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Archive for the ‘General ERP Articles’ Category

As we celebrate “America’s Birthday” we thought it might be worth noting a few facts about the 4th of July.  Indulge me for a brief civics lesson… (I have taught Citizenship in the Nation Merit Badge to many boy scouts over many years after all… 🙂

  • America’s Independence Day is celebrated on July 4 because this is the anniversary of the day that members of the Continental Congress agreed to the final wording of the Declaration of Independence, according to the Oak Hill Publishing Company. Fifty-six delegates signed the document on August 2, 1776, after an enlarged copy was printed.
  • Independence Day signifies America’s break from England and King George III. It was not, however, the start of the Revolutionary War, which occurred in April 1775. Independence Day is celebrated with parades, patriotic music, fireworks, picnics, barbecues and family gatherings. The holiday was first recognized by Congress as an official day of celebration in 1870.
  • Several dates of American independence could have been chosen. July 2, 1776 was when the Continental Congress agreed to break away from England. July 4, 1776 is the date originally imprinted on the document, which is what is shown on the large copy of the Declaration of Independence located in the National Archives. August 2, 1776 marked the day the delegates actually signed the paper. August 10, 1776 was when King George III received the document. Drafts of the large Declaration of Independence were replicated on January 18, 1777, in Baltimore.

And now you know.

Know too that everyone at PSSI wishes all our customers, providers, friends and associates a happy and safe July 4th Holiday!

(And for some of us, it’s even our wedding anniversary!)

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Today, we present a counterpoint of sorts to common ERP selection advice, initially sourced from industry consultants at Panorama Consulting who suggested a few reasons why, despite the fact that business investment spending was up about 10% last quarter, businesses might consider ditching, or at least delaying their ERP projects, offered up for your review:

  1. Your business processes might be the real source of your problems. ERP alone does not solve organizational problems.  If anything, it merely codifies standard practices for use throughout the organization.  Better processes drive efficiency gains, and sometimes big improvements can be gained simply from reengineering yours.  But contrary to myth, you don’t need to know which software you’ll implement in order to reengineer those processes – if anything, it’s the other way around.  Fix the business process, then shoehorn the software to the business and not the other way around.  And in fact, something fixing the process is enough.
  2. Organizational roles and structures may be another issue. As industry consultants at Panorama Consulting note: “Many companies use their ERP implementations as a mechanism to drive organizational improvements such as standardizing operations, but the technology implementation muddies the waters of the real organizational change management work to be done. By defining and implementing your future state processes first, your ERP implementation will be much smoother.”  We couldn’t agree more.
  3. There are many good alternatives to monolithic ERP systems. Technology today has bred a best-of-class thinking that has allowed software providers to solve specific critical business problems discretely.  More often than not, they are commonly referred to as third-part “add-ins” and they frequently solve problems very, very well.  By shoehorning yourself into a single branded solution, you may be settling for mediocre performance or functionality in areas critical to your operations merely for the sake of a “really good accounting system.”  Fact is, today, most ERP systems contain really good accounting systems.  But many of the best focus on doing a few things well, and then let established affiliate partners take care of the many other functions that can make a system really work for your unique needs, i.e., “best-of-breed.”
  4. A technology-agnostic analysis and strategy can be your best way forward sometimes. At our firm, we do them both ways: agnostic and biased.  The agnostic approach says: Just look at us and our processes (or suggested improved processes) and objectively define what we need without paying attention to any specific software.  It’s one good method.  The biased approach says: Take a look at our business and based on your prior experience and knowledge, if you want to slant us towards a solution you already think could work for us, then do that.  This often helps make it easier to paint a more detailed picture of a potential future state, and it can work well when your consultant knows your company already, or you have achieved a mutual level of trust.  Either approach works; it all depends on your own goals and biases.

The overarching point here of course is that it’s not always necessary to throw out everything to improve your processes, your organizational roles or even your software.  A good consultant will work with you to define your true business objectives, and then help you decide on the path forward that is most comfortable and secure for you.

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When it comes to collecting sales taxes, nexus (or location) is everything, as we are reminded by our friends at Avalara, a provider of cloud based tax automation for businesses of all sizes (Disclosure: we have clients using their software today).

Selling products to customers in multiple states can be taxing in more ways than one.  It’s complex, confusing, ever-changing, and the penalties for failure to comply can be daunting and significant.  Avalara’s software automates the tedium of knowing what tax to charge which customer, in any state.  It also manages all the necessary certificates.  It works in real-time by parsing invoice information to a cloud-based tax calculator which instantly and automatically inserts the proper sales taxes.

The fundamental question in nexus then is: “Where must we collect, remit and report?”  A recent white paper from Avalara (available free by asking in our Comments section) helps answer the question.  Of course, Avalara will tell you that you’ll need their software to fully automation the problem’s solutions, but you already knew that.  Still, they helpfully provide the basics you need to know regarding nexus.  If you have nexus (or presence) in a certain state, you generally must collect sales taxes in that jurisdiction.  But the “where” can be tricky, as rules vary from state to state.  Some examples:

  • A physical presence in a state, i.e., an office or a representative or a warehouse. If you have nexus in multiple states, you’ll be liable to collect and remit sales taxes likely in all of them.
  • Delivery and distribution: States Avalara, “As long as you ship goods to customers by a common carrier such as USPS, UPS, or FedEx, you are unlikely to trigger a sales tax obligation through delivery. In some cases, however, the use of a drop shipper or a contract with a distributor that functions as a drop shipper is considered a taxable nexus-creating activity.”
  • Employee location: “Nexus can also be created if you employ sales people in different states. If your employees or contractors conduct any work at a customer’s out-of-state location or deliver products in another state, nexus can also apply.”
  • Event attendance: “Regularly attending tradeshows in other jurisdictions beyond the physical location of a business can also be considered nexus in certain states.”
  • Advertising and affiliates: “If you advertise online or use affiliates to get business, you may trigger nexus. When a business in another state sends customers to your business through links on a website, this can create nexus in the originating state, according to affiliate or click-through nexus laws.”

While the case law is clear, the Internet is once again changing the nature of nexus, and who must pay.  As Avalara notes in a concluding comment:

In 1992, the Supreme Court decision in Quill Corp. v. North Dakota (1992) confirmed that, under the Commerce Clause of the U.S. Constitution, vendors with no physical presence in a state did not have nexus requiring them to collect sales tax, even if they makes sales to customers in that state.  However, as states attempt to collect as much sales tax as they can, nexus-triggering possibilities keep growing. Amazon.com, for example, collects sales tax in half the states in which it does business due to expanding definitions of nexus.

A copy of the white paper is available free from us, or from Avalara.com

 

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Any “digital transformation,” as the consultants at Panorama Consulting like to call things like ERP implementations, can seem daunting, a thing best put off ‘until tomorrow’ when, apparently, it will be… easier?  A recent article by Panorama makes a few points however that are worth noting, and that may get you off the starting line to your own internal project efforts and transformation.  We’ll meld their comments and our experience into today’s post.

For starters they point out, think about your ERP effort at a grass roots level.  You can start simply enough by having a few of your own people map out their current business processes, while thinking about the potential improvements they might want to see in a future state.  We always start our clients’ ERP projects with just such an effort.  Clients are usually too busy to do it for themselves, or perhaps too close to the subject to properly critique it, or lacking in the higher level business analysis skills that can help shape the best outcomes.  But at the very least, you can get your team thinking about how you do things today, and how you could better do them tomorrow, with less overlap and redundancy, and better information sharing and collaboration.

As you gather and review your grass roots analysis results, begin thinking about your overarching project goals.  Instead of starting with no sense of direction, think about the long-term goals business goals that underlie your IT, ERP or digital transformation project.  Be sure everyone understands the same goals, and how each of their individual parts in the process will contribute in the end to a more profitable, focused and leaner company.  Be careful not to get too distracted by the technology, and keep your purpose business-focused: that’s how you’ll succeed with customers and grow your own business.

Defining your business processes and requirements is the logical outcome of the actions and discussion we just noted.  It’s getting your ducks in a row.  It can take some time and outside help may be required (to learn what works and what doesn’t, best practices, etc.).  When you are ready to commence your actual ERP initiative, you’ll be equipped with the necessary data, thinking and step-outlines necessary to give your project its full forward momentum.

If you do all the above, you’ll be well prepared for the final step of hiring your outside consultant or reseller or implementer.  The process will go quicker and more smoothly if you’ve already given serious consideration to your business goals, your processes and workflows, and to your newly imagined future state.  It will help you more quickly and accurately match up process needs with software flows (and vice-versa), and save you time and money getting to the point where you’re ready to actually install and implement.

If it all sounds easy, well then, just remember that all along, your employees still have their regular jobs to do!  Be realistic in your expectations, fair in your judgments and remain focused on the planned business outcomes.  If you orient your resources consistently toward giving your people the tools they need and staying focused on the project’s business goals, you’ll fall into the small but highly desirable category of those who actually succeeded in their ERP implementations.

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… “123456”.  And that’s a problem, according to Security Keeper, Inc.  For years, tech firms have been trying to limit the damage hackers can do by cracking conventional passwords.  They’ve tried two-factor authentication for Gmail, iris scanning, fingerprint ID… and yet phishing and scamming schemes not only persist, they become larger, more audacious, more widespread and more costly.

Our firm has witnessed more than one of our ERP clients compromised by ransomware in the last year.  And while weak passwords aren’t necessarily the only way in to networks, they don’t help.  A product manager at Yahoo! once put it succinctly: “Our vision is to kill passwords completely.”  This was noted in a recent article on computer security in Bloomberg Businessweek (June 2017).  “In the future we’ll look back on this time and laugh that we were required to create a 10-character code” with mixed case, numbers and symbols, according to Yahoo’s Dylan Casey, VP of Product Management.  And the day can’t come soon enough for most of us.

To move in that direction, new ideas are emerging.  Yahoo lets email users unlock their accounts solely through a push notice sent to their smartphones, no password required.  Others are following similar “smartphone-as-skeleton-key” approaches, or are expanding the use of biometrics as unique identifiers, in lieu of passwords.  Samsung is about to allow Galaxy S8 owners authorize mobile payments (in the U.K. for now) utilizing the phone’s iris scanner.  Microsoft and Lloyds Banking are experimenting with allowing users access to online accounts using a webcam photo of their face.

Microsoft also offers fingerprint authentication via smartphone, with plans soon for desktops and laptops.  According to Alex Simons of Microsoft, “You’ll be able to take your phone, walk up to your Windows 10 PC and just user your thumbprint to log in.”  Barclay’s bank is experimenting with identify verification over the phone using vocal records.

While none of these security measures is perfect (you can fool the S8’s facial recognition for example by holding up a photo of the right person’s face), still… they’re big steps in the right direction.  As in all things tech, it’s only a matter of time.

Michela Menting, a security researcher at ABI Research still believes it will be tough to get those last holdouts from using their 123456 though “until we have embedded devices in ourselves that can act as that password.”  Scary thought.  Welcome to the future.

But we’ll close with this factoid from USA Today: 37% of Americans keep a piece of paper with all of their passwords somewhere they deem safe.  (Want to bet it’s more than that?)

 

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In our prior post we noted the key premise of ERP: that’s it’s a strategic investment in your business – just like those machines on the shop floor, or the key employees on your management team.  We also noted that it’s scary to many folks, who in turn wait way too long to make a change or upgrade, because sometimes the costs of efficiencies to be gained can be difficult to calculate, whereas the cost of the system itself is very clear – and of course, always too much.

Today we’ll comment on three points made by Panorama Consulting in a recewnt article intended to answer the question: “What can you do to get ahead and accurately weigh the implementation costs versus the cost of inefficiency if you don’t implement?”

  1. Quantify the costs of inefficiency. Your current processes are likely to be some combination of old, outdated, inefficient, broken, redundant or ripe for opportunity for improvement.  Your customers, your employees and your bottom line are all feeling these costs.  The question is: when are you going to start tracking, calculating and accounting for them?

 While you can hire an outside consultant to do this for you, do you really need or want to?  No.  You can do this yourself by time studies that honestly seek to calculate the very real dollar costs associated with each key process in your system.  At the very least, do a day’s worth of route or process tracking to get a baseline for what it costs today.  You’ve got to start somewhere.  Be sure to factor in all necessary labor, overhead and machine costs.  Don’t fudge – it’s your money you’ll be investing and saving after all.

Identify waste at its source by defining the true costs of these processes now while identifying areas where you even think automation could curb those costs.  You should be able to calculate potential decreased labor costs across a time unit of value (i.e., an hour, a day, a run or a shift).

 

  1. Have a clear vision of what your ERP implementation can and should do for your organization. The fact that your old legacy accounting/ERP system is old is probably true, but it’s not reason enough by itself for action.  You must define what you want in the next system – i.e., increased inventory returns, faster customer responsiveness, fewer shipping errors, increased sales throughput, reduced labor costs or shorter cycle times.  There are too many to list, but you know – or should know – which ones matter most to you.  You can’t identify the cost of these inefficiencies capably until you’ve identified, categorized and measured or calculated them.

 

  1. Define how your organization will achieve those benefits. Panorama consultants note thatNumbers in a business case are meaningless without clear and tangible steps on how to achieve them. In order to fully ‘operationalize’ these potential business benefits, your team will need to outline the steps and owners of the steps to realizing those benefits.”  They give examples like determining which process changes and software modules will fulfill a stated goal, such as x% of improved inventory returns… or how a certain process change might reduce your production cycle times.  You get the idea.  You have to ask a lot of questions… question a lot of processes, and process a lot of data and results.

But if you do, eventually patterns will arise and insights will be realized.  You’ll begin to see the inefficiencies and waste and learn to calculate them at least in gross terms.  (Now here by the way is where an experienced business process or lean consultant can really help make a difference.)

The point is: the costs are there, they are evident when you dedicate the time to look, they are very real and, in our experience over many years, they are very significant.

 

Your ERP investment can pay for itself ten times over – but you’ll never know it if you don’t start counting the ways: the inefficiencies, the improvement opportunities, the competitive advantages, the costs and workflow reductions… all of it.

 

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Deciding finally to upgrade your old accounting system into a modern ERP system is never an easy decision.  All too often, we’ve seen that nebulous fear cause many a client to wait too long.  Usually, it takes the sunsetting (i.e., discontinuation) and total loss of support for their current product – with maybe a touch of hardware obsolescence and crumbling network infrastructure thrown in – before they’ll finally bite the bullet.

We think that’s because it’s hard to quantify the cost savings and efficiencies that will be gained against the much more plainly understood “cost” of the system.

All too often our constant reiterating wail to clients that ERP is a strategic investment in your business – just like a machine on the plant floor – falls on deaf ears much like the baying of the coyotes outside my windows on an Indiana night.

Just this week a client told us that they are not spending any more money on software for the rest of this year.  That’s like saying I’m not spending any more on oil and maintenance for our equipment.  The difference?  Most businesses have difficulty appreciating that – done right – the improvements to processes and business alike that result from a strategically used ERP system can save five, ten or even 100 times their costs in wasted or redundant labor and other inefficiencies.

Except of course: We’ve always done it this way…

You can’t blame them really.  Most folks are coming off “accounting” systems built in the 80s or 90s that mostly documented business ‘transactions’ and not much more when it comes to process improvement.  It’s a stretch for them to appreciate that ERP is just the tool we use to codify and standardize business process improvements.  It’s not about the software, per se, it’s about the improvements to processes and the reduction in costs that ultimately flow through it, once processes have been realigned and the software is configured to accept them.

It’s hard for clients to wrap their heads around this, when all they know is what’s worked in the past: build better widgets, and increasingly more of them, as cheaply as possible, and all good blessings will flow.

The idea that wide swaths of a business might be “leaned out” through the implementation of improved processes woven into an extensive enterprise management system that makes those changes ‘stick’ takes some education and some getting used to.  And it takes an investment in the foundation (like working a little compost into the garden dirt) before the changes can begin to grow and bear fruit.  In other words, it can be a leap of faith.

So in the post that follows, we’ll take a high-level look at three steps to weighing the costs of implementation against the cost of continued inefficiency.  Stay tuned…

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