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Archive for the ‘General ERP Articles’ Category

Our cohorts at Panorama Consulting often write good pieces about the importance of business process change management, especially when it relates to firms in growth mode who also happen to be implementing success strategies and software systems aimed at supporting that growth.

Recently they penned a piece on the topic of what you can learn from your business process management mistakes.  Because we also spend our days reviewing firms’ business processes, we thought their words worth sharing with our audience.  You’ll find their original piece here.

 

Just as researchers search furiously for the cause of disasters involving ships and planes, they suggest we too search for causes behind operational disruptions, which often cause morale problems among employees, inadequate software implementations and customizations, frustration all around, and low benefit realization.

To learn from our failures, the authors suggest we

  • Forgive – “Take a deep breath, forgive ourselves and others” to gain a clear head.
  • Analyze – Conduct a “lessons learned meeting to review project deliverables. Quantifying the direct and indirect costs in terms of time and money will give you an idea of the benefits you’ll need to realize to achieve a positive ROI on failure.”
  • Disseminate – Share lessons learned across the organization.

Panorama notes that “operational disruptions can be avoided by developing an effective business process management plan.”  They suggest including…

  • Business Process Mapping. We wholeheartedly concur, because any successful implementation always starts here.  At a high level, we map current processes and future-state processes, looking for technology touch points, redundancies (and ways to eliminate them), and how to do away with multiple and sometimes proprietary silos of information.  You reengineer your processes in order to optimize your workflows, both human and machine, to best capture the talents of your organization and the areas where you lend the most value to your customers.
  • Organization Change Management. Implementing new business solutions can often result in a decrease in productivity initially.  As the authors note: “Business process management cannot succeed without customized training and targeted employee communication, both of which should begin before software selection.”
  • Continuous Improvement. It’s a mentality.  And it will help ensure that you maintain optimized processes consistently into the future.  Set KPIs and other benchmarks which allow you to record progress and build toward improved performance.  Measure regularly.  If you can’t measure it, you can’t improve it.

Good advice all to anyone implementing process change, organizational change, or structural changes from software to process management.

 

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Software Connect is a consultancy that offers advice on business software.  They recently surveyed WMS buyers over the past two years to see what warehouse management software systems they were buying, and why.  Their conclusions were compiled into a report you can find here but we’ll summarize a few highlights here today, since we have helped folks implement WMS systems for many years and found their advice and comments timely.  For their report, they summarized 116 conversations with buyers.  The common denominator among these WMS system purchasers is that they all have “high order velocity and want to optimize their inventory movement” (and who doesn’t?)

Their key findings…

  • Fully 75% want barcoding, “still far and away the most used scanning tech in warehouses.” By contrast, just 7% were looking into RFID.
  • Budgets for WMS have gone up – as the ROI value over time has been proven, no doubt. In companies of 100 employees, systems are selling for around $300,000.  In companies of 20 to 100 employees, the costs run from about $100 to $150K.
  • Over 50% of buyers are managing multiple warehouses.
  • About half of buyers want standalone WMS, while the other half are looking for a full ERP + WMS system.
  • One-third of those surveyed wanted new software because they needed “more or better features,” (presumably over what they currently have), and 20% are looking to replace an older system.
  • 70% of buyers surveyed were tracking 10,000 or fewer SKUs. Over half of all respondents tracked between 1,000 and 10,000.
  • About 25% of WMS buyers manage customer-owned inventory, and thus have 3PL requirements, which often include things like unique labeling systems and of course the ability to track by multiple client-inventory-owners.
  • Buyers are using new WMS systems to replace a wide range of systems, but the most commonly cited were QuickBooks Enterprise, QuickBooks and Sage 300 (formerly Sage ACCPAC).

Software Connect’s wrap-up sums up their conclusions this way:

A WMS must be able to process all the steps necessary to complete an order. Often buyers demand software integration with other ERP, distribution, and supply-chain systems. All to better connect their warehouse, enterprise, and partner relations.”

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We’ve written several times here about the importance of the new technology called blockchain.  (If you missed those try here for a two-parter outlining the importance of blockchain to supply chains, as well as here for a quick primer blockchain, and finally here for a quick take on blockchain’s benefits to the supply chain.)

 

 

 

Today, we’ll take a very quick look at 3 obvious ways that the folks at ERP consultant Panorama Consulting see blockchain affecting life in the supply chain, in an article found here.

 

  1. Blockchain allows for streamlining secure transactions between logistics suppliers, manufacturers and third-party partners. Blockchain as we’ve noted is a secure ledger consisting of encrypted transactions that appears the same to every member of the chain.  It lives on multiple computer – not just a single one – where all members have an equal view of all its records, permanently.  (For the record, a blockchain has never been hacked, for this reason.)  Thus, all members of the supply chain from source to user see the same record of the data.  Imagine the possibilities…
  2. Blockchain makes everything traceable and enhances accountability. With every transaction visible to every party in the chain, blockchain essentially eliminates fraud, waste and duplication.  Once data has been added to a chain, it cannot be deleted or altered – only amended, publicly.  It promotes integrity of data, intrinsically.
  3. Overall, blockchain makes most things easier. To quote Panorama’s paper directly: “When it comes to the supply chain market, the use of blockchain simplifies almost everything. It virtually eliminates fraud and reduces errors. Additionally, it becomes much easier to manage inventory, improve partner and consumer trust and identify and fix any potential problems. Courier and payment costs are reduced, and the need for paperwork is eliminated. Finally, the long process of reconciling and auditing separate ledgers from different entities in the supply chain is eliminated.”

You’ll continue to hear and read about blockchain, both here and elsewhere, in the months and years ahead.  It’s a topic worth paying attention to for anyone involved in the world of business, transactions and supply chains.  Which in the ends means, pretty much all of us.

 

 

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Reporting and business intelligence can both be of critical importance to a company today.  After all, it’s often said that in the past we adopted technology to aid the business (or perished along the way), whereas today, we are all technology companies.  So let’s take a quick look at a few key distinctions between these two entities.

A Washington D.C. company called T3 Information Systems offers the following two definitions which seem to fit the bill nicely:

Reporting refers to an account or statement that describes in detail an event or situation. The purpose of reporting is to give a detailed status update of a situation.

Business Intelligence (BI) refers to technologies, applications and practices for the collection, integration, analysis, and presentation of business information. The purpose of Business Intelligence is to support better decision-making in business.

Reporting is mostly concerned with what happened in the past (recent or otherwise) or with the current status of things (i.e., sales, receivables, inventory).  Aging reports, sales analyses, customer ledgers and income statements are examples of reporting.

Business intelligence, on the other hand, is concerned with what has happened so far, or what exists in our repositories of data, that can be used to effect and improve future business performance.

3T explains BI simply as… Business Intelligence is built using multiple sources of data, giving the user the ability to cross-analyze and explore relationships that may not have been previously considered. The main goal of BI technology is to be flexible and open to discovering new insights.

An easy-to-understand example of a real-life business intelligence situation would be discount cards. Stores use discount cards to track customer purchases and targeted marketing campaigns. Business intelligence then analyzes and explores this data to inform future decisions.

In short then, business reporting is about status updates, past and current.  BI is about making future decisions. They involve different tools (a topic for another time) provided by an ever-increasing range of software vendors.  In some respects, it’s fair to say that one is intended to pick up where the other leaves off.

Yet you need both — eventually.  It’s just important to recognize the distinctions, and to decide for yourself when you need more than just reporting.  Then you can start exploring your options.

 

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A lot of companies’ ERP projects run longer and cost more than originally expected.  If you’re among them, you’re not alone.  A recent state of ERP report for 2018 from Panorama Consulting confirms with most ERP providers have long known: a few key project drivers make all the difference.

Panorama points out that nearly two-thirds of companies spent more than budgeted on their ERP projects in 2018 nearly 80% took longer than expected (we suspect the other 20% were lying or misinformed).

The report drew five key conclusions regarding the factors that matter when it comes to mitigating time and cost overruns.  They included:

  1. Setting a clear alignment between the ERP project and the organization’s overall business strategy. They give the example of the company who stated business transformation effort was aimed at leveraging technology to surpass its competitors.  Their main goal was to improve customer service.  But their implementation was more focused on using tech to improve and streamline back office functions.  Nothing wrong with that, mind you; it’s just that you can expect a longer timeline and deeper budget when your priorities are allowed to shift in this fashion mid-project.  Keep your eyes on the prize.
  2. Establish clear expectations during planning. “When expectations aren’t aligned with reality, bad decisions with rippling effects can result,” say the authors.  Committing your team to unrealistic project possibilities in terms of time and cost will likely cause you to cut critical project activities and end up with less than satisfactory results.
  3. Stay laser-focused on the people and the organizational change management. Studies say that ignoring these is the number one reason for project delays and cost overruns.
  4. Start with effective business process management and process improvement. Systems today are so robust and flexible that you can do almost anything – and that’s a problem.  Take the time to study and prescribe your organization’s unique process requirements and workflows before you begin actual software implementation.  Plan the work, then work the plan!
  5. Maintain Strong project management, governance and controls. Panorama recommends that you clearly define your project team, governance and controls as part of your project charter. Consider hiring independent, third-party experts that manage these sorts of implementations for a living.  Make sure clear roles and responsibilities, as well as priorities, are in place and that everyone knows what’s expected of them.  It’s a team project, but it requires that someone be “in charge” when decisions need to be made quickly or roadblocks are encountered.  No surprise here: project management is key.

We agree with the assessment, and concur that if you manage these five areas above, the rest of your project can fall into place in a manner that’s congruent with the project you thought you were conducting at the outset.  Easier said than done, no doubt.  But if you want to save time and money, this is where the magic happens.

 

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An ERP software provider called Abas (abas-erp.com) recently released a paper called “Writing a Better RFP” intended to advise companies on what’s wrong with most of their RFP processes, and how they might do better.  While we have no affiliation or relationship with Abas, we thought their advice was very wise and up-to-date in tackling the old paradigm for software selection.

Abas points out two flaws in most companies’ current Request for Proposal strategies:

  1. Putting excessive internal resources into filling out unnecessarily long RFP templates, and
  2. Paying third-party RFP specialists to create complex RFPs.

They make the point that these methods do little more than to make the process very expensive and bog down the selection process – and are of little help in selecting a vendor anyway.

The article’s author goes on to point out that today there are a great many common core functionalities across ERP packages.  Your goal should be to “reveal areas of competitive differentiation between potential vendors.”

So skip the generic questions they advise (which virtually all of today’s modern packages can handle) and cut to the questions that really matter to your company’s work, and how you run the business. They give the example of: “Is the ERP system capable of recommending an available-to-promise date or hard allocating inventory at order entry?”  You get the idea: ask the questions that are truly your choke points, or that relate to your competitive differentiators, to understand how the solution could improve your workflows.

Also, they advise: ask questions that seek to determine whether the vendor has experience and domain knowledge in your particular industry.  In this regard, all systems – and all vendors – are definitely not the same.  You want not just software fit, you want implementation expertise.

Abas points out – and we could not agree more – that RFPs are far too lengthy, and we too often find them filled with hundreds of largely irrelevant, or at least ‘generic’ questions that waste everyone’s time, and do nothing to help you establish clear winners or losers.  They further advise to give more ‘weight’ to the more important questions (to your business) and to the perceived expertise of your provider, and less weight to many of the generic components that most any system can handle, so you’re weighing in a manner that’s relevant to your most important needs.

What’s the right number of questions?  Believe it or not, Abas suggests (and again, biased or not – we prefer to think of it as ‘experienced’ – we couldn’t agree more…) that about 10 to 15, industry-specific  questions will tell you all you need to know to differentiate among vendors. 

Your RFP should be proactive, not reactive.  It should ask the questions most critical to the issues your business faces – and not just short-term, but down the road as well.  What emerging technologies might cause you disruption?  How well will your solution scale, or morph to fit your possible future needs?  Can it be changed and modified easily, and by whom?  All good food for thought.

And finally, ask yourself: Are you looking at cost, or value?  Sure, cost is important and the bottom line matters.  But focusing on cost alone is short-sighted.  Look at the bigger picture: total cost of ownership (TCO), along with the value proposition to your business over the next ten years, not the next two or three.

 

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Each year Panorama Consulting publishes an annual report on trends in Enterprise Resource Planning software and their implementations at companies large and small across the country.  They recently published a brief summary of their conclusions, drawn from this year’s report, that yielded what they call their five key takeaways.  We share those with readers today.  Most of what follows is taken directly from their report, which can be found here.

[We should note that the average company size reported was over $400 million, across many industries, so our small to mid-size clients should take these with a grain of salt.  Small companies’ needs, budgets and buying criteria often vary greatly from their larger counterparts, but some of the broader conclusions still hold true.  Your mileage may vary.]

  1. Cloud ERP software adoption may have finally reached a tipping point. We saw a very large increase in cloud ERP software adoption this year compared to past years, with this year’s mix of SaaS and cloud deployments increasing to 85%, compared to 15% on-premise deployments. While this number may not be striking on the surface, it is a big difference from last year’s data, which showed less than 50% of organizations were deploying cloud and SaaS solutions.
  2. The grand illusion of lower ERP implementation costs. Past years have shown that the average total ERP implementation costs anywhere from 4% to 5% of a company’s annual revenue. This number includes a project’s all-in costs, including software licenses, implementation costs, hardware upgrades, organizational change management, training, backfilling internal resources, and any other costs associated with the transformation.  This year, that number decreased to 3.6% of annual revenue. While this may sound positive on the surface, it actually reveals a flaw in our data: since most deployments are cloud solutions (see point #1 above), initial costs are naturally going to be lower. However, our implementation cost data only captures the initial implementation costs – not the ongoing costs. In most cases, cloud deployment costs less money up front, but can increase longer-term outlays due to higher annual subscription costs. It is important to take this data with a grain of salt.

[The reference figure of 3.6% of annual revenue holds relatively true for even smaller companies.  A $20 million company might expect an outlay of around $500,000 all told.]

  1. ERP implementations are taking longer and resulting in more operational disruption. Despite lower up-front costs, ERP implementation durations are increasing. While the total average duration increased a relatively innocuous 16.9 to 17.4 months, those that took longer than expected increased from 59% to 79%. Again, this can be largely attributed to the increase in cloud deployments, which creates a false sense of implementation speed and ease and results in unrealistic expectations along the way.  Operational disruptions saw a similar increase. Those that experienced a material disruption following go-live – such as being unable to ship product or close the books – increased from 56% to 66% last year.
  1. Despite relatively high satisfaction with ERP software vendors, overall ERP implementation satisfaction levels plummeted to 42%. Customer satisfaction with their chosen and implemented ERP software increased to 68% this year. However, satisfaction with their overall implementations plummeted from 81% to 42%, which suggests that more companies are either struggling with their deployments and/or managing to unrealistic expectations surrounding those initiatives.

[Or… they suggest a flaw in the data?]

  1. Organizational change management still reigns as the biggest challenge to a successful ERP implementation. For the second straight year, organizational change management was atop the list of top reasons why projects took longer or cost more money than expected. Ironically, many organizations think they will actually save time and money by cutting this important corner, but research tells a different story. You are more likely to find that you have underinvested in managing organizational change, and those that do find that they implement faster, less expensively, and with a higher ROI than those that don’t.

 

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