You Can’t Steer the Ship by Looking at Its Wake: When ERP Is Not Enough
Don’t buy an enterprise resource planning (ERP) system expecting it to be a complete management decision-support tool. If producing something is the essence of your business, then you must ‘produce’ in the most efficient way possible. Right? Working with information that an ERP system gathers from the past is only a partial solution for improving production. Does an ERP system find the most efficient way run you production process?
Let’s think about it.
It takes information to run any company. Timely and accurate information is the primary objective of any ERP system. Today, better analytics and key performance indicators (KPIs) are emerging as popular aids to management decision making. KPIs give you feedback on how your company has performed. Obviously, they often suggest the corrective administrative actions that must be taken to make improvements. Tighter controls, better organization, changes to personnel policy, more competitive purchasing, – these are examples of administrative actions that can improve company performance. OK great. But none of these administrative actions affect the production in a direct way. What you need at the center of your business is real-time resource allocation and scheduling of your production resources. These are your machines, your work centers, your technicians, – everything you see on the shop floor.
A recent survey published by Business-Software.com (http://www.business-software.com/offer/top-20-erp-software/), listed the functional capabilities of the top 20 ERP systems for 2016. Of the modules listed as featured capabilities, only nine percent dealt directly with resource allocation, planning or scheduling–yet those are the functions that represent decision making for production. The remaining functionality supported accounting, personnel, purchasing or other support activities. Although all of these database functions are important for business management, they don’t directly suggest better ways to operate the production aspect of your enterprise. What gives?
As we all know, improving production involves finding better ways to utilize scarce and expensive resources. In previous postings, I’ve written about finding these types of possibilities including finding unique time intervals when resources are available, and finding all combinations of resources that can fulfill a need. These capabilities are not present in many ERP systems. And among the ones that have resource allocation and scheduling capabilities, the logic is often based on average lead times–typical of the old material requirements planning (MRP) systems.
So the consequences of picking an ERP system based only on its administrative support capabilities, without checking on the resource allocation and operational scheduling capabilities embedded in it, are to know where you’ve been without knowing how to improve where you’re going, – at least with respect to the production heart of your business! Wouldn’t a better approach be to add the administrative support capabilities to a good production scheduler? Find a really good production scheduler first, and then embed it in your ERP system.