SIGNPOSTS on the ERP journey

ERP vendors are working hard to develop new and enhanced functions for their applications. Far from being superfluous bells and whistles, these new features are intended to provide organisations with an impressive array of new tools that will help them improve their competitive position and strengthen their operating efficiency.

If one assumes the claims for these new ERP functions are true, the question that remains is: will your organisation be ready to take advantage of them?

There is evidence to suggest that some won't be. These organisations have a lot of work to do now - well before the new products reach the market - if they are to be prepared to put them to good use. As much as senior management may want to believe otherwise, ERP (enterprise resource planning) isn't a "been there, done that" issue.

Many organisations haven't actually "done" much of anything with their ERP investment, opting merely to replicate old processes in order to minimise the disruptions involved in transferring to the new software.

To see how far along your organisation has come in its ERP journey - and what preparations it might need to make in order to successfully travel the interesting paths that lie ahead - we've provided the following 10 "signposts".

Traditional ERP systems focused on automating and integrating business processes, sharing data and practices, and producing and accessing information in a real-time environment. However, all of those activities have been directed internally, within the organisation.

Because of that, ERP systems have yet to deliver on their full potential simply because the focus of activity has changed: the greatest value is now external in optimising the processes between organisations.

The Internet has dramatically changed the relationships between suppliers, customers and employees. Organisations that not only collaborate but also integrate their process with those of their customers or suppliers will obviously deepen their business relationships.

After all, it's harder to change a supplier or customer that is wired into your processes. ERP vendors are quick to focus on these external relationships. Their new applications will focus on inter- rather than intra-organisational relationships.

That's great, but what's the point if companies have yet to optimise their internal processes?

No corporate relationship is more critical than the one between the company and its customers. Research has shown that it takes just one-tenth the cost and effort to sell additional products and/or services to an existing customer than it does to win a brand new one. So why have so few organisations developed a truly customer-centric focus?

Simply because it has always been so hard to do, and it is increasingly difficult the more diverse the organisation is. In an increasingly competitive global market, few companies have the resources to devote to cultivating large numbers of new customers at the expense of extending relationships with existing ones.

While new technologies can provide tools to facilitate these relationships, they can also challenge them as well. The Internet and the continually expanding range of alternative distribution channels provide customers with a greater access to knowledge and suppliers than ever before - and that is severely testing the loyalty of some existing relationships.

It is, therefore, not surprising that customer relationship management (CRM) has become the latest ‘buzz' in the market.

A number of CRM products are currently available on the market, and ERP vendors are developing CRM applications, acquiring CRM vendors, or establishing strategic relationships with existing CRM developers that will provide a front-office functionality to their products.

However, the real challenge for companies to realise the benefits of CRM isn't in the technologies.

It's in the process and organisational changes they need to make to eliminate the functional silos that divide the customer experiences within their organisations.

That won't be a simple task; it will take time and involve major change-management issues.

However, for those companies that bite the bullet, make the changes and get them right, the paybacks will be enormous.

Few new features are as likely to be as popular as quickly as this one. Because of their intra-organisational focus, ERP systems to date have had only limited success in reducing production times, inventories or cost of production.

However, the Internet is proving to be the important link that helps companies optimise their external relationships with suppliers to better manage their sourcing of goods and services.

The area of maintenance, repairs and operations (MRO) purchases alone typically accounts for more than one-third of indirect goods and services an organisation purchases, at an average cost of $115 per transaction.

E-procurement offers impressive paybacks by eliminating maverick buying and enabling companies to leverage their relationships with their suppliers.

Ideally, companies will be able to integrate all their suppliers into the production cycle in real time.

An important consideration to begin addressing now is the system and other requirements that your customers may impose on you in order for you to link into their supply chains.

If your current ERP environment isn't compatible with that of your key customers, you'll have to move fast to adapt.

If supply chain optimisation and e-procurement look as though they'll be instantly popular with ERP customers, this is the area that may well be the most exciting for ERP vendors.

The increasing convergence of hardware, software and telecommunications makes it ever easier for companies to outsource various applications.

For large organisations with the volumes to justify it, outsourcing can reduce the total cost of ownership and eliminates the problems of network capacity, hardware obsolescence, the need for additional skills training, etc.

The question remains, however: is there a market for vendors to tap?

So far, there seems to be relatively little demand in the business world for this kind of ERP capability.

Companies can reduce costs while increasing service levels and convenience - meeting the growing demand for around the clock access to orders, reports, status and employee data. Self-service helps companies reduce the high costs associated with data entry and can lead to greater accuracy of information since customers or employees who enter their own data are less likely to make keystroke and other errors.

They will also identify and correct any errors that may already exist in their records. Clearly, adding a self-service capability to ERP systems is appealing, both for the increased capability it will bring to existing functions and the potential it opens up for new ones. However, if companies are to fully realise those benefits, they must begin now to ensure that they have the interconnected databases and other systems necessary to support this service. In particular, they need effective security mechanisms to protect corporate databases from the hackers who inevitably seem to try their luck with most sites.

Publicly listed companies are well aware of the marketplace pressures for improved disclosures, both in terms of quality and timeliness of information. As online trading grows, and stock markets move to 24-hour trading, these pressures will increase. At the same time, complex businesses with global operations find they need instant access to the operating information required to manage their enterprises.

Out-of-the-box ERP solutions do not come with an elegant reporting solution, but the new applications now being developed by ERP vendors will address this problem. With this technological enabler soon to be in place, companies should now be taking steps to address the underlying process issues.

This is another new feature that is bound to be an instant success with many ERP customers.

Browser-based Web access will provide companies with infinite, simple and low-cost access to their corporate data from virtually any place in the world. The Internet is quickly becoming the preferred ‘free' communications vehicle. Web access to ERP will resolve the many problems and costs (such as transmission and telecomms) that are currently associated with setting up remote access to central ERP systems. If your company is still wrestling with remote access, it's worth bearing in mind that all ERP vendors have announced their plans for 100 per cent Web-accessible solutions.

Workflow automation remains a largely untapped feature in most companies. Many simply transferred their existing functions and processes from their old systems to their new ERP solutions.

The biggest ERP operating cost is labour - associated with manual processes, reconciliation, error checking, and internal control. Workflow enhancements that automate approvals, routing and controls will not only reduce overall operating costs, but will also increase operating efficiencies.

Changing processes - including entrenched behaviour patterns commonly defended as "that's the way we do things around here" - is one of the most difficult undertakings for any organisation. Nevertheless, it is a bullet that management and workers will have to bite together.

With most ERP vendors either developing full-feature workflow automation or having strategic alliances for it, these changes will need to be made sooner rather than later.

Typically, employees work with many different tools during the day, and the number of those tools will increase as companies become more diverse and sophisticated, and as individual jobs become more multifaceted.

One of the key reasons why many critics believe ERP solutions fail to live up to the expectations companies have for them is because they are process-oriented rather than task-oriented solutions.

This is all bound to change when ERP vendors deliver multi-sourced content and functionality that mirrors the way employees prefer to work. Currently, most vendors are working on ‘business portals' or extensive personalised configuration tools designed to deliver task orientation.

With the fast-growing world of e-commerce - and, in particular, e-tailing - it comes as little surprise that ERP vendors are also focusing on this area.

Online retailing strengthens supply chain relationships, enables companies to open new distribution channels to reach customers globally, and can help reduce the overall cost of order processing.

However, online retailing presents a world of regulatory issues that need to be addressed.

Companies that sell online are able to complete transactions with customers in virtually every jurisdiction of the world, and that may expose them to compliance with a myriad of legal and tax rules.

Then there are the organisational and technological challenges to online retailing.

For example, building the infrastructure necessary to support 24x7 shopping and customer support is a major undertaking. Even though costs for online transactions are less than for traditional sales, companies' overall costs will rise since they will need to maintain their traditional formats in addition to their new online ones.

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