what is erp

What is ERP? – every enterprise has one

I am often asked "what is ERP?" like it's some new and unique way of operating - the panacea for all business problems. It is not ... it's just the latest marketing TLA (three letter acronym) for something that every business has!

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The world is full of marketing buzz and hype. Creating the newest, glitteriest and trendiest shiny object. The magic potion that will be the solution to your problem. We can solve your business, your website, your weight, your health, your finance or your relationship problems ... and overnight!

Unfortunately for us … but fortunately for the suppliers of these hopes and quick fixes … we fall for them. Saying “yes” when we should be saying “no, no, no!”

Businesses are also presented with these shiny objects and quick fix solutions. Whether getting customers, keeping customers, having a happy workforce or finding needed money. Someone is there with the latest "wave a wand potion".

The History

Enterprise Resource Planning (ERP) computer packages have evolved over the last 50 or so years. As more and more elements of manual systems were computerised. 

Starting with MRP 1 (Material Requirements Planning) through to MRP 11 (Manufacturing Resource Planning). Evolving with the development of computer technology to become ERP (Enterprise Resource Planning). Now a fully integrated business system integrating the complete business. 

Everything the business always did but now more integrated and with the integration more integrity. 

Over the years each step was marketed as the solution for organisational problems. To break the independent siloed systems within each department, improve communication or eliminate redundancy.

Business is the Same

Through the ages business fundamentals have not changed. 

The cycles of managing the acquisition of customers, trying to keep them and getting new ones. The working capital cycle of establishing what you need and when, buying it, stocking it, converting it into a sale. Delivering it and then collecting the cash. To then starting the cycle all over again. 

A System is not a Magic Solution 

Despite the development of technology, the same problems still exist. The organisation structures virtually guarantee a siloed business and the people who use the systems are the same people. While most of the technology issues have been resolved the people issues remain.

So I. another attempt to overcome these barriers the latest buzz word is “digital transformation”.

Designed to overcome the new mix of boomers, GenX'ers, Millennials and now GenZ'ers. People with different ideas about work and leisure. Blending technology into organisations with boomers moving (being moved) out and replaced by the other cohorts. Groups who view the workplace very differently and have different expectations from life. 

The Crucial Element … the People 

Businesses today face the same issues with change that they faced 30 years ago. The problem is people … both the managers and staff which no computer system can fix. 

I remember back in the 80’s when explaining our proposed MRP 11 system to a stock recording clerk. He looked at me like I was smoking something and said, “I’m sorry sir, but that will never work here”. Fast forward to 2003 when implementing a much newer ERP system that included lot traceability. Here the Quality Manager told me that “this system won’t work as well as my manual system”. A system that I’d verified was garbage.

Both views reflecting a lack of understanding and a resistance to change. The idea that this may threaten “my job” or “my proprietary knowledge” was the same. 

New technology … same humans!

All Companies have an ERP System

All companies have, and have always had, an enterprise planning system. The only difference is that the manual systems have been replaced by computer packages. Integrating the legacy systems and still trying to break the silos ... and resolve issues that a system alone can't.

Without addressing the people issues any system is doomed. It's not the operating system that needs fixing … it is the organisation.

If your company is looking to implement change make sure that the people are prepared. And ensure that there is strong and consistent leadership. Remember that it is a business system and not a computer system. Success or failure depends on the organisation and the people … not the package.

If you get it wrong, you may end up going the way of the very public failure of the Lidl ERP software implementation … it was dumped with a EUR500 million loss! And they failed with the same computer system that is working with many of their competitors!

ERP systems are a neat way of tying all the business systems together - some address specific industry needs but all are variations of a theme - the required business operations of every business.

About the Author Patrick

A “nevertiree.” Passionate about small business success and teaching. Every day a learner and excited by all the opportunities available today. On a mission to help SME owners find their way to financial freedom.

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