ERP and Business Process: A Chance to Make Repairs

One of the largest forfeitures of ERP value is the missed opportunity to repair illogical business processes. I am using the term “illogical business processes” here to refer to two separate business practices that co-exist perfectly well in a legacy environment, but are logically incompatible in an ERP environment.

Different Versions of the Same Story

One example that doesn’t seem emotional or threatening to anyone is the practice of each function having a separate and stand-alone forecast. It is possible in a legacy environment for every function to have a different forecast because every function has a different support system. My assertion that this is illogical is based on the assumption that (a) anticipating the future with reasonable accuracy is a required skill of any successful business and (b) an organization in which every functional area is empowered to envision and plan for a different version of the future cannot be aligned, and can only optimize performance by accident. If my sales forecast depends on tripling sales of product A, but your production forecast only forecasts doubling product A because that is all there is capacity to make, and our mutual friend in purchasing forecasts no increase in the components for product A, how likely is product A to achieve its financial goals? And of course, from an accountability standpoint, this is a black hole; everybody executed their job according to expectations, but the organization failed.

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Every ERP implementation will turn up a few of these business processes. It may be a delivery service promise that is incompatible with inventory policy, or a performance guarantee that is incompatible with existing quality performance. The point is, when these problems become apparent, who in the organization is responsible for fixing them?

Changing the World is Hard

Unfortunately, if the answer is “the ERP implementation team”, then that is the worst possible choice. The reasons this happens are why value is left on the table. The first reason is that there is a certain vanity among executives causing them to dismiss problems with existing business process design; after all, they reason, if it were important, they would have already known about it and fixed it. The second reason is that even if someone will acknowledge it and own it, it’s just incredibly hard work to fix it. These practices evolve because people perceive the cure is worse than the disease, and leadership has to work hard to change that perception. The last reason is that often, leadership does not understand the details of operating the business sufficiently to lead intelligent discussion about resolving business process issues with ERP.

The reason the ERP implementation team is the worst choice is because they can’t fix anything; they can only figure out ways to get around or discard one or more illogical legs. However, that just leads to the organization blaming the ERP system’s short-comings; “the new ERP system won’t let us…”

Are you leaving value on the table? Have you ever asked your ERP implementation team if they are encountering illogical business practices? Ask. You may be surprised by the answer.