ERP Readiness: Business Process Regimentation—Is It Worth Giving Up My Ad Hoc Systems for ERP?

In the last couple of posts (here and here), we’ve discussed how to determine whether or not a business’s processes are ready for an ERP system. In this post we’re going to tackle the issue of business process regimentation before we dive into how to conduct a process readiness assessment.

Regimentation

Regimentation: to subject to order or uniformity. ~Webster’s Dictionary

Practically speaking, ERP systems will constrain your business processes and often require that your business processes conform to commonly assumed best-practices.  Put another way, a business that installs a new ERP system, especially if it is their first ERP system, will almost always subject their “as-is” business processes to some degree of regimentation.

Why is this so important?

Companies that embrace the fact that implementing an ERP system will mean changing their business processes will save time and money by doing so early. They anticipate and plan ahead for process adjustments before implementation rather than being surprised by such changes after the “implementation clock” is ticking and the pressure to complete the project is high.

Businesses that resist changing their processes before reaching implementation sometimes justify their resistance by insisting on ERP system customizations during or after implementation. Overly customized ERP systems take longer to implement and are often more expensive. It is a better rule of thumb to regiment as many business processes as possible prior to ERP implementation. Any processes that remain—that cannot be regimented beforehand—may very well be unique processes to your business or industry and will therefore require unique optimization. Identifying those unique business processes prior to implementation allows for better planning so that those non-negotiable optimizations are made on time and under budget.

The Benefits of Spreadsheets, Small Business Accounting Systems, and other Ad Hoc Systems

When businesses are just starting out, they solve day-to-day problems as they come up. As a result, ad hoc tools and solutions are often implemented to address problems on the fly. It’s a little like laying down train tracks in front of a moving train!

Let’s take a look at the order-to-cash process once again. In a small business or start up, much of the order taking process can be done “by hand.” Order details might be taken manually on paper, with inventory checked in a spreadsheet. The order details might be physically handed to a picker in the warehouse who may or may not generate a separate pick ticket. Once the product is picked and checked, the warehouse worker might create a separate packing slip, and the paper order or pick ticket might be returned to the back office so that inventory can be manually reconciled, and an invoice generated. It’s easy to see how ad hoc systems are initially created to solve an immediate problem with little consideration to the other steps in the process or to efficiency. Spread sheets and accounting software are discrete systems that do not demand uniformity because the handoff between one system and the next is manually accomplished.

Unfortunately, ad hoc systems are not scalable. Capacity can only be increased linearly, usually by multiplying your workforce—two order takers can generate twice as many orders as one, etc.

What ad hoc systems lack in efficiency and scalability, they make up for in flexibility, modularity, and speed of implementation. Updating an order form doesn’t affect the inventory tracking spreadsheet, for example. The systems being employed generally do not dictate how a process will flow from one department or person to another. Uniformity is generally not a requirement of these systems because there is very little, if any, automation. For example, an item number might be just about anything you can type into spreadsheet cell. Thus, regimentation is low, and flexibility is high with ad hoc systems. An inefficient process can be mapped to an ad hoc system because the system doesn’t require the process to be efficient; this is why it is difficult for businesses to migrate away from such systems.

The Benefits of Dumping Spreadsheets and Embracing ERP

Let’s see the order-to-cash process in a business that utilize an ERP system. Taking an order and checking inventory are now one and the same step—the ERP system can be setup to disallow placing an order for an out-of-stock item without flashing an inventory level or backorder warning to the customer service agent on the phone.  The pick list is automatically generated and sent to the next available picker’s tablet, who picks the items, and updates the system with the push of a button so that a packing slip is automatically generated at the packing station. When the items are packaged and placed in shipping, the system is updated and the same customer service agent who took the order is alerted so that he or she can close the order and generate an invoice, which automatically updates inventory and triggers purchase orders when inventory levels drop under a certain threshold.

ERP systems automate much of what used to be a manual process in an ad hoc system. When the order-to-cash process is handled by an ERP system, efficiency increases. One person can now do the work of three, four, or five people, meaning the system scales as your business grows. But, in order for the system to automate your business processes, those processes must become much more standardized. Information might need to be inputted in a uniform way.  One small example is creating uniform item numbers. An ERP system might not dictate how those numbers are formatted and standardized, but once they are, subsequent codes generally have to conform to that standard. In order to generate an automated pick ticket, the ERP system might require that location information in the warehouse (aisle, shelf, and bin numbers) be created and maintained for all inventory numbers, or perhaps barcodes must be created for handheld inventory scanners. Changes to forms can be made, but not as easily and not without considering the requirements of the rest of the ERP system. Some changes to the system might require the work of a technical analyst or programmer. The value of increased efficiency and scalability that an ERP system provides more than outweighs the loss of flexibility in an ad hoc system.

Are you running your business with ad hoc systems? Is your growth limited because your systems can no longer scale? Call us today! You know your business processes, and we know ERP. We’d love to help you scale your growth.

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