In the enterprise software industry, we hear a lot of talk about how ERP software can and should improve performance, reduce costs and make businesses more efficient. Marketing hype from ERP vendors and systems integrators creates a utopian promise of efficient operations that eliminates Excel spreadsheets, manual processes and outdated legacy systems. In fact, the concept is quite attractive to most C-level executives, especially those in Lean Six Sigma organizations.
The reality, however, is that most ERP implementations fail to deliver on these promises, leading a bad taste in the mouths of most organizations that have unsuccessfully tried to leverage ERP systems to drive measurable business value. To add insult to injury, many of these same organizations take pride in their lean and sigma initiatives. The irony is that the same companies that have six sigma teams, lean processes and business process improvement centers of excellence in place are the same ones wasting time and money on ERP initiatives that don’t deliver measurable business value to the organizations. These companies that have fully mastered the science of eliminating every possible dollar and defect from their supply chains are the same ones over-spending and under-delivering on their ERP implementations.
Not only are ERP implementations difficult to manage, with most projects going over budget, taking more time than expected and/or failing to deliver expected business benefits (according to our 2012 ERP Report), but they in many cases create more waste that they eliminate. For examples, organizations have a bad habit of over-investing in shelfware – licenses and modules that will never be used – which is hardly consistent with a culture of minimizing waste and eliminating defects. In addition, many organizations waste a great deal of time, money and resources on inefficient implementation processes simply because they don’t have the expertise to correctly implement the software. These organizations may be experts in manufacturing, supply chain management or procurement, but they rarely have the expertise to effectively and objectively manage their ERP initiatives.
So is it possible to integrate Lean Six Sigma and an effective ERP implementation? Absolutely. Here are three ways that an ERP implementation can effectively contribute to an organization’s culture and discipline of Lean Six Sigma:
1. Minimize waste and non-value-add activities. Despite the fact that most organizations get bogged down in their ERP implementations and end up with less efficient business processes than they had before, it is possible to minimize waste and non-value-add activities if implemented appropriately. The first step is to develop a business transformation plan that incorporates all the critical success factors of a lean implementation, including organizational change management, effective training, business process improvement and other key elements that will enable lean business processes and efficient organizational adoption of those lean business processes. Rest assured that pre-configurations and software best practices will not get the job done from a lean six sigma perspective – instead, organizations need to do the hard work of defining how software can best support their lean processes. Most of our clients find it more valuable to leverage Panorama’s industry best practices and business process mapping, blueprinting, and improvement services than trying to go at it alone.
2. Performance measures, KPIs, and benefits realization. ERP software alone won’t drive performance – only people, business processes and performance measure will. In other words, buyer beware when you hear the common refrain that your chosen ERP software will drive performance based on its technological capabilities. Sure, it’s possible that in theory the software alone will drive performance, but the reality is that nothing will improve without a comprehensive benefits realization plan that establishes key performance indicators (KPIs), analyzes how the metrics will improve as a result of the new business processes, and assigns accountability to those employees and stakeholders that will ultimately be responsible for achieving performance. This benefits realization plan should also be tightly coupled with the established lean business processes (per the first bullet above) and the organizational change management plan in order to achieve those expected business improvements.
3. Increase quality and reduce defects. Unfortunately, most executives want to simply get their ERP software up and running without bringing the organization to its knees or losing their jobs in the process, so increasing quality and reducing defects is often the last thing on the ERP implementation team members’ minds. Teams without extensive ERP implementation expertise, or those that are myopically focused on the technical aspects of a project (as is the case with most ERP implementation partners and system integrators), will often become overwhelmed with getting a bare bones project done on time and on budget. Much like Maslow’s hierarchy of needs, less experienced and effective implementation consultants and team members will focus on survival rather than the higher levels of the hierarchy that actually deliver business improvements. As with #1 and #2 above, effective business process mapping, organizational change management and benefits realization are three components required to reach the “self-actualizing” stage of an ERP implementation.
Lean Six Sigma is a complex process requiring cultural change, discipline and a commitment to business improvement. Companies that are able to effectively implement such a mentality clearly know how to manage complex transformations, but those same organizations tend to struggle with the complexities and risk of an ERP implementation. However, by incorporating the above three components into their initiatives, organizations can better integrate Lean Six Sigma and effective ERP benefits realization into a comprehensive approach that delivers measurable business value, lean performance and increased quality into day-to-day operations.
Click on the following links to learn more about Panorama’s Six Sigma service offerings, including our Six Sigma and Value Stream Analysis and Lean Manufacturing, Six Sigma and Supply Chain Management Workshop.