Audience Opinion Piece

An Enterprise Resource Planning (ERP) system is the central nervous system of your operation.  It is crucial to all your business functions.   Without it, your business becomes fragmented, data is lost, you become ripe with manual offline processes, and you lose the source of truth of many critical data points to name a few things.   Then why do we always put it off?  Why do we do the necessary monthly patching and apply band-aid after band-aid to keep an aged system barely afloat? The simplest answer is this; ERP rollouts are not for the faint of heart and are a massive undertaking.  They take huge financial investments, require a lot of human capital, need to be highly organized and executed, and the entire organization needs to be aligned.  Whether you have no ERP instances or several, I’ll outline why manufacturers should modernize their ERPs.

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Garbage in, garbage out

Data is the gold standard in today’s digital landscape.  While AI, machine learning, and generative AI dominate conversations, their true potential hinges on the quality of your data.  Without solid, reliable data, you’ll only scratch the surface of advanced analytics.  Data forms the foundation of your organization.  If that foundation is unstable, your aspirations for advanced analytics will falter.  Investing in clean, structured, and well-managed data is essential to unlocking the full power of AI and analytics.  Cleansing your data should be a primary driver behind why you begin an ERP journey giving your organization an opportunity to align data elements across business functions, build modern data structures, and, where appropriate, start fresh.  Taking it a step further, you have an opportunity to implement a data strategy and governance model across the organization that will help keep your data sets healthy and harmonized.  Your data is how your teams transact and communicate across the organization.  Data doesn’t lie, but as the saying goes, garbage in garbage out.  Clean your data and set your organization up for a less complicated ERP rollout and set yourselves up to be ready for advanced digital transformation efforts.

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The Cost of Customization

One of the main reasons you have a customized ERP solution today is because your business processes vary from site to site.  In most cases, customizations have sped up transactions, reduced manual data entry, stopped offline data collection and genuinely added value.  However, each custom transaction comes at a cost: the price of maintenance, the organizational impact every time it’s modified, and the limitations it imposes on keeping your ERP modern.  Over time, you create a complex bowl of custom transaction spaghetti in the system’s back end, hindering agility and innovation. Whether it’s corporate office differences in countries you operate in or nuances from each one of your production facilities, you have tweaked your core ERP solution to meet the needs of the business.  Let your ERP project be the opportunity to get back to basics.  You now can harmonize business processes across the organization to the best of your abilities.  You can standardize operations across functions, regions or sites.  You will get back to industry best practices which will drive out of the box adoption of your ERP and allow you to focus on a standard solution.  Harmonizing business processes will also create a level playing field across the organization that will make it easier to manage the system, the teams, maintain the data, and allow you to compare each function to look for opportunities to improve.   A large change management effort will be needed, but the long-term positive impacts will pay dividends.

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Resilient and M&A Ready

Taking it to the next step, cleaning data and standardizing business processes with your ERP journey will allow for advances scalability efforts and align your organization for M&A activity.  Harmonized data sets mean all your business functions are seeing and speaking the same language.  This allows for smoother operations, a stronger understanding of the health of your entire organization and adds resiliency allowing you to recognize where there may be faults.  As you grow, you are no longer trying to wrap a system around a process, but the process will align with system and your teams will spend more time focusing on value added activities.  When you’re operating at a high efficiency, with minimal gaps in your process, you are setting up for much smoother M&A activities.  If you follow these recommendations, you will write your M&A playbook.  A standardized, harmonized ERP without customizations makes your organization more agile, resilient and prepared for future acquisitions or mergers.  You will have the ability to integrate or divest at a high rate of speed allowing for a much smoother transition with less financial impact.  

Let's Go! 

Embarking on your ERP journey will be a complex undertaking that requires serious consideration. Preparing for the future though will make your organization more resilient, streamline business operations, and reduce IT operating costs.   Advancing your ERP journey will serve as an important step in driving the organization's overall digital transformation.