The term “Y2K” may conjure up memories of doomsday predictions and fears of widespread blackouts, but for manufacturers, it may bring ERP to mind.
A massive replacement cycle of ERP systems occurred in the late 1990s and many companies have not upgraded their systems since. With the average lifespan of an ERP system being ten to 13 years, replacement cycle logic indicates that we should be on the cusp of another ERP system replacement wave.
The Great Recession may have staved off the demand temporarily but it certainly hasn’t disappeared. Industry analysts and observers have been waiting for the floodgates to open for new systems.
Here are 12 signs that your organization may need to look into a new system:
1. Your CEO asks how much the product or job that just shipped cost the company, and the answer given by both the accounting and manufacturing managers is, “I don’t know.”
2. You’re considering a new business opportunity or a new strategy and one of the concerns that’s raised is, “our ERP system won’t support that.”
3. Your salespeople need to call “someone in production” before they can respond to a customer’s inquiry about a new or existing order.
4. Your idea of ad hoc reporting is to go to a pile of green bar reports to pull data that you can transcribe into an Excel spreadsheet.
5. Your idea of business intelligence generation is to write a request to IT asking for a report or other output to be run from your system and then waiting days or weeks for it to appear on your desk.
6. You are engaged with your workforce in a continuous process improvement program, and one of the themes coming out of your kaizen blitz or kaizen burst efforts is that your ERP system is getting in the way (as a source of waste).
7. The software vendor has notified you that the ERP solution you’re using has reached the end of its life and a support agreement renewal is not available. The same applies if you ask your software provider for a product development roadmap for your ERP solution and none is immediately available.
8. Your organization has recently been involved in merger activities and the legacy ERP systems cannot be easily adapted to address the changes in the combined business.
9. Your organization has recently been part of a divestiture and you have six months to get off the ERP system of your former parent company and onto a new system.
10. Your auditors inform you that they are unable to complete their work because the required information cannot be obtained from your existing system. The same applies if your auditors inform you that your current system cannot support any number of other regulatory compliance issues such as Sarbanes-Oxley, FDA, FAR and DFAR.
11. You have concerns about how you will run your business after that one person who really knows your current ERP system retires next year.
12. You are analyzing the work queue in front of your IT department and realize that the vast majority of items needing attention are tied to keeping your ERP system running, versus leveraging it to drive new value for your business and your customers.
ERP has come a long way since the Y2K replacement cycle. Nowadays, what matters more than anything else is a system’s ease of use. Sophisticated equipment is useless if the people hired to use it can’t understand it. People want an ERP system that’s not only easy to use but also intuitive.
Another important area is advanced analytics and business intelligence. Analytics used to be something that was nice to have but now it’s a requirement. In years past, people pursued best-of-breed solutions for their particular needs. This resulted in a disparate systems scenario in which there’d be three, four or five different pieces of software managing manufacturing, and none of them were interacting with each other. The explosion in siloed and incongruous information was challenging to mine for data about the processes and results that spanned across these various silos. Now, companies are looking for centralized ERP where all the parts work together, providing the organization with a single data set about the business. Working with a single system running on a common and pervasive data set increases the usability of the system, helping people and processes to become more efficient.
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