Cindy Jutras: Don’t overlook the basic plumbing that is ERP

ERP provides the necessary infrastructure that forms the operational and transactional system of record for manufacturers of all types and sizes.While an ERP evaluation was once thought to be a strategic five- to eight-year decision, Aberdeen research finds the average age of implementations to be almost nine years, implying the longevity of these solutions often exceeds the anticipated life.

As a result, many aging implementations, based on outdated technology, are limiting the business evolution necessary to any company that wants to thrive amidst shareholder expectations of growth and increasingly demanding customers.

Best-in-Class ERP implementations can be a strategic weapon in standardizing and automating business processes, and providing the visibility needed for agile, data-driven decision-making.

A couple years ago, shortly after joining Aberdeen to run its Manufacturing research practice, I decided to benchmark ERP in manufacturing. Aberdeen’s management at the time tried to talk me out of it. ERP wasn’t a sexy topic. I would struggle to get survey responses, and nobody would care about reading the report that would be based on those responses.

I stubbornly persisted and in a world where we write good solid benchmarks based on 200 to 500 survey responses, in the summer of 2006, 1,245 companies responded to my call for participation, and more than 1,800 companies later downloaded the resulting benchmark.

When I repeated the process in 2007, survey participation grew to 1,716, and downloads exceeded expectations at 2,128. I guess somebody cares.

But a question persists. With its roots in material requirements planning (MRP) and a history that spans more than two decades, ERP has truly become a mature business application. In a world where industry observers are in constant search of the “next killer application,” can a technology that is viewed by many as a necessary infrastructure also be a strategic weapon that provides competitive advantage?

Aberdeen’s July 2007 ERP in Manufacturing found the average ERP implementation used a weighted average of 31.2 percent of available functionality. Top performers implement 28 percent more functionality and are 100 percent to 280 percent more likely to use advanced technologies such as workflow and event management, yet ERP in general remains largely underutilized.

Simply taking better advantage of ERP basic functionality can yield dramatic results though. Because it is generally viewed as basic “plumbing,” potential benefits of ERP often are overlooked. Yet with proper attention to full integration and proper controls, Best-in-Class companies are able to achieve very impressive results.

Aberdeen’s Best-in-Class boast reductions in inventory (24 percent); manufacturing costs (15 percent); and administrative costs (15 percent) while improving manufacturing schedule compliance (18 percent); and complete and on-time shipments (20 percent). These achievements can generate savings of hundreds of thousands of dollars while also impacting revenue through improved customer service and response times.

To participate in this year’s ERP in Manufacturing survey, access https://www.aberdeen.com/survey/ERPinMFG08MBT/

In appreciation for sharing your time and thoughts with us, Aberdeen will provide complimentary access for you to the full benchmark report as soon as it is published.

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