Grant Thornton: how to leverage ERP for value
It is a well-known fact that organisations invest a considerable amount of money and time in implementing their “Enterprise Resource Planning” (ERP) solutions. The combined software and hardware costs tend to be on the high side, with key members of staff typically spending upwards of three years supporting the implementation in some way. The investment of so much effort can invariably lead to exhaustion, and the eventual solution could easily start to mirror the legacy system it was meant to replace, there are numerous horror stories abound - of enterprise transformations going wrong. The scenario is fairly common - companies filing lawsuits, huge organisational issues along with other major challenges. Common causes tend to be highlighted quite frequently but much less so, are the missed opportunities, says Shahid Safdar, Technology Advisory Director at Grant Thornton.
Most organisations focus on costs, schedules, hardware, software features, and other technology problems when they are implementing their new ERP systems. ERP implementations, however, are much more than information technology projects. These projects provide excellent opportunities to transform the entire organisation. Approaching an ERP implementation with certain “value-add” objectives defined at the outset will help get the most from the investment made in time and money, and deliver capabilities that were not possible in legacy systems.
Some opportunities worth considering are:
Business Process Re-Engineering (BPR)
A new ERP implementation provides organisations with an opportunity to streamline the operation and “trim the fat” – the aspects of day-to-day operations that are unnecessary or, merely unable to keep pace with evolving business requirements. BPR begins with mapping how existing processes are performed and then comparing them with suggested business processes provided by the ERP software. Most ERP software processes are based upon “best practices” that have been gleaned from an extensive and varied install base and refined over time. These processes serve as a good starting point for redefining the way things are done, and the closer you can approximate these “best practices,” the easier your implementation is likely to be.
Workflow and Automation
The use of legacy systems typically results in a high volume of manual and repetitive processes which span multiple departments and are prone to error and delay. This situation tends to be compounded further by long-term employees who have come to see their jobs as “steering” these processes through different stages of completion. A new ERP system presents an opportunity to remove error prone and inefficient manual based processes with workflow tools. ERP enabled workflow automates most employee-process interactions by leveraging business rules, tasks, and checklists to deliver the required process outcomes. Physical intervention in repetitive activities is cut-out enabling employees to focus on more value driven tasks.
An ERP implementation provides a great opportunity to enhance reporting and make it more responsive, to provide training and to increase the ability of staff to analyse key data. It is likely that existing (pre ERP) reporting processes have developed over time. Reports may be written in computer programming languages by the IT department and they may typically be run overnight, as a batch process. Though batch reporting through the IT department may not go away entirely, handling most future reporting needs, especially ad-hoc reporting, at the point of consumption will become a possibility. The role of IT will shift from being a developer of reports to supporting end users and focusing on effective and efficient delivery using the most appropriate reporting tools.
A new ERP implementation provides an excellent opportunity to initiate a talent management programme – especially if one does not exist or the existing one needs a refresh. The new system will likely change the organisational makeup, job descriptions and skill sets will need to change dramatically, with some positions being eliminated while others are created. Because of this dramatic change in the expectations placed upon staff, organisations should proactively address the inevitable personnel issues and take the opportunity to help guide staff through the ERP implementation and prepare them for their new roles once the system is live. Consider the following benefits:
- Competency and skills planning - planning for competency and skills enables an organisation to identify the critical talents and skill sets essential for each position. This effort will result in a skills foundation that becomes the baseline for monitoring employee success throughout and after the ERP implementation process.
- Career and compensation planning - this type of planning provides a growth and advancement roadmap for employees that illustrates what is possible for them during the ERP implementation, as well as what they may transition into once the new system is up and running. Career and compensation planning also outlines the proper rewards employees will receive for obtaining the necessary skills and making a successful transition.
- Recruiting and performance management - early preparation for filling the inevitable vacancies will help your organisation attract and hire the right people with the right skills. Continually monitoring and assessing the progress of existing talent development helps you compare staff performance progress to organisational objectives and ensures that legacy staff members are responding to the new skill requirements.
Business intelligence (BI)
BI enables better decision-making based upon deeper analysis of raw data via the use of tools such as:
- Key performance indicators (KPI) – can be used to help define and evaluate progress towards long-term goals and objectives; and measured and tracked over time for more informed decision-making.
- Scorecards - this type of tool tracks the progress of departments and/or personnel within their defined responsibilities, as well as any consequences arising from their actions.
- Dashboards - tools that are easy to read graphical web sites or portals that consolidate and summarise information from numerous sources (reports, KPIs, other scorecards etc.) into one location. Dashboards can illustrate for example, how well an organisation is performing overall and can be customised for individual executives who can drill down for more detailed information.
- Alerts & exceptions - BI systems are set up with pre-set or dynamic thresholds to provide alerts or exceptions for immediate action to remedy or, take advantage of a particular situation. This could be something fairly rudimentary such as configuration of pre-determined stock re-order levels or, something a little more complex, such as integration with various mechanisms that support “machine-to-machine” communication (IoT) etc.
A BI capability tagged onto an effective ERP implementation can serve as a catalyst for the creation of a data-mining initiative - a project that helps derive greater analysis of patterns that may be inherent within the data, and that can be used for developing even greater actionable business insights / support faster and proactive decision making (i.e. a “Big Data” initiative).
The opportunities outlined above are not all-inclusive, there are multiple additional benefits that can be generated by defining and undertaking a well thought out ERP implementation, the areas that have been highlighted are merely a selection that stand out for obvious consideration.
Organisations also need to appreciate the macro environments in which they operate in and the demands that may be placed upon them by broader economic drivers or evolving legislation. Something that is currently very much at the forefront of triggering business change, especially in the GCC region, is the imminent application of VAT (value added tax) – expected to be in place by early 2018. VAT is a transactional tax with complex local country compliance requirements. For businesses that may be in the process of or, on the cusp of implementing an ERP system, correct configuration is essential to ensuring that large scale errors are not present in both the charging of VAT to customers, the production of VAT-relevant documentation and the reporting of VAT relevant information. The challenge is to understand all the available options and make decisions that best support your business, invoicing and indirect tax reporting obligations.
Since most ERP systems have a life expectancy in the region of 15-20+ years, experiencing a full ERP implementation will not be a common occurrence for most organisations. At no other time in the history of your organisation will you have the opportunity to make large-scale and sweeping changes in how the organisation operates. Are you ready to maximise the opportunity and take advantage of your ERP implementation to transform your organisation?