Overcoming the 10 Major Problems with ERP

By Keith Launchbury, CFPIM, CIRM, CSCP

Workshop Outline

1. 10 Major Problems with ERP

2. Difference between ERP & ERM

3. ERM Organizational Checklist

4. Principles of Integrated Enterprise

5. Foundations of Successful ERM

6. Overcoming the Major Problems

7. 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 $1,000,000,000• Fox Myers $1,000,000,000• HP $160,000,000• Nike $100,000,000• Waste Management $100,000,000• Hershey $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 moneyon 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

Product Volume

Pro

duct

Va

riet

y

Low High

Low

High

Engineer to Order

Make to Order

Assemble to Order

Make to Stock

Mass Customization

Source: Keith Launchbury, Master Planning of Resources Review Course, APICS, 2000

Type of ERP Software Strategies

Sales Volume

Pro

duct

Va

riet

y

Low High

Low

High

Standard code

Custom code

Modular code

Subscriber code

Mass Customized code

Source: Keith Launchbury, 2014

DEBACLE

ERP comes in one size only

GAPEPICfail

outage

NOTSWEET

DieinthemixXXXL

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. Implementation is a huge investment

7. It doesn’t do all the things we need

8. It is very difficult to access the data

9. 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!

ERP

Etc.

MES

ABM

SCMQMS

PMS

CAD/CAM

APS

S & OPFSS

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

RealisticSchedules

RightMeasures

ReliableResources

TotalProcessControl

EffectiveTeamwork

TotalFlexibility

TotalPreventive

Maintenance

Planning Control

AccurateDataBase

The three aspects of business

The Organization Perspective

VISION

MISSION

GOALSPERFORMANCE

MEASUREMENTS

The People Perspective

REWARD AND RECOGNITION

Educationand Training

EMPOWERMENT

PROCESS TEAMS

The Technology Perspective

ERM

ERP MES

DISCIPLINES

APS SCO JIT

SALESPLANNING

OPERATIONSPLANNING

OPERATIONSMANAGEMENT

SUPPLIERMANAGEMENT

PERFORMANCEMEASUREMENT

MASTER SCHEDULING

BUSINESSPLANNING

MATERIAL PLANNING

CAPACITYPLANNING

CLOSED LOOPERM

Resources OK?

Performance OK?

Planning OK?

The Planning Horizon

BUSINESSPLANNING

SALES & OPSPLANNING

MASTERSCHEDULING

MATERIAL AND CAPACITYPLANNING

REVIEW & RE-PLAN PLANNING HORIZON

ANNUALLY

MONTHLY

WEEKLY

DAILY

5-10 YEARS

18 -36 MONTHS

1 - 52 WEEKS

1 - 366 DAYS

SALESPLANNING

OPERATIONSPLANNING

OPERATIONSMANAGEMENT

SUPPLIERMANAGEMENT

PERFORMANCEMEASUREMENT

MASTER SCHEDULING

BUSINESSPLANNING

MATERIAL PLANNING

CAPACITYPLANNING

ERMFEEDBACK

LOOP

Resources Not OK?

Performance Not OK?

Planning Not OK?

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?Are you ready for ERM?

• Changed from Internal to External Performance Measures

• Flattened the Hierarchy

• Promoted Enterprise Wide Thinking

Are you ready for ERM?Are you ready for ERM?

• Evolved to a Team Based Organization

• Reengineered Major Business Processes

• Adopted Activity Based Costing

Are you ready for ERM?Are you ready for ERM?

• Eliminated all Organizational Waste

• Standardized Information in all Operations

• Committed to Lifelong Learning

Are you ready for ERM?Are you ready for ERM?

• Created Flexible Processes

• Accepted Single Compensation Program

• Benchmarked with the Best

Are you ready for ERM?Are you ready for ERM?

• Become a Global Organization

• Adopted Shared Vision, Values and Goals

• Driven out Fear

Are you ready for ERM?Are you ready for ERM?

• Developed a Flexible Workforce

• Educated all Leaders in Enterprise Resource Management

Principles of the Integrated Enterprise

Enterprise Resource

Planning

Management

Leadership

Typical Business Organization Chart

Big BossAcquisitions

Big BossOutsourcing

Big BossInfighting

Someone else Well connected

Assistant to Big Boss

Peon

Assistant

The Worker

Leader

Supervisor

Old Hire New Hire

Big Thinker

Trouble Shooter Small Person

Junior Manager

JuniorAssistant

Middle Manager

Type 2 Boss

Muddle Manager

Chair Filler

Little Person

Smart Person

Idiot Deadwood

Backstabber

StudentTrainee

Good Person

Saboteur

Pencil Pusher Geek

Dreamer

Roadblock Nice Person

FamilyMember

Social Climber

Spy

Toadie

Leader Space Cadet

Big Mouth Clerk

Next Boss Assistant

Sleazy Boss

Scheemer Out to Lunch

Empty

Junior Middle Boss

Middle BossLots of noise

Lackeyno purpose

Hanger On

Big BossOperations

Big BossBackbiting

Big BossNothing Much

Super Boss Friend

Previous Boss Yes Person

The Super BossPresident

Troublemaker

Departmental Silos

Information Systems

Design Engineering

Finance and AccountingSales and Marketing

Production

Human Resources

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

VisionMission

Values Goals

Results

Plans

Rewards

ActionsMeasurements

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

AccurateInformationData Base

RealisticPlans andSchedules

CommittedOrganizational

Leadership

EnablingInformationTechnology

MRPEducatedWorkforce

EffectivePolicies andProcedures

ERMTrained

Workforce

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

Bill of Material Accuracy 98%Inventory Record Accuracy 95%Master Schedule Accuracy 95%Engineering Change Control 95%Planning Performance 95%Cost Accuracy 95%Routing Accuracy 95%Production Performance 95%Purchasing Performance 95%Customer Service 98%Productivity 95%Sales Performance 95%Forecast Accuracy 95%Inspection Performance 95%Capacity Performance 95%Inventory Level Actual/Plan

TARGET

Data Integrity

Transaction Data

Information

Intelligence

Value Availability

The Information Haystack

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

72

A

B

C

D

95%

80%

70%

60%

Effective Planning?

DEFROA

OSWO

The Balancing Act

74

Demand Supply

SalesForecasts

ActualOrders

ProductionOrders

PurchaseOrders

Business Plan

TIME HORIZON

PLANNING LEVEL

Company

Business Unit

Product Group

Facility

Site

Department

Workcenter

Machine

Operator

Sales and Operations Plan

Minutes Hours Days Weeks Months Quarters Years

Master Production Schedule

Material Plan

DetailedSchedule

LongRange ResourcePlan

MediumRange Resource Plan

RoughCutCapacityPlanCapacity

Plan

Sales andOperations

Planning

ResourcePlanning

MasterProductionScheduling

MaterialRequirements

Planning

CapacityRequirements

Planning

SupplierControl

ProductionControl

PerformanceMeasurement

Rough CutCapacity Planning

Monthly Planning Meeting

Weekly Scheduling Meeting

Daily Delivery Meeting

SummaryKeys 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

Benefits• Reduced time to market• Reduced cycle times• Reduced inventory• Reduced overhead• Increased profitability

Costs• Hardware• ERM software• Communication networks• People development• Consulting and support• System development

A proven path for ERM implementation

MARKETING

ORGANIZATION

FINANCIALS

PRODUCTION

HR

DATA BASE

EDUCATION AND TRAINING

MATERIALS

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 TIME

The Top Ten keys to ERM project success

1. Top management leadership2. Ongoing education and training3. Strong project team and leader4. Organizational accountability5. User selection of software6. Good project plan7. Realistic cost/benefit justification8. System name/newsletter/promotional items9. Regular performance measurement10. 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