Extending ERP

1
Extending ERP

• Has ERP moved on?

2
Factors of change over medium term

• ERP target is a moving target changing needs
• In competition with stable system / long term
  return on investment
• What is the life cycle of an ERP type investment?
• Upgrade path of vendor may or may not be whats
  required
• To what extent is the package used formative in
  terms of what new directions are investigated?

3
Time pressures

• Acceleration in cycle time is sustained in some
  industries
• New product development (design to MKT to
  Manufacturing)
• Order to delivery time
• Pressure to reduce OTD time to less than
  manufacturing time gt manufacture to forecast /
  finish to order
• Decoupling manufacturing and demand management
• Manufacturing cycle times
• Internal lead time
• JIT planning backwards
• But also optimising process gt radical redesign
  of sites
• Purchase planning no longer driven by work orders
  (too late!)
• Distribution channels
• Direct deliveries
• Web based logistics
• Outsourced logistics operations Banta / Sercom

4
Presure to reduce Costs

• Constant since industries began
• Margin for drastic reduction greatly reduced
• Correlated with time pressure gt do more with
  less
• ERP cannot be left become a constraint
• Productivity
• Transaction cost / automation
• Data collection
• Visibility
• Cost management / how much does everything cost?
• Costing alternatives gt outsourcing
• ERP must have required features to support such
  arrangements

5
Key ideas in Outsourcing

• Outsource costly activities
• Outsource non-core activities
• Outsource labour intensive tasks
• Outsource when scarce resource
• Simplify capital / cash flow situation
• Avoid when strategic dimension at stake

6
Examplecostlylabourintensivebut
7
Modern day outsourcing

• No shame approach from both sides
• Scope of outsourcing extends to virtual
  organisation gt more activities are outsourced
  than insourced
• Existing firm vision of core activity reduced to
  minimum
• New firm creation of virtual firm
• Provider only goal is to be best go getter
  solve any headache for a fee

8
Customer service

• Increase demand for variety / personalisation
• Loss of economies of scale / demand planning
  problem increased
• Problems solved by traditional ERP (repetitive
  orders )no longer relevant
• Products attributes
• old type ERP gt different product code
• New style ERP gt understands notion of product
  attributes and provide seamless link to
• Materials
• Costs
• Processes
• Support for greater differentiation
• No extra cost
• Design for maximising revenues (CRM)

9
Globalisation

• 24 / 7 / borderless, MNCs, networks etc
• Companies cannot be insular in their approach
• Responsiveness
• Changes to business rules and processes
• How easy is it to change the ERP?
• Managing exceptions
• Being flexible in implementing local rules
• Seamless coordination across sites (re run orders
  / schedule work etc)

10
Managing Exceptions

• Supply exceptions
• Raw materials did not arrive / are not up to
  scratch
• How can you go ahead reagrdless?
• Operational exceptions
• Downtime / sub standard production / shortage of
  staff
• How do you recover?
• Demand exceptions
• Customer changes / cancels / high prioritise an
  order at no notice
• How can you face up?

11
Reacting to exceptions

• How fast can you identify them?
• How thoroughly are they communicated to all who
  need to know?
• What business rules are already in place to
  handle these exceptions?
• Mechanistic decision making
• How responsive systems are to application of
  these rules?

12
impact

• Effectiveness of response determines
• Can it be done?
• How much it will cost?
• Will you know the cost before you go ahead?

13
Identifying exceptions

• Early warning systems for missed deliveries / QA
  findings

14
Communicating about Exceptions

• Early warning to customers
• Clearer understanding of outsourcing and
  procurement decisions
• Better plant scheduling
• Shop floor management eg better maintenance
  (preventive but not wasteful)
• Warehouse management
• Priorities
• Optimisation
• Automatic emails, mobile devices using push
  systems
• Visibility on normally unconnected activities
  HR or maintenance

15
Business rules

• For or against business rules
• Looking to the future all the time is fine, but
  the past contains the answer to many questions gt
  learning organisation
• Best / most desirable practices
• Incorporate into systems and processes throughout
  the firm