In the not-so-good old days, things were simpler. Sales would submit a forecast; managers would build budgets around that forecast and all of the assorted budgets would roll up under a financial plan for the year. The financial plan would then be manifested in a production plan for the factory and a purchasing plan to acquire the supplies, parts and other necessities required to build the product to fill the forecasted sales.ERP software provided the managers with a way to track reality against the plan. Early on, this was provided in the form of batch-generated hard copy reports. Production plans for a given month or quarter would be tweaked based on the previous period reports. In a world where most customers were located close by and where suppliers were just down the street, this system worked remarkably well.
It’s Not 1980 Anymore and Now the World is Flat
Today, managers and CFOs are looking to ERP to provide much more information, to provide it in real time and to provide it in an understandable format.
Customers are all over the planet. Suppliers are likely spread around. Pricing volatility is magnified by the distances involved and by other factors such as political stability, weather, labor availability and a host of other things.
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With this geographical range and with these market sensitivities, the days of looking at last months sales to figure out what you’re going to order for next months production simply will not get the job done. You can’t drive a car by looking in the rearview mirror and basing your forward motion on where your car has been.
The new management paradigm is not so much based on reaction to previous performance, but rather, to modify activities as they happen; the ultimate goal being to change the outcome of the current reporting period. This kind of requirement means each manager, director and every C-level executive needs to have delivered to them the specific, actionable information required to make these critical decisions intelligently and in a timely manner.
Bye Bye Batch
To do this, ERP systems have to be well past the batch reporting mentality that more or less has defined them for so many years. Data reported must be available in real time. That data must at once have sufficient detail to supply a granular image of business activity, but simultaneously it must be readily distillable into actionable information.
It’s All About Your Role
Role based ERP is a natural evolution or movement toward a leaner and more responsive type of ERP system. Each role has unique and variable needs. The persons associated with those roles should be able to configure and re-configure their own information dashboard to reflect specific needs at different times of the day, month and year. They must not be locked into a fixed format or report, nor should they be subjected to a deluge of data trying to cover all possible needs at all times.
The advantages of role-based architecture are numerous. Let’s look at a few.
Training – Learning to handle individual roles is vastly simplified if the role itself does not require learning beyond the requirements of the role itself. That receivables clerk just needs to learn about processing receivables rather than learning the ins and outs of the entire finance system. This means new hires are productive sooner, implementations are delivering advantages sooner and that more cross training time is available to assure an adequate level of redundancy within a department.
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Security – Let’s face it, whenever an employee leaves an organization a lot of proprietary information goes with them. Most folks are honest and don’t go out of their way to divulge your trade secrets, but it does happen. Role based limitations limit access to the “big picture” to those who really need it to do their job. This limits the unnecessary exposure of proprietary information.
Better Execution – When you are able to define the parameters of a job effectively, the person in that job will more fully understand what is expected of them in terms of performance. This facilitates better measurement of employee output, quality of output and it isolates areas that need attention. You have tangible, measurable factors to evaluate rather than subjective feelings or gut impressions. Problems become evident sooner allowing for change, which minimizes the negative effects of the problem.
Better Management – Because actionable information is delivered to each manager based on their requirements and needs, they will spend less time sifting data and more time planning and executing. Managers will reap the same benefits that clerks do in the area of reducing the waste around their jobs and increasing access to actionable information.
Economy – It only makes sense that roles utilizing less ERP resources would reflect lower fees and resource overhead expense. This is very good news in terms of the run rate associated with large ERP systems.
It’s like driving a car, there are times when you need to pay close attention to the speedometer and other times when you are more focused on the fuel gauge. Managing a production process or enterprise is the same, on different days you’ll need different data in order to do you job. Your ERP system must facilitate that.
ERP as an Agent of Transformation within the Enterprise
Today, great ERP systems must truly facilitate the management decision-making process, not just supply piles of data to be sifted and pondered. Highly detailed, massive reports are essentially useless if the information within the data is too obscure to be understood.
For several years companies have been scrounging around looking at this point solution or that tactic to help reduce the expense line. Most of these actions have a one-time positive effect. You can only layoff so many workers; you can only reduce expenses so far. Sooner or later, revenue must grow. Business execution systems, such as ERP, must simultaneously address both sides of this margin equation. Revenues must grow AND expenses must be reduced. This transforms the organization into a market-defining force.
Conclusion
The ERP of old is no longer adequate for companies linked to widely dispersed customers and suppliers. Today, ERP must facilitate the interaction of the enterprise with the marketplace. Real time data, delivered to specific roles transforms the enterprise.
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