Overcoming the 10 Major
Problems with ERP
By Keith Launchbury, CFPIM, CIRM, CSCP
Workshop Outline
1.
2.
3.
4.
5.
6.
7.
10 Major Problems with ERP
Difference between ERP & ERM
ERM Organizational Checklist
Principles of Integrated Enterprise
Foundations of Successful ERM
Overcoming the Major Problems
Open Forum
What is ERP?
“A re-titled and re-programmed 1960’s era MRP
system purporting to provide complete business
system functionality for the whole organisation
plus it’s customers and suppliers from a single
software vendor”
This is NOT the APICS Definition,
but it is the truth!
ERP is not Pretty or Easy
Financial impact of the most expensive
ERP Failures
•
•
•
•
•
•
US Navy
Fox Myers
HP
Nike
Waste Management
Hershey
$1,000,000,000
$1,000,000,000
$160,000,000
$100,000,000
$100,000,000
$100,000,000
Sound Familiar?
•
•
•
•
•
“Surely, they can’t be that naïve”
“They thought they could just “buy” ERP”
“They said it would be easy”
“Don’t bore me with the details, make it work”
“What do you mean, it doesn’t have a daily
shipments report?”
• “We spent 6 zillion dollars and it doesn’t do
something that simple”
Implementing ERP is a monumental task
“A bit like employing
an army of consultants
to build a great pyramid
out of paper money
on a windy day”
Top 10 reasons why ERP projects fail
1. Top Management not involved and/or not
willing to change business habits
2. Inadequate project planning
3. Not getting the right people on the project team
4. Insufficient user education and training
5. Believing the software vendors sales pitch
Top 10 reasons why ERP projects fail
6. Underestimating the time and resources
required
7. Not having the right people on the project team
8. Migrating data from the legacy system
9. Project run by IT
10.Inadequate system testing before going live
The Current Business Environment
•
•
•
•
•
•
•
•
•
Highly informed and demanding customers
Rapid technological change
Explosion of information
New global markets
Tough worldwide competition
Environmental concerns are important
Quality is a given
Extreme pressure to reduce costs
Time and service are competitive weapons
Business Pressures
•
•
•
•
•
•
•
•
Customers are more demanding
Do more work with less people
Work smarter
Work quicker
Make it right now
No excuse for mistakes and rework
Use the right tool for the job
Access to the right information is key to success
Types of Manufacturing Strategy
High
Engineer to Order
Mass Customization
Product Variety
Make to Order
Assemble to Order
Make to Stock
Low
Low
High
Product Volume
Source: Keith Launchbury, Master Planning of Resources Review Course, APICS, 2000
Type of ERP Software Strategies
High
Standard code
Mass Customized code
Product Variety
Custom code
Modular code
Subscriber code
Low
Low
High
Sales Volume
Source: Keith Launchbury, 2014
ERP comes in one size only
NOTSWEET
DEBACLE EPICfail
XXXL
GAP outage
Dieinthemix
10 Major Problems with ERP
1. The system is integrated but the
organization is not
2. People still work in functional areas
3. No one understands the complete system
4. The system is too complex
5. The system was oversold
10 Major Problems with ERP
6.
7.
8.
9.
Implementation is a huge investment
It doesn’t do all the things we need
It is very difficult to access the data
The data base is powerful but the reporting is
weak
10. Technology is only part of the solution
1. The System is Integrated – The
Organization is Not
• How do you implement an integrated system
in a decentralized, divisionalized,
departmentalized environment?
• How do you consolidate information when
people use different numbering and naming
conventions?
2. People still work in functional areas
• People have become specialists in narrow
functional business areas
• Business needs generalists
• The system needs generalists with extensive
depth of knowledge in all areas
3. No one understands the complete
system
• People are still educated in specific
disciplines
• Support people may understand parts of the
system
•
•
•
•
Marketing
Operations
Finance
System design
4. The System is too complex
• How many data fields are on the Item Master?
• How many user defined fields are there?
• How many data tables are contained in the
system?
• What happens if there is an input error?
5. The System was Oversold
• One system (software supplier) can do
everything
• Replace all your old systems with one piece of
software – no interfaces and no support
problems
• It will run the whole organization
• It will help you reinvent your business
6. Implementation is a huge investment
• Implementation takes longer, requires
more resources, and costs more than
anyone ever imagined
• Implementation is never finished
• There is always another release
• Everything costs more money
7. The system doesn’t do all the things
we need
• The system appears to do many things
• In practice the functionality is limited
• Many daily business functions are not
handled by the system
• It is not good at handling change
8. It is very difficult to access the data
•
•
•
•
The system is not easy to access or to use
The system is not easy to change
Looks easy on paper and in the manual
Very difficult in practice
9. The data base is powerful but the
reporting is weak
• It seems that we spend a lot of time loading
and entering data
• But when we need to get it, it is not easy to
get at
• Many standard business reports are simply
not available
• We are told you can write them yourself
10. Technology is only
part of the solution
• Management really wanted to believe that they
could buy their way out of system problems
• You do not buy a successful ERP system
• You either change the ERP system or you
change the way you do business
• Management believes they can carry on doing
business the old way with the new system
Difference between
ERP & ERPII
The Death of ERP
That’s right. ERP’s days are numbered. And it is because
of a fundamental shift that is taking place regarding how
people consume products and services driven by the
massive growth of the cloud itself.
I’m referring to the shift we are experiencing away from a
20th century product-based, “buy once” economy to a
21st century services-based “Subscription Economy”
centred around recurring customer relationships.
Tien Tzuo, founder of Zuora
ERP is a Core system,
not a Complete system!
FSS
S & OP
Etc.
APS
MES
ERP
CAD/
CAM
ABM
PMS
SCM
QMS
It’s not just Planning!
Enterprises need to
manage their resources
not just plan them!
The term should be ERM
not ERP
World Class
•
•
•
•
•
•
•
•
•
•
Watching
Operational
Results
Leap
Dramatically, as
Competitors
Lose
All
Significant
Sales
World Class Operations
Control
Planning
Accurate
Data
Base
Realistic
Schedules
Right
Measures
Total
Process
Control
Reliable
Resources
Effective
Teamwork
Total
Flexibility
Total
Preventive
Maintenance
The three aspects of business
The Organization Perspective
VISION
MISSION
GOALS
PERFORMANCE
MEASUREMENTS
The People Perspective
Education
and Training
EMPOWERMENT
PROCESS TEAMS
REWARD AND
RECOGNITION
The Technology Perspective
ERM
APS SCO JIT
ERP MES
DISCIPLINES
Performance
OK?
BUSINESS
PLANNING
SALES
PLANNING
Resources
OK?
OPERATIONS
PLANNING
PERFORMANCE
MEASUREMENT
OPERATIONS
MANAGEMENT
SUPPLIER
MANAGEMENT
CLOSED
LOOP
ERM
Planning OK?
MASTER
SCHEDULING
MATERIAL
PLANNING
CAPACITY
PLANNING
The Planning Horizon
REVIEW & RE-PLAN
PLANNING HORIZON
ANNUALLY
5-10 YEARS
BUSINESS
PLANNING
MONTHLY
WEEKLY
DAILY
SALES & OPS
PLANNING
18 -36 MONTHS
MASTER
SCHEDULING
1 - 52 WEEKS
MATERIAL AND CAPACITY
PLANNING
1 - 366 DAYS
BUSINESS
PLANNING
SALES
PLANNING
OPERATIONS
PLANNING
Performance
Not OK?
PERFORMANCE
MEASUREMENT
OPERATIONS
MANAGEMENT
SUPPLIER
MANAGEMENT
ERM
FEEDBACK
LOOP
Planning Not OK?
Resources
Not OK?
MASTER
SCHEDULING
MATERIAL
PLANNING
CAPACITY
PLANNING
Enterprise Resource Management
(ERM)
A Business Philosophy and Practice
which ensures that the Right Products and
Services are delivered to the Right Customers in
the Right Quantities at the Right Time at the
Right Price therefore producing the Right
Results
ERM Organization Readiness Checklist
Workshop
Are you ready for ERM?
• Changed from
Internal to External
Performance
Measures
• Flattened the
Hierarchy
• Promoted Enterprise
Wide Thinking
Are you ready for ERM?
• Evolved to a Team
Based Organization
• Reengineered Major
Business Processes
• Adopted Activity
Based Costing
Are you ready for ERM?
• Eliminated all
Organizational
Waste
• Standardized
Information in all
Operations
• Committed to
Lifelong Learning
Are you ready for ERM?
• Created Flexible
Processes
• Accepted Single
Compensation
Program
• Benchmarked with
the Best
Are you ready for ERM?
• Become a Global
Organization
• Adopted Shared
Vision, Values and
Goals
• Driven out Fear
Are you ready for ERM?
• Developed a Flexible
Workforce
• Educated all Leaders in
Enterprise Resource
Management
Principles of the
Integrated Enterprise
Enterprise Resource
Leadership
Management
Planning
Typical Business Organization Chart
The Super Boss
President
Big Boss
Acquisitions
Someone else
Well connected
Big Boss
Outsourcing
Assistant to
Big Boss
Big Boss
Infighting
Big Boss
Operations
Junior
Manager
Muddle
Manager
Junior
Assistant
Little Person
Troublemaker Big Thinker
Peon
Supervisor
Assistant
Leader
The Worker
Smart
Person
Lackey
no purpose
Family
Member
Roadblock
Deadwood
Previous Boss
Yes Person
Hanger On
Junior
Middle Boss
Backstabber
Idiot
Super Boss
Friend
Social
Climber
Chair
Filler
Trouble Shooter Small Person
New Hire
Big Boss
Nothing Much
Middle Boss
Lots of noise
Type 2 Boss
Middle
Manager
Old Hire
Big Boss
Backbiting
Nice Person
Spy
Empty
Toadie
Scheemer
Dreamer
Pencil Pusher
Student
Trainee
Out to Lunch
Sleazy Boss
Geek
Saboteur
Good Person
Next Boss
Big Mouth
Leader
Clerk
Space Cadet
Assistant
Departmental Silos
Information Systems
Design Engineering
Human Resources
Production
Sales and Marketing
Finance and Accounting
New Organization Model
Strategic Direction
Planning and Coordination
Operational Execution
The need for Integration
•
•
•
•
•
•
•
Customer partnerships
Supplier partnerships
Global operations
Information as a competitive weapon
Managing diverse resources both internal
and external
Implementing new technology
Managing change
Organizational Alignment
Goals
Measurements
Mission
Vision
Plans
Values
Actions
Results
Rewards
Which department is responsible for?
•
•
•
•
•
•
•
Inventory
Quality
Customer Service
New product introduction
Product support
ERP implementation
Business processes
Foundations of Successful ERM
Building Blocks of
Successful ERM
Effective
Policies and
Procedures
Accurate
Information
Data Base
ERM
MRP
Trained
Educated
Workforce
Workforce
Realistic
Plans and
Schedules
Committed
Organizational
Leadership
Enabling
Information
Technology
FUNDAMENTAL OPERATING DISCIPLINES
Effective Policies and Procedures
•
•
•
•
•
•
A Policy is a statement of management intent
A Procedure is a work instruction
A Practice is a work habit
Policies may not be followed
Procedures may not be followed
Practices are difficult to change
In Reality
•
Practices may or may not correspond with
procedures
• Management may not be aware of all
practices
• Procedures may or may not be followed
• Practices are very hard to change
Implementation of Procedures
•
•
•
•
•
•
Develop
Review
Approve
Communicate
Ensure compliance
Maintain
Accurate Information
Data Base
•
•
•
•
•
•
Item Definition
Product Structure
Work Center Definition
Routings
Inventory Records
Open Orders
ERM Educated Workforce
• Education
– General Concepts
– Specific Concepts
• Training
– Instruction in procedures
• Assessment
– Needs Analysis
– Job Skills Definition
– Testing
Realistic Plans and Schedules
•
•
•
•
•
Plans must be realistic
Customer service depends on valid plans
Plans must be integrated
Plans must be communicated
Plans must be revised when situations change
Committed Organizational Leadership
• Commitment without comprehension is
•
•
•
•
dangerous
Comprehension is essential
Leadership must be willing and able to change
behavior
Leaders must “walk the talk”
Stay committed to the process
Enabling Information Technology
• Systems must work for people
•
•
•
•
Not the other way round
Systems should be flexible
Systems should be easy to use
Systems should be easy to change
Fundamental Operating Disciplines
•
•
•
•
•
•
Data Integrity
Inventory Record Accuracy
Realistic Schedules
Time Fence Policy
Change Control Procedure
Effective Performance Measurements
ERM Performance Measures
TARGET
Bill of Material Accuracy
Inventory Record Accuracy
Master Schedule Accuracy
Engineering Change Control
Planning Performance
Cost Accuracy
Routing Accuracy
Production Performance
Purchasing Performance
Customer Service
Productivity
Sales Performance
Forecast Accuracy
Inspection Performance
Capacity Performance
Inventory Level
98%
95%
95%
95%
95%
95%
95%
95%
95%
98%
95%
95%
95%
95%
95%
Actual/Plan
Data Integrity
The Information Haystack
Value
Availability
Intelligence
Information
Transaction Data
The Manufacturing Data Base
• The Item Master File
– Indicates everything you ever wanted to know about
any given item
• The Bill of Material File
– Indicates the relationship between a finished product
and the quantity of components required to produce it
• The Work Center Master File
– Indicates the work center in which a product will be
produced
• The Routing File
– Indicates the sequence of operations required to
produce a product
Class A Performance
D
C
B
A
95%
80%
70%
60%
72
Effective Planning?
OSWO
DEFROA
The Balancing Act
Sales
Actual
Forecasts Orders
Demand
Production Purchase
Orders
Orders
Supply
74
PLANNING LEVEL
Company
Business Unit
Product Group
Facility
Site
Department
Workcenter
Machine
Operator
Business Plan
Sales and Operations Plan
Master Production
Schedule
Material Plan
Rough
Cut
Capacity
Capacity Plan
Detailed Plan
Schedule
Medium
Range
Resource
Plan
Long
Range
Resource
Plan
TIME HORIZON
Minutes Hours Days Weeks Months Quarters Years
Monthly Planning Meeting
Weekly Scheduling Meeting
Sales and
Operations
Planning
Resource
Planning
Master
Production
Scheduling
Rough Cut
Capacity
Planning
Material
Requirements
Planning
Production
Control
Supplier
Control
Daily Delivery Meeting
Capacity
Requirements
Planning
Performance
Measurement
Summary
Keys to Implementation Success
Enterprise Resource
Management
Opportunities
•
•
•
•
Integration of operations
Consistency
Standard infrastructure
Information access and
transfer
• Reduced system
operation cost
Problems
• Organizations are not
ready for ERM
• People not ready for ERM
• Transitioning
• Mergers and acquisitions
• Technology gap
Enterprise Resource
Management
Costs
Benefits
•
•
•
•
•
Reduced time to market
Reduced cycle times
Reduced inventory
Reduced overhead
Increased profitability
•
•
•
•
•
•
Hardware
ERM software
Communication networks
People development
Consulting and support
System development
A proven path for ERM implementation
ORGANIZATION
EDUCATION AND TRAINING
DATA BASE
MARKETING
PRODUCTION
MATERIALS
HR
FINANCIALS
Q1
Q2
Q3
Q4 Q5
Q6
Q7
Q8 Q9
Q10
TIME
The Top Ten keys to
ERM project success
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Top management leadership
Ongoing education and training
Strong project team and leader
Organizational accountability
User selection of software
Good project plan
Realistic cost/benefit justification
System name/newsletter/promotional items
Regular performance measurement
Professional guidance
Managing the Change
• ERM Success is
– 80% people that work as a team
– 15% ERM Software that works
– 5% A computer that does the job
Education
the successful ingredient
• A common denominator to all change
management is extensive education
• Education breeds enthusiasm
• Enthusiasm breeds involvement
• Involvement breeds ownership
• Ownership breeds success
A comprehensive and ongoing
education plan
• Initial education of everyone to create
awareness of change
• Intensive education for people involved in
making the change happen
• Continuous education to ensure
continued success and improvement
My forecast for the future
of ERP is mainly cloudy with a
90% chance of pain
1. The System is Integrated – The
Organization is Not
The solution is:• Alignment of the Organization
• Common Vision, Mission, Goals and
Rewards
• Consistent Policies and Procedures
• Effective Performance Measurements
2. People still work in functional areas
The solution is:• Enterprise Resource Leadership
• Empowerment
• Process Action Teams
• Project Goals
3. No one understands the complete
system
The solution is:• Needs Assessment
• Education
• System Training
• Skills Assessment
4. The System is too complex
The solution is:• Simplify the system
• Select and use only those data elements
required to support current business systems
• Use ERP as a core system
• Add other modules where needed
5. The System was Oversold
The Solution Is:• Define Business Requirements
• Conduct a Full Load Complete Systems
Requirements Check
• Identify Applications Not Met
• Create Realistic Expectations
6. Implementation is a
huge investment
The Solution is :-
•
•
•
•
Simplify the System
Reduce Project Support Staff
Do Not Pay for Software Errors
Do Not Reinvent the Wheel
7. The system doesn’t do all the
things we need
The Solution is:• Join a Systems User Group
• Share Common Problems
• Do Not Write Custom Code for Common
Problems
• Pressure the Supplier to Get It Right
8. It is very difficult to access the data
The Solution is:• Create a Data Warehouse
• Provide Data Mining Capability
• Design Standard Inquiries
• Create Exception Reports
9. The data base is powerful but the
reporting is weak
The Solution is:• Create a Complete Data Dictionary
• Provide User Query Capability
• Develop a Paperless System
• Make It User Friendly
10. Technology is only
part of the solution
The Solution is:• Create an Integrated Enterprise
• Educate the Workforce
• Implement the Basic Disciplines
• Enforce Effective Policies and Procedures
For More Information
Keith Launchbury, CFPIM, CIRM, CSCP
Keith Launchbury & Associates
www.keithlaunchbury.com
Email: Keithlaunchbury@gmail.com
Tel (954) 303 1022