Sometimes a company invests in and ERP system without understanding the real why.
Here is the typical company growth story.
- A company starts – they don’t have any type of accounting system, but they start building parts for customers.
- The company grows to 10 or so employees. They hire a Book Keeper. That Book Keeper tells them they should buy an accounting package. So they buy PeachTree, QuickBooks, or something similar. Some inexpensive application. Inexpensive because it doesn’t help them make product.
- The company grows to 35 or so employees. There are couple of employees that are good with Excel so they start building “tools” to help them. And the Book Keeper is now full time and is building more Excel sheets. There are more meetings now, because we need to communicate what we are late on and why.
- The company continues to grow. Now they have closer to 50 employees. The owner is happy and frustrated. Happy because of the dollar volume. Frustrated because there are so many things going on that it is getting real difficult to stay on top of it all. And, there are too many meetings!
- The company hires some new “leadership”. The new “leadership” says, we need to get a new system. All these spreadsheets are killing us.
- After some debate, the company buys a new ERP system. This is after they get over the shock of how much it costs.
- They want training – they get training
- They don’t like it – it doesn’t seem to work
- They try to make it work like their spreadsheets…..
- They start using more spreadsheets, like the old ones
- They have a new, up to date version…..of the same old problems
The decision to buy the ERP system was a good one. However, they failed to recognize that the real issue is that they needed to process transactions differently. Instead of adopting the new ERP system, they tried to make it work like the old.
The story may or may not sound familiar. However, unless you recognized that the real reason by buy an ERP System was actually due to the increase in transactions, you missed out on a very important concept. Automation of any kind is to increase the quantity of transactions without increasing the head count. You buy a new tool and you need to do things different, based on how the tool was designed.
The failure is not recognizing that the ERP system is a tool that is designed to run a company. Not just write checks, print purchase orders and issue invoices to customers. It is a well thought out system that if used correctly, can
- Tell you how much capacity you have and what you need to ship
- Shorten the time between cash going out the door and cash coming in
- What parts are actually making money
- Who needs additional training so you can reduce mistakes