Tag: erply

Feature – Lean-Enabled ERP

The old equation of part cost plus profit equals selling price is no longer accurate. Rather, a fixed or decreasing price less part cost yields profit. If manufacturers want to increase profits under this equation, controlling cost is key.

Increasingly, discrete manufacturers with blanket annual volumes are turning to lean-enabled concepts in an attempt to reduce waste (thus costs) to improve profitability. Some, however, have missed an important point: Lean manufacturing is not limited to waste reduction within pure manufacturing processes. It should also include all supporting activities, such as supporting ERP software. The entire organization should focus on eliminating inefficiencies wherever they occur, while continually improving quality.

The Japanese call waste Muda, which is defined as the opposite of value. Training employees to recognize and eliminate Muda can lead to reduced costs and, thus, improved profits.

There are eight types of Muda, motions that contain no value: motion, waiting, conveyance, correction, over-processing, overproduction, inventory and knowledge. (See sidebar) The goal is to eliminate activities that do not add value.
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Feature – Lean-Enabled ERP

Causes of ERP Failures

Causes of ERP Failures

by Bruce Zhang

ERP is the acronym of Enterprise Resource Planning. Multi-module ERP software integrates business activities across various functional departments, from product planning, parts purchasing, inventory control, product distribution, to order tracking. ERP has transformed the way multi-billion dollar corporations conduct their businesses. Successful implementation of ERP systems could save tens of millions of dollars and increase employee satisfactions, customer satisfactions and sustain competitive advantages in every-changing marketplace. Corporate executives are often perplexed by the stories that how reputable corporations (Hershey Foods) have failed miserably and lost ten of millions of dollars in their ERP endures.

The failures of ERP projects are preventable if we can identify the common causes of the failures regardless the companies and industries that implement them.

ERP Failures
Image by Behrooz Nobakht via Flickr

An ERP system is the combination of ERP software, the business processes that the ERP transforms, the users of the ERP system, and the computer systems that run the ERP applications. The failures of a ERP project is often the result of the failures in one or more of those four components. The failures in computer systems (hardware and operating systems) are much easier to identify and to fix, so we’ll examine the failures in software implementation, business process and user acceptance.

ERP Failures -Software Implementation

Module-based ERP software is the core of ERP systems. Most ERP projects involve significant amount of customizations. Packaged ERP software modules have built-in functionality that work in a standard and simplified enterprise environment. However, every organization is unique in data requirements and business processes. It is the customizations that transform packaged ERP software into ERP software that meets organizations’ individual business processes and operations. Long and expensive customization efforts often result the pass of release deadline and budget overrun. Customizations may make the software more fragile and harder to maintain when it finally goes to production. Major changes may be required in the later stage of the implementation as a result of incomplete requirements and power struggles within organizations

The integration of ERP systems (http://www.sysoptima.com/erp/erp_integration.php) with the IT infrastructures also challenges ERP project teams. The use of appropriate implementation methodologies can often make or break a ERP project. (http://www.sysoptima.com/erp/implementation_methodologies.php)

ERP Failures – Failure of Accommodating Evolution of Business Processes

According to Anthony, R. A, business processes fall into three levels – strategic planning, management control and operational control. Organizations continuously realign their business processes of all levels in response to the ever-changing market environment. Many ERP systems aren’t flexible enough to accommodate evolution of business processes. Many ERP system need a major overhaul in every a couple of years.

ERP Failures – Failure of User Acceptance

The users of ERP systems are employees of the organizations at all levels. ERP projects usually modify the company’s business processes which create extra workload for employees who use them initially. They may not think that the workflow embedded in the software are better than the ones they currently use. Ongoing end-user involvement and training may ease the difficult in organization’s adaptation of new systems and new business processes.

Bruce Zhang has over 10 years experiences in developing and implementing ecommerce and ebusiness systems in various industries. He operates a website www.sysoptima.com that automatically aggregates the news and new articles in e-business (ERP, CRM, Supply Chain Management and Knowledge Management) from over 50 sources daily (www.sysoptima.com/newsbot/) to help corporate executives, professionals and consultants to keep up with the latest development in enterprise software market. The website offers a knowledge base for understanding business software from a systems perspective.

Another Related ERP Failures post

Causes of ERP Failures

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ERP and Lean

Chris Shaul

Today, many ERP vendors are offering Lean Manufacturing modules in their solutions. These modules propose to assist companies in their lean effort. The real question is to what degree will these modules be used. Can a traditional manufacturer going to a lean model utilize a lean software tool immediately? When implementing an ERP system, process redesign is a must. The change that must occur in order to support an ERP system can be tremendous. But can a company bite off and digest all of the changes? Which should be done first, lean or ERP? These are all some of the questions that a typical manufacturing manager who is about to embark on an ERP implementation might ask.

First, lets define a few things. Lean is the removal of waste within a process and the concept of pulling items to a demand. It is also known as the Toyota Production system as it was developed and refined by Toyota in Japan. ERP is a business process enabled by software tools. It is not a software project! ERP streamlines your information flow such that it parallels your process flow. ERP works to build product to a forecast and then execute a production plan and inventory purchases synchronized to meet the predicted and actual demand. Lean, on the other hand, uses a pull system to meet an actual customer requirement. Lean uses the philosophy of smaller batches and reduction in non-value-added activities to create a much shorter lead time, thus delivering faster to a customer. ERP does not by its’ nature drive efficiencies in the production process. It only provides planners with information on what is going on and allows them to plan faster. If the process is broken, then automating it with the use of ERP will only highlight the problems.

What is the answer? The answer for many is to implement lean as part of an ERP intiative. Some would say that it should be a predecessor to an ERP initiative. Lean purists will argue that you do not need MRP and MPS to drive the production. ERP folks will argue that MRP and MPS are essential to having parts in-house and suppliers coordinated with the production. The answer for most companies is a hybrid solution, where lean is driving waste from the production and supply chain process (although also in the above-the-shop-floor activities too), while ERP is being implemented, such that you are automating value added processes and not trying to replicated waste processes in your new system. MRP can be used to plan longer lead time items, or items with higher value, whereas a Kanban can be setup for the faster turning and less expensive items.

Working from the perspective of a hybrid model, lean principles and practices can be implemented just prior to the ERP initiative. Then during the ERP implementation, the lean concepts must be considered and utilized in the setup of the new system. Tools such as Value Stream Mapping can define areas for quick improvements. Then once those improvements are made, a process flow based on the future state model can be applied to the ERP system. For example, a production cell might be setup for a particular product line with kanban inventory control. This would change how you would define your production process in the ERP system. Better ERP systems can run in this hybrid mode of traditional MRP and modern Lean concepts. Some product lines might be more suited to the MRP/MPS method because of supply chain issues or because of the long lead times that are associated with the products. Other product lines might be easy to immediately switch to flow manufacturing. Because of this, you want a system that can handle both methods.

Using a hybrid model, you select and position the ERP system to work alongside your lean initiatives. By leaning out processes (above and below the shop floor), you are avoiding “automating the mess.” Doing so will shorten lead times, reduce inventory, reduce production costs, improve employee moral and streamline your ERP implementation. Be sure to choose an implementation partner that is familiar with lean and is able to work in a hybrid manner. What order should these two tranforming intiatives occur? It might be best to have the lean initiative lead the ERP intiative by a few months. Then begin to implement the system. But do not stop the lean transformation. That should now be an ongoing philosophy of continual improvement. Use it to your advantage during the ERP implementation. Doing so will only help you on go-live day.

References:

http://www.advancedmanufacturing.com/September00/informationtech.htm

http://www.lean-manufacturing-info.com

http://www.qad.com/company/newsroom/lean_value.html

http://www.mapics.com/software/EE/SyteLine/sl7-aps.asp

http://www.cmtc.com/

http://www.inventoryinc.com/complimentary.html

Chris Shaul is a Sr. IT Consultant and specializes about ERP selections and implementations.

A developers view of ERP

A fascinating article on the design and functionality of an ERP system from a different perspective:

“… The task of IT is to begin building systems on a new foundation, using a new kind of blueprint. First, adopt the following rule: Business processes define database table relationships; database table configurations drive application components; applications drive interface development.

This hierarchy is powerful and effective, as long as you stick to it. Break away, and start redefining database tables to serve apps, or basing apps on interfaces (two long-standing standards from the old days), and your ERP framework will not bear the weight of it long. …

If your company is going ERP, then there are probably several driving forces behind the decision, possibly including: the need to increase supply chain efficiency; the need to increase customer access to products or services; the need to reduce operating costs; the need to respond more rapidly and flexibly to a changing marketplace; and the need to extract business intelligence from data over time.

All of this is fine for the decision-makers, but what does it mean to you as a developer? To achieve senior management’s objectives above, IT needs to make the following things happen:…:

Read more about ERP from a Develops point of view here.

The Shrinking Landscape of ERP

Chris Shaul

Now that Oracle has gobbled up its competitors, Peoplesoft and JD Edwards, and has aquired Seibel CRM, there is a shrinking landscape of Tier 1 vendors available in the marketplace. It used to be the old JBOPS (JD Edwards, Baan, Oracle, Peoplesoft, and SAP) that people relied on as the playing field for their selections. Now, you have Oracle and SAP battling it out at the top end. SSA Software is working at bringing Baan back to the game under the name SSA ERP LN, but the market has not yet recognized the “new Baan”. So essentially there are now three players in the Tier 1 space.

SAP and Oracle are continuing to compete on the extensiblity of their solutions. SSA is making some buzz in the market too.

So the question is, will there be more variety or options, or will it be more of the same. If it is more of the same from each of these three players, then who will companies turn to? One possible answer in the future will be Microsoft and their Axapta (Now called Dynamics AX) product. But that product is still a few years from being a true Tier 1 competitor. The advantage with the Microsoft solution is very flexible technology that allows solutions and modifications to be built around the product core easily, without breaking the upgrade path. This flexibility outshines the other players. The depth of the product will be their in a few years, but it is not there yet.

What about the Tier 2 players? Can QAD, Epicor, or Infor produce a competing product? As of right now, no. It seems that is not the niche they want to play in. So for now, in the upper tier space, there will be only a few players and few options. But with everything in the IT world, a short time can reveal many new changes.

Chris Shaul is a Sr. IT Consultant and specializes about ERP selections and implementations.

The ERP comeback

Chris Shaul

ERP seems to be on the move again this year. Vendors are ramping up, customers are calling again, selection projects are beginning. Why now? With all of the things going on in the world, what is it that is driving the return of ERP and technology initiatives?

This can be attributed to several factors. First is the rush to implement prior to the year 2000. In the late 1990’s, every company was working to shore up their systems to prevent the dreaded millennium bug. Companies that couldn’t patch or were not even sure about it, moved in droves to the ERP market. It was a frantic time. Now, six and seven years later, the lifecycle of those original ERP systems is coming due. Companies that implemented back then are now reconsidering their systems and are either performing major upgrades or migrating to new solutions.

Second was the freeze on IT spending in the post 9/11 era. After 9/11, companies invested in very little infrastructure and spent more of their budgets on IT security related issues. It is only of late that companies are loosening the purse strings again to invest in infrastructure and strategic systems.

Lastly, because of the IT downturn in the early part of the 2000’s, there has been a tremendous consolidation of software providers. Sage and Infor have quickly aquired a multitude of smaller software providers and are rebranding and in some cases consolidating their offerings for the small and medium enterprises. Microsoft and Oracle have recently gobbled up competing ERP offerings. Microsoft with the acquisition of Navision/Axapta, Great Plains, and Solomon. Oracle with the acquisition of JD Edwards and Peoplesoft. The result of this consolidation is a more focused message and a clearer landscape of providers. In the mid to larger enterprises, t is almost a choice of platform rather than options. You have the SQL Server camp and the Oracle camp. That is for a different article. But clearly, companies interested in choosing new software now have a smaller field of vendors to look at. Instead of a selection, it is now a choice of perhaps two ways to go.

This comeback is not without problems. Continue reading The ERP comeback

Open Source ERP?

Chris Shaul

There are many vendors around today providing Enterprise Resource Planning (ERP) Software . These systems control the entire lifeblood of the business enterprise. From manufacturing to financials, from customer service to plant maintenance, these systems run the company. The information flow is critical to a company. Further the information flow must match the process flow. With many commerical ERP systems available today, how can you be sure that the ERP system you are selecting is the right fit.

Some daring folks are now trying on Open Source ERP solutions. Few of these solutions are developed or maintained by a commercial entity. Rather, many are developed by a group of programmers who collaboratively build these systems. The real benefit to these systems is that they are really open. The source code is available for all to see and modify.

With this openness, companies can truly fit the software to match their process flow. But they will need to have the coding expertize in house. They will also need to fully understand their process flows. Can you use open source without modifying code? Of course. Most of these systems have best practices built in. It does help though to know your processes and be willing to modify and improve the processes to match the best practices.

Compiere is one such software. CIO.com has an interesting article about Compiere.

Another system, in the Customer Relationship Management (CRM) world is sugarCRM. This is a full function, open source CRM system. Its functionality rivals many commerical entities’ systems.

Is open source ready for prime time? It depends upon who you ask. If you ask a Linux enthusiast, then yes it is. If you ask a traditional IT manager, probably not.

Chris Shaul is a Sr. IT Consultant with CMTC and specializes about ERP selections and implementations.