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The Gap Between ERP and Management
Wednesday, February 12, 2014

The tendency for corporations to view Enterprise resource Planning (ERP) as a technology project that the company is undergoing and that requires minimal attention by senior management, is a major impediment in the effective implementation and operation of ERP systems!

The rise of the IT profession has spawned a whole industry, in itself, that is cloaked in vagaries and shrouded jargon, all designed to promote the industry as being too hard for anyone but the specialists to understand. (Translate pay a lot of money for implementation services from third parties).

The difficulty in this technology evolution is that management at all levels need to get a more detailed understanding of the technology and the application and use of ERP as a core information tool for planning and control.

The ERP technology has now been around in one form or another for the past 40 years or so but the understanding of the potential of the technology, by senior management is, at best, poor. The full potential of the technology continues to elude organisations, particularly manufacturing and distribution industries due to their failure to fully utilise the business philosophy and make the necessary changes to the planning and control decision making that is enabled by a fully functional ERP.

The many organisation’s around the world, that have fully embraced ERP, have reaped enormous benefits in the areas of inventory reductions, purchase cost reductions, transport, production efficiency, reduced cost and improved customer service.

The competitive advantage of organisations that have successfully implemented ERP is significant and can only be brought about by senior management, IT and operational users all understanding what the potential of the technology is and how to achieve it. The ERP software component of an ERP project accounts for about 25% of the success of the project but unfortunately, for most organisations, it is seen as the most important part of the project. The belief that implementing a set of software modules provides the benefits of ERP is reflected in the statistics on failure against expectations. Seventy five percent of implementations are seen as failure against original expectations and even those companies that believe they have successfully implemented an ERP system they report benefits against expectations of around fifty percent. The failure here is separating the hype from the reality up-front when the project is being
cost-justified. A realistic cost justification carried out by the company less the technology hype would go a long way in determining a realistic expectation of benefits to be gained by implementing the ERP technology. This involves a greater understanding of what is possible and realistic and what isn’t by senior management at the concept and approval stage of the project.

The other seventy five percent of the project success includes:
Effective project management
Clear implementation objectives through a well- managed project plan and model
Data clean-up (Bills of materials, routings, inventory, work centres etc.)
Data conversion
Process reengineering

The tendency for companies to believe the sales hype of proven path implementation methodologies (never matched by actual outcomes) needs to change so that organisations take control themselves to ensure that the technology and all the decision making processes that are needed to make it work are actually implemented as part of the overall ERP project.

By immersing themselves into the full ERP project and not just seeing it as a technology project management can bridge the gap and ensure the technology is implemented and operated to provide the best return on investment.

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