Why Does ERP Fall Short?
Most manufacturers look to their enterprise resource planning (ERP) system to enhance the organization’s overall performance. In many cases, the original drivers that led to an ERP selection were the goals of streamlining and simplifying business processes for a sustainable competitive advantage.
In case after case, implementations miss their mark. Instead of delivering promised cost reductions, business agility and performance improvements, ERP systems create complexity, duplication of effort, and in the worst cases, poor quality and customer service, and a dangerous lack of visibility into the business.
Likewise, legacy ERP systems don’t keep pace with change. The manufacturing sector faces continually changing business processes, data, and requirements which make it nearly impossible for a typical, inflexible ERP system to keep pace with what the business really needs.
The Warning Signs
Check these ten warning signs to see if your ERP system is killing your business.
Your ERP system can’t integrate mission-critical business data.Your data is “locked up” within your outdated ERP system and is difficult to access. You can’t easily analyze it for decision-making. Worse yet, quality management, engineering and design, EDI, customer orders, and release accounting all reside in “silos” of information that exist independently of each other. A silo environment increases complexity and ensures duplication of efforts with different versions of the truth, which compromises the quality, reliability, and accessibility of vital information.
Changes to the system are costly and time-consuming. The software vendor issues releases every 24 months and rarely provides the new features you need on a timely basis. Any change coming from the vendor seems to cost you six figures and many months to complete. Nor can you find skilled resources to help with these updates at an affordable rate, so you are stuck using an outdated system and facing the costs. Industry analysts see this as a bad sign, as noted in an Aberdeen Group study,
co-sponsored by Plex. “While it may be acceptable to skip a release or run
one release behind the most currently available, lagging significantly behind on
an ERP implementation will leave functionality and technology improvements
largely unused. Not taking advantage of new releases can mean losing a
competitive advantage and wasting the money paid in maintenance fees.”
Your disaster recovery plan involves tapes. If your servers or data center burned down, you would have to buy new equipment, configure it, and then reload your data from tapes. Recovery Time Objective (RTO) is the time it takes to get back up and running after a disaster, and you’re in a precarious position when it comes to this metric. The Recovery Point Objective (RPO) — or how much data you would lose in the case of a failure — is significantly lacking with back-up tape methods.
Beefy PCs or “fat clients” are needed to run the system. Sure, PCs are getting cheaper, but they are running less memory. If you need to install and maintain fat clients (a networked computer with most resources installed locally, rather than distributed over a network), you run into IT management difficulties, security risks, and high maintenance and licensing costs.
Maintenance fees are high. With rising ERP solution maintenance fees, you’re not in control of IT expenditures. Some of the biggest ERP vendors consistently raise maintenance fees, which increases your total cost of ownership over time. For instance, SAP’s annual maintenance fees have been quoted as 22 percent of the original license cost plus cost of living index adjustments. As you review your IT spending, pay particular attention to multiple support contracts for the same applications, made worse by information silos. Technical differences among a range of applications also require the hiring of experts to implement and maintain the various applications.
You can’t access the data easily if you are traveling. It’s obvious that business doesn’t stop when you are traveling. Smartphones help you stay in touch, but if your ERP doesn’t have mobile apps, you’re out of luck. Wireless connectivity is everywhere, yet you’re limited because you can’t stay in touch with business operations.
Upgrades are disruptive to the business. We already noted that upgrades from software vendors usually come out every 12–24 months on average. They often require updates to the operating system, database management system, disk space, hardware, etc. Upgrades take time to plan and to execute. You’re in trouble if the business has to be ”down” for a period of time to do the conversion.
Trading partners can’t easily interact with the system. In today’s manufacturing sector, the value stream is increasingly interconnected. More just-in-time replenishment is being done, and suppliers need easy access to your orders and inventory levels. Do your suppliers need to load special software to connect? Can they quickly and easily get the information they need?
New employees need time to learn the system. Many older ERP systems are difficult to learn and workers are easily frustrated when they are instructed to “Press F1 to inquire” or “Press Enter to accept.” If you have staff turnover, you are losing money while the new people learn the shortcuts to get up and running.
Globalization is too difficult. Many legacy systems require you to run a different version to support China, Eastern Europe, or various countries. Changes to the translation are difficult, if possible at all. Rollups of localized, unique financial data are done via spreadsheets, which is cumbersome. This is not acceptable in today’s global marketplace.
The Next Step
Fortunately, a new breed of cloud ERP resolves these challenges so manufacturers can thrive by doing what they do best, not writing and maintaining software.
The Plex Manufacturing Cloud ERP offers robust ERP/MES functionality without the need for expensive servers, operating systems, database software, backup equipment, and the IT specialists to manage all of that. Plex is always up to date and is available to customers via a monthly subscription fee. That means no hassle, business disruption, or costs with version upgrades.
The Plex Cloud ERP system integrates and streamlines all aspects of a manufacturing company, including sales, engineering, quality management, production, scheduling, shop floor control, barcoding, part traceability, warranty tracking, shipping and receiving, EDI, human resources, tooling, and more. With no up-front investments in servers or IT infrastructure, Plex’s integrated manufacturing system can help drive out costs and improve quality in your organization.