User:Carlos Conejo, LSSMBB/sandbox

70-80% of companies are Under-Utilizing ERP Systems!!!

Companies are still not fully utilizing one of their largest and most familiar IT investments -- their Enterprise Resource Planning (ERP) systems -- suggests a new study by performance management firm Ventana Research. At face value, this may seem surprising; companies typically invest tens of millions of dollars in ERP systems to manage their accounting, inventory, human resource and CRM processes. Just how much? A couple of the companies where I have worked have spent anywhere from 10, 20, 30, 40, $50 million and more! Ventana Research further estimates that Fortune 500 firms are currently saving $60 billion annually because of investments made in the 1990s.

The First Step in Maximizing your ERP is to: Turn the Module on!

Some readers would say that the first step is a comprehensive Needs Analysis and I would agree. The premise of this article however, is what to do with the ERP system that you have already installed. I have consulted at many companies that are fraught with ERP waste, redundant processes, employees inventing "work-arounds" to get their work done, using different files and document types: excel, Portable Document File (pdf), etc. Everyone complains and no one does anything about it. In many cases, the "fix" has been as simple as turning on a module. In one case the company where I was consulting was hesitant to implement Bar Coding, they gave me all kinds of excuses, from: it was going to take too long, they even talked about bringing in a consultant to help them develop their Bar Coding -- it would be a huge investment. When IT and I snooped around their ERP settings, it turned out that all we had to do was "click" the radio button in the settings, and Voila! We had Bar coding.

At a City, their Fleet Services had never activated half of their modules.

A Printing Company didn't realize that their ERP system, SAP, one of the most robust ERP systems around, had a module that allowed their Customer Service Department to automatically make outbound calls, send e-mails and texts to their customers to remind them to pick-up their orders, or to call to correct issues with their printing jobs. They were currently under-utilizing three people to do this. After we "turned the module on" we were able to re-deploy these three people into the Sales Department. This resulted in an immediate revenue gain of at least $1 million a Quarter!!!! How many years had they gone without this feature? How many years of lost revenue? I love company executives that pontificate and tell me that their business is too busy to improve their processes!!! Sure.... whatever you say. Are you happy making $50 million, or would you rather make $100 million?

Step 2: Make the Time to Draw an Enterprise-wide Value Stream Map so that everyone understands the flow of Information, People and materials.

This is the critical step normally conducted BEFORE your needs analysis but if the train has already left the station, it is still not too late to take a step back and do some heavy lifting. Map the major financial, internal processes, customer service, and supply-chain first. Then map each individual spoke or sub-process. Sometimes referred to as “Point-Kaizen.” Once you do this you will see all of the waste that has either built in or that is being generated because people are either working outside of the ERP system, or don’t know how to access the services.

Step 3: Make the Time to Train Employees how to maximize your ERP System

If employees don’t know how to use the system or how to access the features. How do we expect them to do a good job? Yes, this step can be “painful,” but remember the 1:3 Rule: For every hour we invest up front, we will gain three out the back. The State of California actually has some statistics that say a “typical company” that trains their employees can get 15 times return on invested time! Source: ETP.CA.gov.

Step 4: Set-up Your ERP System Correctly the First Time

Unfortunately, there are ERP Sales Reps that fail to provide the proper set-up support, or who may not fully-understand how each module might be used. Sometimes the implementation happens so quickly that even though the reps explained how to use the modules, internal folks have mis-understood how to properly set-up the module. So we get the proverbial: “garbage-in, garbage-out!”  As a consultant, I have experienced several times when the modules were incorrectly set-up. In a couple of places the fields were transposed so they never worked. We discovered this when we were trying to pull inventory reports and what we got was item descriptions. The fields had been transposed, and the organization had been using their ERP system this way for years. No wonder we could never find anything. Employees had invented their own way to get the work done, and they never told anyone about this!

At a metal manufacturer they invested in a robust ERP System, but they never took the time to set it up… at all. Employees referred to this scenario as a “donkey pulling a Cadillac.”

Step 5: Make sure You Can Grow Your ERP System as Your Needs Grow

Make sure your ERP System has capabilities to grow as your organizational needs grow. Make sure there is room to add peripherals or that there is compatibility with other software and hardware. You may not be using hand-held scanners and bar-coding today, but make sure that you know up front that you can if you need to in the future.