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How to use a new ERP system to improve business processes

Packaged ERP will not match your business processes exactly -- and that's a good thing. Here's why you should use the prospect of a new system and its implementation to become better.

One of the most challenging aspects of selecting and implementing a new ERP system is determining and dealing with...

the so-called functional fit of the system -- how well the system functionality addresses and supports the company's current processes and procedures.

It is a given that no packaged system will exactly match every procedure that a company is using at the time the system is selected. An old rule of thumb specified that a company should expect an 80% fit (a meaningless measurement, and an arbitrary target), use the system's flexibility and adaptability to improve the fit as much as possible, and change processes to fit the system's functionality for the rest.

New ERP, new opportunities

The prospect of a new ERP system and its implementation provides tremendous opportunities for improving business processes.

Indeed, a difference between system functions and current processes is not necessarily a bad thing. Moving existing practices into a new automated system will not necessarily generate any business benefit outside of possible administrative improvements. Automating a mediocre inventory accounting system will yield an automated, mediocre inventory accounting system. Packaged ERP is purported to encompass industry best practices, and changing your current processes to follow those best practices could, indeed, improve the processes and spawn improved results.

A well-organized system implementation project starts with a review and the documentation of existing procedures -- an as-is definition of company processes. The extended project team then defines the to-be versions of these processes, or the desired endpoint of the project. The difference between as-is and to-be is what generates the improved performance after the project is completed and the new system is implemented. Ideally, candidate software functionality will be mapped against the to-be definition to determine the best fit and the software selection.

There should be an allowance for software processes that are an improvement on the to-be model. It is conceivable -- likely, in fact -- that there is functionality built into the candidate software processes that will offer additional opportunities for greater efficiency or better customer service than was envisioned by the team in their modeling efforts.

Users critical to success of new ERP

Either way, it is incumbent upon the implementation team to develop and carry out a transition from the way things are done now (as-is processes) to the new, improved way of doing business with the new system. And that, in the simplest terms, is the essence of the implementation project.

Users -- the folks who are now performing the procedures and will be adopting the new ways -- must be involved in the modelling and definition of how their day-to-day activities will change, so they will be invested in the new system and motivated to make it a success. They must be provided with enough information through education and training to know how the new procedures will work. And they will be most impacted by the change, and so should get the full support of the project team, their managers and supervisors, company executives, and technical support resources.

Having user involvement throughout the process from definition to implementation is the best way to ensure that the new system and processes are complete and fully functional, take care of all the company's needs in that particular area of the business, and do, in fact, succeed at improving business processes.

Implementing a new system that exactly duplicates existing processes and procedures is unlikely to deliver improved performance or lower cost.

There are far too many examples of new systems and processes that made the user's job less convenient, more inefficient or simply unworkable. In such cases, the theory and functionality may be perfectly fine, but may not fit within the organization's culture, resources or orientation. A new process that doesn't fit, for whatever reason, will not be accepted, will not function as it should and could easily result in less efficiency, poor performance, reversion to the old way of doing things and a proliferation of spreadsheets, notes and manual procedures to work around perceived deficiencies.

Albert Einstein reportedly said the definition of insanity is doing the same thing over and over and expecting a different result. Implementing a new system that exactly duplicates existing processes and procedures is unlikely to deliver improved performance or lower cost.

Change is necessary. Changed procedures -- that is, improved business processes -- are a necessary part of any new system implementation. Properly planned and implemented procedural changes, in conjunction with a system implementation, fuel the improved performance that justifies the hard work and expense of buying and implementing a new system.

Next Steps

Guide to hybrid ERP implementation

How communication contributes to successful ERP projects

Undoing the negative effects of a rushed ERP project

This was last published in May 2017

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