ERP systems not path to increased profit

ERP (Enterprise resource planning) software is not the answer to improving a company's profit, says the head of one supply chain software and implementation firm.

"CEOs around the country have all had three or four ERP systems over the past 20 years," says Motherwell Information Systems Asia-Pacific Chief Executive Officer John Quirk. "None of them have been very successful and they haven't added to the bottom line," says Quirk.

"The real issue for IT is to take profit improvement to these businesses. Companies can improve profits by 3 to 7 percent of revenue if they implement really good supply planning and optimization and all those things beyond ERP," Quirk said.

He says the enterprise resource planning system backbone provides the data but what's needed beyond that is very sophisticated optimisation, scheduling and planning for the business.

"The project part is easy and, technically, goes in well. You get 99 percent of the project right, but the business only benefits by 5 percent. The CIO then says the company can't absorb the changes," he said.

Motherwell gives the example of ERP producing a plan that says a factory should close for three weeks, but the factory manager won't accept that because he's geared all his planning the way he has done it for years.

"What companies really want to do is automate. New Zealand companies have done a lot to re-engineer their businesses but they could do a lot more," he said.

ERP is becoming a commodity, Quirk says, which is why the big vendors are moving down the food chain. "Will it make a difference? It's like a new car -- it will go a bit faster. I'd prefer it if these big vendors shared the risk and reward our of profit improvement," he said.

Motherwell's business is ERP implementation and support -- it deals in SAP AG and Ross Systems -- and supply chain implementation, with SAP and Numetrix.

The company, which is based in Auckland, has 250 staff in Australasia and a strong presence in the metals industry in the US. Annual turnover exceeds $NZ40 million ($US21.4 million)

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