Supply Chain Management Review (SCMR) recently published the results of a survey of industrial executives currently using Enterprise Resource Planning (ERP) systems. According to the survey, over 60% of respondents reported the need for more functionality for their specific industry. The results indicate that the more complex the business model, the greater the need for industry-specific functionality.
This raises the question of why ERP is still in common use, despite those who long ago predicted its demise for the very reasons highlighted by this survey. Do the results of this survey signal the beginning of the end for ERP? With a large proportion of companies still relying on ERP for accounting, invoicing, etc, it’s more likely we’ll see it being used in combination with other systems such as APS (Advanced Planning & Scheduling) and EAM (Enterprise Asset Management). These solutions step in where ERP fails. Let’s take a look at three key areas in which ERP is not meeting the needs of users:
1. ERP has some long-term and short-term planning capabilities, but its limited capacity for planning and scheduling is generally most apparent on the day of operations. It’s not easy for planners to handle disruptions and last-minute changes; rescheduling is cumbersome and time consuming. ERP systems do not make it easy for planners to explore what-if scenarios, analyze planning requirements, or get feedback on the quality of planning decisions with reference to business goals. In addition, ERPs tend to focus on the present; they handle poorly future planned or predicted changes.
2. ERP systems are typically based on what is assumed to be “best practice” – it reflects standard and generic processes across industries, rather than on-the-shop-floor realities and the unique challenges facing distinct industries. This one-size-fits-all approach means that implementation involves fundamental change to business processes. It also means that the system cannot be configured to fit real-world business environments, which are often less than ideal and vary greatly from industry norms. While almost any organization can use the standard ERP approach for invoicing, this is not the case in areas such as planning and scheduling, where there tend to be a greater number of industry-specific and customer-specific constraints.
3. Customization of ERP systems is possible, but it’s generally the responsibility of the user, as are testing and fixes once the system has been modified. Most ERPs are not set up in a way that allows for easy upgrades or modifications, meaning customization is more likely to lead to instability and unpredictability.
Do you have experience working with ERP, either alone or in combination with APS and EAM? How has your organization overcome the limitations of ERP? Do you agree with the majority of respondents to SCMR’s survey?
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