ERP (Enterprise Resource Planning) systems are one of the most widely accepted and used Commercially Off The Shelf (COTS) software products that are available in the market.
Often ERP was implemented to address some business or regulatory challenges such as Y2K or Sarbanes Oxley. In many circumstances, there was no specific business justification for implementing the ERP system as it was simply viewed as imperative to remain in business.
As a former vendor of what was often called Best of Breed (BOB) software, sometimes also referred to as a Point Solution, I grew to hate the ERP vendors as their purported “comprehensive” solutions derailed all other IT implementations.
The general argument we made was that our point solutions better served and were optimized for the division or portion of the organization to which it was targeted. We contended that the global and galactic ERP system simply couldn’t meet the tailored needs of specific business processes within the organization.
In addition, by the time an organization got around to implementing the specific module applicable to that area of the business, it would be many years later and much value would be lost. The reality, of course, is somewhere in between.
As the cost for technology has declined, there have also been a large number of highly integrated ERP systems available at lower price points from what was prevalent as recently as a decade ago. This has enabled companies of any size to invest in an ERP and gain benefits.
To understand how an organization could benefit from ERP, it is important to understand where the value lies in these systems.
Below we’ll take a brief look at some of the inherent reasons why ERP provides value:
Where Does ERP Provide Value
Financial Executive magazine says the value of ERP comes from its standardization. This includes the schema and terms used to describe common business objects but also in how the data is captured and recorded.
If organizations use terms like Each, Unit, Part Number, SKU, Item, etc. all to describe the same thing, then the organization will quickly become confused when trying to understand what is going on in the various areas of the business. ERP systems with their standard naming conventions eliminate these issues.
ERP systems are designed to be a single system that collects and reports on activities throughout the organization. This is especially true with systems that provide multiple modules to support the different functional areas of the business such as manufacturing, purchasing, finance, warehousing (inventory), estimates/quotes, orders, etc. By addressing all the different parts of the organization in one system a true picture of financial commitments being made, how orders flow through the organization, where there backlogs/delays, etc. is possible
Since ERP systems are comprehensive they also enable an organization to see the various flows of products and information through the different functional areas of the business such as purchase orders > received goods > inventory > materials issued > work-in-process > finished goods > shipped product. This cross-functional nature is particularly valuable from an accounting perspective as it eliminates rekeying or transcribing of data between disparate systems.
One way to think of ERP’s value is analogous to money. Money’s value is that it is a common denominator to express value across different operations, transactions, and situations. In a similar way, ERP aggregates data across different operations and parts of the organization and puts it into a common form and format. It’s really the data the ERP collects aggregates and normalizes that provides value.
Application to Business Decision Making
As described above the greatest value of ERP is the standardized, comprehensive, cross-functional data that now is in the system. The challenge for most organizations is how to access that data and use it to make decisions. Historically ERP system providers have provisioned a set of tools to give access to the very valuable data that is embedded in the system. Originally those were called reporting tools then over time they became known as analytic tools or business intelligence (BI) tools. In addition, most systems allow the extraction of data into a spreadsheet format that can be manipulated using all the capabilities inherent in the spreadsheet. These capabilities allow a user to analyze the data and make operational business decisions based on what the system is reporting.
Challenges in Unlocking the Value in ERP
As we have discussed, the capabilities inherent in ERP can provide powerful insight into the business as to a variety of important metrics needed for decision making. The foundation for these decisions is the actual data itself that is stored in the ERP system. Amazon founder Jeff Bezos is famously quoted as saying “Show me the data” before he would commit to any business decision. Showing that data from the ERP turns out to be more difficult than many organizations realize. There are a number of reasons for that that we will discuss below:
Reporting Tools Require Expertise to Use
To pull a report that combines data from different areas of the business often requires a level of expertise that the average user does not possess. This includes knowledge about the reporting tool but also knowledge about the underpinning data structures in the ERP database. To effectively create reports using what the preferred BI or reporting tool of choice is, most companies bring in outside consultants to create these reports.
Creating Reports is Time Consuming
Creating reports turns out to be quite time-consuming. Data from the Excel world indicates that a straightforward tabular report takes about 4 hours to create. A more complex report can take 8 hours to create and a multi-dimensional report with multiple tabs and calculations between these tabs can take up to a week to create. In most organizations, the management and operational teams simply don’t have this amount of time to put their day job on hold and invest in creating these reports.
Additional Data from Outside the ERP System is Needed
As much as an organization would like the ERP to be the only system in their company, the reality is that there is a need and often even an imperative to have other software applications in the business besides the ERP. These applications exist because they perform a job better than the ERP, or the organization has some specific unique business practices the ERP can’t support, or the organization might be slowly implementing the different modules in the ERP over time, but for practical reasons couldn’t implement all the ERP modules at once. Using a reporting tool built specifically for the ERP system is problematic in this case, as the tool is not designed or capable of extracting or reporting on data from outside the ERP system.
Reports Are Often an Afterthought in the ERP Implementation
Most organizations when implementing an ERP system focus their energy and budget on getting the system implemented, migrating data to it, and training the users on how to use it. Reporting is often left to the end of the project and in many cases, the organization and the budget are often exhausted at this point.
Unlocking the value of ERP
Another approach to unlocking the value that is in the ERP is to use an Analytics Service as opposed to a tool. As powerful as many BI tools are, they still require someone to build and create reports, they typically lack the out-of-box function many organizations need. At IntelliDash, our approach is to provide reporting through an “Analytics as a Service” approach.
This approach eliminates the shortcomings discussed above. We provide the expertise in having a deep knowledge of the ERP system, but also in the underlying database that supports it. Since our reporting is leveraged across multiple organizations the time consumed is minimal as many required reports have already been built for other organizations and who generally need to answer the same business questions.
Of course, every organization is different but our pre-built dashboards give you a head start. Additionally, we provide a variety of filtering capabilities in our reports that enable someone to essentially filter out those data elements they don’t want to see and enable them to see only what is relevant to them. This expands the breadth and usage of this technology in the same dashboard or report can be used for reporting on different departments, sales teams, products, etc.
Finally since our “Analytics as a Service” set of reports and dashboards are all pre-built so time to value is quick and report. Reach out to us today to understand more about our IntelliDash “Analytics as a Service” offering.