Question

How to measure, manage, improve, and sustain process value of an Enterprise Resource Planning (ERP) system.

Answer 1

Hi,

Here The Explanation:-Enterprise resource planning (ERP) is a process used by companies to manage and integrate the important parts of their businesses. Many ERP software applications are important to companies because they help them implement resource planning by integrating all of the processes needed to run their companies with a single system. An ERP software system can also integrate planning, purchasing inventory, sales, marketing, finance, human resources, and more.

Inorder to manage ERP:-

• Coordination:-ERP brings business process management together in one application, but the coordination to make sure the various aspects of the company operations are represented in the software is a management issue. From human resources, companies may include time sheets, payroll, expenses and personnel planning. Financials may include accounting, assets and profit analysis.
• Ongoing Improvement:-Typical ERP systems require constant changes to keep up with the evolving business structure and changes in the organization or external conditions. When the company does not initially include all operations, or when it starts up new initiatives, the ERP manager has to integrate the new processes. Executives often need additional or new information so new reports are required.
• Training and Support:-The ERP application relies on receiving correct data about the operations it covers. Employees have to input data or record activities and results in a form the software can recognize and process. The ERP manager must make sure all employees who have access to ERP databases know what data to enter and what form the data must take.
• Security and Updates:-A key function of ERP management is to keep the data secure and the software patched. As suppliers identify threats and vulnerabilities, they issue new patches to make the ERP application secure. The company's own operating systems, networks and work stations have to provide a secure environment for the ERP databases that may contain sensitive data as well as personal or private information of employees and customers.

To Measure:-

• In order to measure the return of an ERP implementation project, it is necessary to first diagnose the needs of the business and recognize tangible and intangible benefits, not everything can be measured. To achieve the ROI within the shortest time and to reduce costs from the Enterprise Resource Planning System to the maximum, enterprises need to have a platform that integrates the whole management of the company.
• Managers have to know very well how much they will spend on the project, and this amount should avoid unexpected costs. Everything must be understood before moving ahead, from the needs and customizations, the architecture and software modules, the number of users, the duration of the implementation, or whether it is on premises or on the cloud.
• if the ERP Return on Investment (ROI) was identified before the start of the project and evaluated continuously throughout the implementation process.
• The formula of calculating the ROI is simple, starts by calculating the Net Revenue that the investment will generate for the company during all the time that it will be operating, subtracting its acquisition costs and dividing it all by the own costs of acquiring.

To Improve:-

• Curb ERP employee knowledge erosion:-Most new employees only learn 80% of what the previous employee training them on the system knew how to do. Many users may be performing functions in the system without knowing why. Employee turnover exacerbates this knowledge erosion problem.
• Consolidate disparate systems:-Running multiple disparate systems can be inefficient and error-prone. Look at outside systems your company may be running and ask your ERP partner if they offer the same functionality. ERP providers come out with new functionality every year so there is a chance they may now have what you are looking for. And the cost of new functionality often comes down each year.
• Eliminate Obsolete Reports:-Is your company producing daily, weekly or monthly reports from the ERP system or ERP system data that no one reviews? Many companies add to the lists of reports they want to see, but don’t often eliminate reports they are no longer using. Sit down with various management departments and review the ERP reports they use and get rid of those that are obsolete.
• Improve System Performance with Data Archiving:-Has your company ever done a comprehensive delete/archival of old data? If not then performing a comprehensive delete and archival of old system data may significantly improve your ERP system’s performance.

How to Sustain:-

• Not doing careful requirements gathering:-you must take the time and make the effort to analyze those processes as part of your ERP requirements gathering. Implementing a new ERP system is an opportunity to identify and improve/redesign your business processes. Automating a bad process only makes a bad process run faster.
• Understand your incumbent system:-The decision to purchase a new ERP system has been made, but why? There are many reasons a new ERP system will be sourced, but it is important to understand that the implementation of a new ERP system will not simply create a return on investment or solve the issues of the business.
• Homework & Collaboration:-Once a business has come up with clear defined goals that the new ERP system must achieve and defined some tangible metrics to judge success then the next step is to find the right product and the right vendor.Many businesses send out invitation to tenders listing hundreds of questions filled in by potential vendors based upon an assumed set of answers to open questions. Whilst these may assist in narrowing the choice down, the choice of software alone cannot be based upon these.
• Budget Control:-To be able to control a budget you need as a business to identify the real costs of ERP. These costs can include hardware, training, organisational change management, developments, staff cover for project members and the software. The identification of a clearly defined budget scope is critical and difficult. The ERP supplier can provide a scope of services and a software and hardware budget, but this is not the entire budget.The non-budgeted elements are difficult to define because the breath of these areas vary greatly project to project and business to business. However it can be said that almost all projects involve data migration and every project requires modification even if it is to the output documentation.
• Resources and Team:-Implementing an ERP project requires an internal project manager and team. Whilst the majority of businesses try to achieve this by assigning these roles to key members of the business and making them continue to do the day-to-day work that has made them key, it is ultimately a struggle and causes issues with the project and the business.The most successful implementation projects have at least a 100% dedicated internal project manager to ensure the project is kept on track, on budget and moving in the right direction.
• Training and Understanding – User Acceptance:-There are many philosophies on how best to train staff, but the simple rule to follow is to actually train the staff.During implementations there are many methods of training, but before any of this can really commence the software must be understood by the business, and the business must be understood by the ERP partner.This is not simply how the incumbent software is used, but the business processes, requirements and the reasons behind why transactions and processes are undertaken. This understanding will lead to further questioning and mapping of processes to the new software to see how the software can be leveraged to full potential to meet the needs of the business.