Executive guide to ERP Part 6: The operation stage

Executive guide to ERP Part 6: The operation stage - SYSPRO ERP SYSTEMS

At the end of the animated film ‘Finding Nemo’ are these last lines:

“We did it!”

“Now what?”

That is how people can feel after an ERP system has been implemented. After a long project, your organization has finally gone live with an ERP system that allows the company to automate and integrate the majority of its business processes, share common data across all functions, and produce and access information in real-time. The truth is that going live is not the end. Rather, going live is the end of the beginning of a program towards improvement, innovation and agility.

 

An ERP project is long-term

Companies should avoid having a short-term focus on what it means for its ERP project to be “complete”. A classic report by Deloitte Consulting discussed how ERP-enabled transformation occurs over an extended period (ERP’s Second Wave: Maximizing the Value of ERP-Enabled Processes). Understanding that an ERP project is an ongoing program is important to maximize and sustain the full benefits of an ERP system. The most significant benefits are more likely to be realized sometime after the go-live date. In order to get to that stage, executive decision-makers and their organizations must work to ensure that the primary drivers, the system, process and people come together to operate the new system and perform the new processes.

After go-live there is a stabilization period of a few months during which bugs are fixed and proficiency grows. Once that has ended, the operation stage starts. Success or failure is determined during this stage, and there are strategies that executives should follow to ensure that the ERP-enabled business benefits and strategic objectives are sustained and optimized.

Executive guide to ERP Part 6: The operation stage - SYSPRO ERP SYSTEMS

 

During this stage, three common problems can and do occur. These problems start the day your ERP system goes live and don’t disappear.

 

  1. Application erosion

Coined in 2001, application erosion describes how over time the value of the ERP system reduces. The system has not changed but the usage of the system decreases.

Much of the reason for application erosion is people-related. Staff only use the features they are familiar with from regular use. Newcomers get taught only a subset of what the organization started with. When the ERP project is young there are ‘super-users’. These people know the system very well, are advocates for its use and are the ‘go-to’ people for other staff to get answers. Over time, however, these staff move on, so a new generation of super-users is needed.

 

  1. Imbalance

A business will work better if the three dimensions of business processes, people and systems are in balance. It is like having a meal at a three-legged table. If not all the legs are equal length, it is possible to eat but it takes more energy and the chance of spillage is high. With unbalanced dimensions, the business can work but it takes more energy to maintain and the risk of something going wrong is much higher.

Imbalance can happen when the organization goes for advanced business processes and tries to run them on a system incapable of supporting those processes. Or, an ERP system is implemented but the organization fails to train its own people or hire sufficiently qualified people to operate the system.

 

  1. Degradation

Degradation occurs when a balanced status of systems, business processes and people organization is disturbed by some event and then over time the unused potential degrades to a new level where all three dimensions are in balance again.

The impetus for the initial degradation may be completely outside the control of the business. For example, a resignation of a key individual can destabilize the functional organization of a business, requiring modifications to the business processes and possibly requiring changes to the system to enable those left behind to cope with the new situation. The new business processes will often not work as well as they did before the key individual left and the system may operate in a less than optimal fashion. Another example is where a major customer suddenly demands a change in the way its orders are handled. This business process change may require changes to the ERP system that manages sales orders and product data which in turn requires additional personnel to cope with the changed business processes.

 

The maintenance strategy for operating an ERP system

To prevent these problems from happening requires a clear and definite strategy to enable organizations to maintain the business benefits of the ERP system. For all these problems, if you do nothing, they will arise. And if your organization suffers from them today, you need a plan to regain that value.

  1. The old saying “use it or lose it” applies to ERP systems. Functions not frequently used tend to be forgotten. Retrain existing users to prevent them from forgetting about functions they don’t use frequently.
  2. Staff turnover has an impact. Unless there is a formal training program for incoming users, often it is existing users that train new users. Even with the very best intentions, existing users will teach perhaps only 70-80% of what they know. So the first generation’s 100% of knowledge drops to 70-80% for the second generation and 50-65% for the third generation. To prevent application erosion, invest in a formal training program for new users.
  3. Ensure that the system operation is maintained at a sufficient level. Upgrades to software and hardware should be kept up-to-date and there should be sufficient funding and staffing of technical personnel.
  4. For business processes, the maintenance strategy should require that business processes are regularly reviewed for relevance and to ensure that business process documentation is in use and kept up to date.

The goal is that all three dimensions are in balance. To achieve this, the organization must have:

  • Business processes that achieve business objectives but are not unnecessarily complex,
  • a system that supports the business processes and minimizes additional or more complex functionality,
  • enough people with the skills to operate your processes with your system.

Rather than the discontinuous change of the ERP implementation, this phase emphasizes the kaizen concept of continuous improvement.

 

Getting full value from an ERP system

The Deloitte Consulting study mentioned that after having their ERP application in operation for a while, companies might embark on a synthesize/synergize period in which further improvements are sought in business processes and complementary solutions added. These changes may not be large-scale but they are still discontinuous changes. They are not risk-free and will create some instability before settling down. If there is an unstable situation before you begin, you will have trouble.

Businesses need a maintenance strategy to guard against the problems of erosion, imbalance and degradation. After the exertions of an ERP project, you may want to consider the additional time, effort and money of an improvement strategy. However, in the aftermath of the stabilization period, organizations are better served by focusing on a strategy to keep the three aspects of people, business processes and ERP system in balance. In the long run, you need both an operating and improvement period.

A company that considers “complete” as going live can end up disappointed. If, on the other hand, it takes a longer view and sees going live as a major milestone toward greater benefits from a longer, more ambitious journey, then the result can be very different.

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