ERP has a long and, sometimes, not so glorious history. Over the years, ERP has evolved and moved in certain directions in response either to platform changes or at the direction of system designers seeking to develop a better ERP product. Most would probably agree that today’s ERP is superior to offerings of the late 1980’s.
Most of those folks would also quickly point out that ERP still has certain shortcomings. When you throw in a rocky economy, globalization, mushrooming amounts of data and activist stockholders, the shortcomings of ERP become even more obvious.
In the not-so-good old days, things were simpler. Sales would submit a forecast; managers would build budgets around the revenues contained in that forecast and the projected expenses to produce the products sold in support of the forecast.
All of the assorted budgets would roll up under a financial plan for the year. The financial plan would then be manifested in a production plan for the factory and an acquisition or purchasing plan to acquire the supplies, parts and other necessities required to build the product to fill the forecasted sales.
ERP provided the managers with a way to track reality against the plan.
Early on, this was provided in the form of batch-generated hard copy reports. Reports were delivered on a daily, weekly, monthly, quarterly or annual basis. Each manager would receive those reports relevant to their own piece of the enterprise. After analyzing the contents of the report, the manager might make changes in the forecast, raising or lowering the quantities of supplies and parts ordered in response to the sales reported for the preceding report period.
In a world where most customers were located close by and where suppliers were just down the street, where sales reps physically called on customers with regular, weekly or monthly frequency, this system worked remarkably well.
Today, things are different. Today the customers are all over the planet. Suppliers are likely spread around just as much. Pricing volatility is magnified by the distances involved and by other factors such as political stability, weather, labor availability and a host of other things.
Demand is just as volatile. A large seismic event can drive demand for certain types of product through the ceiling. A local fad can cause a spike in demand for one product and leave a previous best seller looking for sales.
Political climate, cyclical weather events, world agricultural crop performance and a myriad of other things are all relevant to the manager, director, CFO and other ERP consumers of today. The reason for this is that these events affect price, supply demand and other fundamental factors that ultimately result in determining how many widgets the enterprise buys, makes or sells.
Even if you run a 20-person factory in a basement in the middle of Kansas, you probably are buying and selling stuff all over the world.
With this geographical range and with these market sensitivities, the days of looking at last months sales to figure out what you’re going to order for next months production simply will not get the job done. You can’t drive a car by looking in the rearview mirror and basing your forward motion on where your car has been.
Today, managers and CFOs are looking to ERP to provide much more information, to provide it in real time and to provide it in an understandable format. The new management paradigm is not so much based on reaction to previous performance, but rather, to modify activities as they happen; the ultimate goal being to change the outcome of the current reporting period.
This kind of requirement means each manager, director and every C level exec needs to have delivered to them the specific, actionable information required to make these critical decisions intelligently and in a timely manner.
To do this, ERP systems have to be well past the batch reporting mentality that more or less has defined them for so many years. Data reported must be available in real time. That data must at once have sufficient detail to supply a granular image of business activity, but simultaneously it must be readily distillable into actionable information.
In a previous piece, we talked a bit about roles in ERP and this is where true role based ERP makes its mark. Each role has unique and variable needs. The persons associated with those roles should be able to configure and re-configure their own information dashboard to reflect specific needs at different times of the day, month and year. They must not be locked into a fixed format or report nor should they be subjected to a deluge of data trying to cover all possible needs at all times.
It’s like driving a car, there are times when you need to pay close attention to the speedometer and other times when you are more focused on the fuel gauge. Managing a production process or enterprise is the same, on different days you’ll need different data in order to do your job. Your ERP system must facilitate that.
Today, great ERP systems must truly facilitate the management decision-making processes, not just supply piles of data to be sifted and pondered. Highly detailed, massive reports are essentially useless if the information within the data is too obscure to be understood.