Does your ERP system run your business?

It is very tempting to say your ERP system "runs your business." But it's your people that do the work, not your software.

People who use large ERP packages will describe how they use the software as "We use Oracle to run our business," or "SAP runs our business." It sounds tempting, doesn't it, to be able to install a monolithic software package and turn it on, and watch as it manages your entire company?

Of course it's not true. Software does not run your business, your people do. ERP software is a tool - a large tool, true, but still a tool - that your people use to run your business. ERP facilitates taking orders, managing inventory, managing shipments, recording revenue, etc. You can do all these functions without software, but it would be a lot more work, and would take a lot more people. Business software helps your people do their functions faster and more accurately.

The whole reason for ERP packages is to support your business, not to run it. If your ERP (or any of your business systems, for that matter) impedes your business, you need to revisit it. If your people tell you you can’t perform some business function or another because “the system won’t let us,” your organization suffers from the “our software runs the business” syndrome. They have ceded their jobs to the software.

Let me give you a simple example. I worked with a company that had no idea if they were shipping their products on time or not. They knew they were shipping products, and they knew they were getting complaints from their customers that their deliveries were late, so they knew they had a problem. They could not quantify it, however. The business users blamed the ERP system they were using, and wanted to scrap it in favor of some other big ERP system, which, of course, would have been a multi-million dollar, incredibly disruptive undertaking. But, the pain was huge, and they were desperate.

The problem, however, was a pretty simple one. One of the key uses of ERP systems is to help coordinate all the functions and resources in your organization to ensure that everything is available at the right time so that customers get their products when they want them. This is a key function of ERP. To think, therefore, that a major ERP package was preventing this from occurring was a stretch.

As it turned out, the customer service organization did not enter or manage the delivery dates of the orders they were taking. They just left it to the default date, which meant that the order dates used to schedule shipments were wrong, and they were therefore ignored by everyone. In addition, the product team did not provide meaningful lead-times and component structures (Bills of Material, inventory types, other data) which the system uses to help guide manufacturing and purchasing. Between these two omissions, the system did not have the data it needed to help coordinate activities. So, the system “didn’t work.”

The company was doing all their production planning and delivery scheduling manually - actually worse than manually, because their system was a hybrid of manual processes and an ERP that was running off of bogus data. The result was frustration, late deliveries, and organizational pain.

Once we identified the problem and implemented the solution, which was to have Customer Service manage delivery dates and ensuring the system had its product data properly set up and properly used, the problem disappeared. Delivery issues went from being the number one customer complaint to being a non-issue.

The real problem was not the software. Software does what its told on data that is provided to it. This is more than GIGO ("Garbage In, Gargage Out"), however. This was a failure in process. A company needs to know and use its systems properly in order to get the most out of them - indeed to get anything out of them. If you try to “set it and forget it” and let the software “run your business,” you get these types of issues. Software, even monolithic systems like SAP and Oracle, is not smart enough to run your company. Only your people are.

It’s your people, following good business processes, using ERP and other business technology, that run your business.

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