A pharmaceutical company was convinced that it needed either to replace its current enterprise-resource planning (ERP) system with a totally different software package or install the major upgrade that the current vendor was pushing. Why?
• Dozens of spreadsheets, and manual workarounds had sprung up in the plant to help with production scheduling and handling make-to-order items that were new to the business over the past few years.
• The executives weren’t getting accurate margin data on which to base decisions.
• Sales forecasting, new pricing and rebate schemes, sales management reporting and period-end financial closing all required extensive manual intervention.
The assumption was that the company, a client of ours, had outgrown its current ERP system, and that a $5 million investment was required to implement an ERP package that would address the current issues. However, after a five-week deep-dive review of the sales, supply chain, finance processes and the company’s use of its current ERP system, it became apparent that the current software was more than adequate.
The problem was that the company was not taking advantage of the existing functionality, configuration options and business-intelligence (BI) tools. So rather than a high-risk, high-cost, 18-month ERP re-implementation, the company undertook a four-month project to:
• Redesign key business processes around changes in master data and configuration settings.
• Implement high-value BI sales, margin, forecast performance and financial reporting.
• Implement a finite scheduling package to make the best use of production scheduling.
This company is not an outlier. Companies frequently undertake large ERP replacement programs that are totally unnecessary. Several factors lead to this misstep.
Why They Believe It’s the Answer
While there are countless legacy ERP systems performing successfully throughout the world, there are typically several dynamics at work in companies that lead them to incorrectly believe a new ERP package will solve their business- process issues. These dynamics include:
•ERP software vendors that are constantly introducing new features and versions, as they must to drive their growth. Whether cloud-based versions, different functionality or new industry-specific solutions, vendors are constantly suggesting reasons for their customers to upgrade.
• Constant personnel changes in the executive ranks. New executives bring their past experiences and biases with them. Whether the current ERP system is Oracle, SAP, JDE, QAD or XYZ, a new executive can always find issues with the current system and justify why the package they prefer, or are simply more familiar with, is better.