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About ERP Systems

Top Three Questions prospects ask Manufacturing Practices, Inc.

Michael Roman - Monday, February 28, 2011

Top Three Questions Asked of Manufacturing Practices, Inc.

 

We receive and comment on a number of questions on a regular basis.  Here are the top three questions we receive.

What specifically is an ERP System?

Although there are some differences between the details of what comprise an ERP System, there are basic pieces that must exist to manage an Enterprise.

  1. Planning in the short term – (2 years or less)
    1. The planning system allows proactive activities to plan what is needed in terms of Material and Labor for the planning period
    2. To gain the best advantage in using the planning system, Inventory, Bills-of-Material, and Bills-of-Operations (Routings) need to be accurate
  2. Execution – activities that allow the plan to be performed
    1. The execution system operates on the planning system data to procure the materials and labor needed based on the dates and quantities from customer orders or the Master Schedule (or Forecast) data
    2. To gain the best advantage in using the execution system, reporting methods must be timely, and work center efficiencies and Part Master Lead-times need to be correct
  3. Control – activities that tie back to the planning and execution systems that identify if the plan is on target to meet customer goals and where is it failing to meet expectations
    1. The Control system operates on shop floor and purchase orders from the execution system and creates data that identify if dates and quantity deliveries are being met
    2. To gain the best advantage in using the control system, proper attention needs to be focused on the dates created in the planning system

Contrary to most beliefs, any company can and should plan resources in both the short and long term.  Sometimes those resources are internal people, equipment, and materials.  Sometimes these resources lay outside of a company’s boundaries.  Regardless, a company must and can plan them.  Starting and maintaining a planning activity like Sales and Operations Planning (S&OP) is not difficult.  The difficulty is getting past the objections for performing the needed planning activities.  The S&OP Process lays the foundation for the hours of production needed, the types of raw materials needed, and the delivery of customer expectations as well as a product so that daily activities becomes ‘business as usual’ instead of fire fighting activities.

What is the biggest hurtle companies face in implementing an ERP System?

Small and midsized organization all have a common factor that contributes directly to their achievements, the entrepreneurial spirit.  They act quickly and forthrightly and face the consequences.  Planning is not one of their strengths.  To the question in point, more than anything else ERP is a platform for planning a company’s activities.  That said education has proven very successful in bridging the cultural gap for entrepreneurs that now need to learn to plan.  Two types of education are necessary.

The top management of a company needs to understand the details of the ERP System to some degree.  They need an understanding of which modules perform what function, how those modules interact, and the benefit of a module to the overall success of the organization.  Educating top management separately from mid-level managers and users has shown to be the best way to achieve this goal.  There are several reasons for this but the strongest reason is that this method allows company executives to discuss delicate company issues without fearing that the other groups might misunderstand those discussions.  Another reason is attendees can discuss the details at the appropriate level for each group.

The second type of education involves how to plan.  Any company will benefit from utilizing a formal planning system and ERP is certainly that.  Learning to effective plan the activities of procurement and operations is not a difficult task.  The largest part of the process is getting Sales, Operations and Financial people to meet for the first, second and third times.  The process usually manages itself after the third or fourth meeting.

Properly educating the company has shown to deliver unexpected benefits for organizations that create extraordinary results.  It is difficult to know the actual ROI, but APICS suggests that the ROI on education is about $3 for every $1 spent.

How long a period is required for finding and implementing a system?

There is not a simple answer to this question except to say that IT DEPENDS ENTIRELY ON THE ORGANIZATION!  I have been involved in selection and implementations that took 9 months.  I have been involved in implementations that took 9 weeks.  I also worked with organizations that took several years to implement the basics of Master Scheduling, Engineering Change Control, Inventory Management, MRP, Work Order Scheduling, with Financial Integration.  It depends completely on how committed the organization is to making the implementation its TOP PRIORITY.

Every company is different because every organization’s management team manages a company differently.  Sometimes implementing an ERP System requires changing the fundamental approaches of a company’s TOP Management or even its personnel for sundry reasons.

Usually education is the First Step in the process.  The Second Step is to clean-up (LEAN or remove the non-value added activities) associated with the company’s daily activities.  The Third Step is to identify the key business requirements of the business.  The Fourth step is to find software that can demonstrate how to support the key activities with process steps that most closely match those of the Organization.  The Fifth Step is to train to use the software.  The Sixth Step is to adjust and test the processes.  The Seventh Step is to perform the Conference Room Pilot.  With the successful completion of the Conference Room Pilot, the system is ready for use.  How long does this take?  How close to executing Step 4 is your organization?  Is Step 2 complete?  Have you performed Step 1?

 

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