But most of the improvement in operating profit typically comes from specific point solutions, such as price optimization, production-scheduling optimization, inventory- level optimization and transportation optimization. Focusing on implementing point solutions, whether specific modules of the existing ERP software or third-party packages built to work with the ERP package, is often the best way to address key business requirements and improve the bottom line.
Then there are business-decision-support solutions (also known as focused “big data”). Most companies have all of the data needed to provide executive management with the analyses required to support the day-to-day business decisions. But very few companies are laser-focused on providing the business with exactly what they need to make those daily decisions. Instead, companies typically put all the data in a data warehouse and let the business access it without providing the necessary analytics.
A decision-engineering approach identifies the exact business decisions for which executives need assistance — for example, what price should I set for this product, how many drivers should I schedule for tomorrow or how should I sequence production? Such an approach can improve the bottom line by helping executives make a better decision by using analyses and information targeted specifically for that decision.
Just because an ERP system is old doesn’t mean it isn’t doing its job or that it needs to be fully replaced. It’s important to remember that the original purpose of ERP systems was to process business transactions efficiently. As long as your ERP system continues to do that, the costs and risks associated with wholesale legacy-system replacement can make for a poor strategic decision.
Often the issues with current ERP systems can be addressed with point solutions focused on optimizing specific functions and with business-decision-support solutions. Re-directing efforts to these solutions can be a much more effective — and cost-efficient — way to improve bottom-line results.
Bruce Myers is a managing director and Chris Payne and Adam Pollak are directors in the information technology and applied analytics practice at AlixPartners, a business-advisory firm.