree of Freedom project magnitude is greater substantially more complicated Often considered a bootstrap project that can elevate a company to a more professional level. Used to implement best practices and launch Lean Manufacturing, Activity Based Costing, and Advanced Planning and Scheduling initiatives, etc.

32 The Degrees of Freedom Framework Two Degree of Freedom ERP Project The focus is on changing the ERP system and people organization while leaving the existing business processes mostly intact. risk is dependent upon the number of organizational changes project magnitude is greater project complexity is dependent upon the number of organizational changes This project class is usually used to centralize or decentralize functions such as purchasing or finance.

33 The Degrees of Freedom Framework Three Degree of Freedom ERP Project The stated intent is to change everything simultaneously: the people organization; the way business is conducted; and the system for doing so. This class of project is used for startup companies, when an existing business unit is spun off into a new company, or when the business objectives demand such drastic changes. Highest risk Highest Cost Longest timeline Highest possible business gains

34 How to proceed: I d like to leave you with these points for your consideration: 1. What is and where is and where can you find the value from your current systems? 2. Get your ducks in a row before you start thinking about new ERP 3. Once you decide to move forward with new systems or business processes be involved, lead the charge, drive toward your strategic goals, measure the results and reap the rewards 4. Return to Step 1 and repeat that step often!