When I set out to write something about ERP (Enterprise Resource Planning), I was wading into an area about which there had already been millions of words written -- a Bing search for the phrase Enterprise Resource Planning yielded 2 million results. But intrigued by what I found, I persevered.
ERP, coined in 1990 by Gartner, grew from 1983’s MRPII (Manufacturing Resource Planning), which was itself based on MRP (Material Requirements Planning) developed in 1964 to counter Toyota’s manufacturing programs.
Each phase of this evolution came with acronyms providing a common lexicon for describing what organizations were planning to do.Along with this evolution came an escalation in scope, each level addressing more of the intended users’ processes than its precursors, and a subtle shift of focus: from the subject as a collection of functional challenges and means of dealing with them, to a structural edifice that can be developed, packaged, bought and sold as a coherent whole -- and product offering.
Look where you will: the record of ERP implementation is hardly reassuring.Depending on which survey you consult, most ERP efforts (from 50 percent to more than 70 percent) take too long, cost too much and achieve nowhere near their goals.
Why, I wondered, would something so obviously fraught with danger have become so intriguing to organizations dealing with their information worlds?And why, knowing all this, would organizations keep lining up at the ERP ticket window for a ride to at best an uncertain outcome?
Yet they do and there are dozens of vendors -- at least 40 -- offering "ERP” systems and solutions.Obviously, we’re fascinated by something about the prospect of integrating all our processes, hoping that our organizations will somehow begin to operate as unified wholes.
A Too-Well Trodden Path?
As I ruminated on this seeming incongruity, it occurred to me that the ERP phenomenon shares a number of characteristics with movements of the past.Perhaps most notable among these characteristics is our seeming fascination with big, celestial concepts, often defined by the Acronyms we assign them and the authorities that tell us we should be interested.
Could it be that we fall in love with the very size and apparent finality of what a movement like ERP appears to offer us? Could the canonization of ERP as well be driven by factors more aligned with the IT community than the needs of the organizations that consider it?
Like a number of concepts before it, ERP has gone through a “celestialization” and commercialization process making it, if not more achievable, certainly more attractive... and saleable.This process, no respecter of setting, has appeared in such diverse disciplines as corporate planning, knowledge management, content management and, of course, Enterprise Resource Planning.
DéjàVu… All Over Again?
In the 1970s, as planning became a discrete academic discipline, major firms set up “planning” departments filled with bright young graduate level planners who knew all the formal techniques of planning, but precious little about the industry in which they were to work.Some automotive and industrial firms had literally hundreds of these “planners” grinding out plans, sometimes completely divorced from the realities of their industries or markets.
By the 80s, after some disastrous results, the “Inventio Sponte Inventionis” (“planning for the sake of planning”) trend had faded and planning again became an important function within the expertise of specific industries.
Then the 90s saw Knowledge Management become the rage in many information settings.KM, a formal discipline since 1991, followed a path that included development of unified, and very expensive, "Knowledge Management” systems sold by major vendors and marketed, at least implicitly, as “the” answer to making knowledge maximally useful for the organization.
In reality, acknowledged even in the academic literature about Knowledge Management, no monolithic software system can solve knowledge problems absent the proper culture, procedures and willingness within the organization, and the “Big KM System” market lasted only until its targets learned that there was more to Knowledge Management than expensive software packages.
The same thing happened with somewhat less naiveté in “content management,” due in part to the lessons of the KM era. Vendors turned the functions of content management into systems that claimed to address them in single comprehensive packages.They didn’t of course, missing major nuances of users’ needs and often including bells and whistles that many users didn’t need nor wish to pay.Indeed, content management turns out not to be something one can buy but instead a series of things one must do.
And so we come to ERP
Why is it, other than rank naiveté or hubris, that organizations believe they can integrate their business processes in a single, blazing project?Even with phased implementation, this amounts to replacing virtually every major process, often with tools completely unfamiliar to the organization.
ERP, despite its obvious difficulties, is often discussed, even presented, as a unified and mature concept tuned to today’s growing organizational needs.“If your organizational functions suffer from deficits of information and process integration,” the narrative goes, “then replace them with an enterprise level system and you will solve your problems.”
While that characterization may contain an element of truth… somewhere, evidence suggests that its attendant challenges are much more important and badly underestimated until the post mortems of failed efforts.
Antidote for ERP Mission Creep
This section would be more fun to write -- and probably to read as well -- if the answer was more technological or formally procedural.Unfortunately, it isn’t.
In fact, the best way to avoid becoming a failure statistic in the ERP literature is to resist the temptation to allow your organizational view to be filtered by the assumption that process and information challenges can or should be addressed by adding another layer of technology or, in the case of ERP, replacing what you have with a new set of tools.Here are a few ideas:
First: Understand the Difference Between Process and Procedure
Organizations suffering from marginal or failing operational processes often attempt to address them through changing the procedures by which they are supported.While the definitions of process and procedure have become somewhat muddled, there is a distinct and important difference:
- Processes: are the basic functions of a working enterprise.Things like “taking orders, filling orders,” “evaluating and updating inventory,” “billing and receipt” are processes.They are the basis of the business, broadly functional and although capable of improvement, unlikely to materially change.
- Procedures: are the specific manual and automated steps and functions we employ to support the organization’s processes.This is where new or upgraded software, hardware, communications and manual procedures can impact the organization.To the extent that these components act to support the organization’s processes, they can be valuable.But implemented in a way that degrades or forces arbitrary change in those processes, they can be a serious drag on the organization’s productivity.Sadly, much ERP implementation falls into this category.
Second: Look at how well your processes support a smooth flow of information through your organization
ERP presentations usually name a series of basic processes to which the new software systems will be applied (summarized here from Wikipedia): Financial Accounting, Management Accounting, Human Resources, Manufacturing, Engineering, Bill of Materials,Workflow Management, Quality Control, Manufacturing Process, Manufacturing Projects, Manufacturing Flow, Product Life Cycle Management, Supply Chain Management, Project Management, Customer Relationship Management, Data Services, Access Control.
The length of this list alone should be a warning that any attempt at mashing the whole thing together may take you far beyond your organization’s ability to remake itself.
Organizations living with less than optimum conditions within and among these basic functions are facing problems that likely transcend improvement by the implementation of new software tools, even tools with the lofty title ERP. Indeed, each of these areas is itself a complex set of processes worthy of address individually, and unlikely to improve through forced integration at the behest of an ERP software toolset.
So if your organization’s processes are inefficient or poorly defined, you must look carefully at them, streamline and properly integrate them.While you will want your IT folks in the discussion, they cannot be allowed to run the conversation because while automation may be of value in this endeavor, software and hardware do not themselves constitute solutions, and technology consultants and vendors are not likely to help you much as you seek to understand what doesn’t work correctly and how it should be improved.
If your processes are coherent and well defined but are saddled with inefficient or overly complex procedures -- too many steps, too many or inaccurate data transformations, old software or hardware, overly manual steps, etc., -- then those procedural elements, including both hardware and software can make a major contribution, if they are always evaluated and implemented with an eye to their congruence with their underlying processes.In such endeavors, technology experts can move closer to the head of the table because changes will fall largely in their bailiwick.
In the final analysis, with ERP and other areas of operation, it's well remembered that the weight of the acronym does not by itself set the bar for acceptable effort and success. What appears so logical in the PowerPoint sales presentation often doesn't work in real life and business, and not careening off the ERP high dive doesn't necessarily constitute a failure to stay abreast of the information world.
None of this, of course, constitutes a reason to ignore the benefits available through closer integration of your organization's business and operating processes.Prudently handled, there are real potential benefits to addressing deficits in the areas subsumed under the ERP banner.
It does, however, suggest an appropriate level of circumspection about what you are doing and how best to improve it without risking the farm.
Image courtesy of bekulnis (Shutterstock)
Editor's Note: This is not the first time Barry has sounded a note of caution. Read The Connected World: This Decade's Dot Com Bubble?