Can enterprise resource planning (ERP) be used to provide your business with a competitive edge? Possibly…. but not in the way that most people think. Robert Walmsley, looks at what really brings benefits when it comes to ERP solutions.
The ERP competitive edge dream
When I started implementing “package solutions” in the 1980’s, there was very little customisation available. You implemented the processes as designed by the software provider. As we went through the next 2 decades, implementations became larger and more complex, with armies of consultants customising ERP solutions to meet the specific requirements of each customer. Configuration screens, user exits, development languages, 3rd
party solutions – all harnessed to ensure that the individual customer’s unique processes could be replicated within the ERP system. Everyone could design their own Order to Cash and Purchase to Pay processes – under the premise that these processes were what made an organisation different and therefore gave it the competitive edge.
The ERP competitive edge reality
Sadly this has not worked. Instead companies have ended up with large, complex solutions with excessive costs of ownership. These don't give an organisation the competitive edge, just a deep hole in their operating costs. Meanwhile system changes – whether driven by the business or IT – are costly and time-consuming to design and deploy, and regression testing…don’t get me started on the costs and complications of regression testing!
So how should we be deploying ERP?
My firm view is that we should be reverting back to standardising processes at the heart of the business, while focussing on those areas of the business process that truly make a difference. For example, purchase to pay – I contend that there is generally no competitive advantage in customising this away from a standard process.
However, if you can get better visibility of your customers’ requirements, coupled with good procurement analytics, plus some predictive forecasts, you can arm your procurement teams with information that has a greater commercial impact. This will allow them to strike better deals with your suppliers because they have more accurate forecasts on what will actually be needed. In parallel, you should be looking to remove time spent on the transaction processing side – raising purchase orders, processing goods receipts, validating invoices – automate this. That will give you your competitive edge.
What ERP solutions would be best to support this?
Given that we are an SAP Practice, it will come as no surprise that I’m going to focus on SAP’s technology. The development of SAP’s public cloud version of their flagship ERP solution, SAP S/4HANA Public Cloud, has been impressive, maturing quickly since its release several years ago.
This now allows our customers to deploy a core ERP quickly and cheaply – and transfer the cost and complication of upgrades to the provider (in this case SAP). Each quarter, SAP automatically upgrades the software, allowing advances such as Machine Learning to be incorporated as standard. As customisation is limited, the regression testing is really only needed to check that interfaces to/from feeder systems are still operational – the testing of the core is taken care of by SAP.
So, what would be a good way to test out the hypothesis that I have put forward?
One way would be to deploy a new ERP in a “2-tier” landscape; implementing S/4HANA Cloud into a subsidiary. Not only will you get a quick return on investment and lower the total cost of ownership, but you will also discover what real-time visibility of your operations can do for your decision making.
And then what?
Well – the world’s your oyster, really. If your core ERP is simple and looks after itself (well, SAP looks after it), that leaves you free to focus on what really does give you a competitive edge. For example, how can you harness social data to more accurately predict what your customers will be buying? How can you deploy advanced supply chain solutions to remove latency from your supply chain? How can you more accurately forecast your monthly costs? This
is what will give you the competitive edge….along with the ability to run your ERP at a fraction of the cost and with a small proportion of the headcount that you previously used.