Manufacturing - ERP failures
In this article, Raymond D. Atkinson, discusses the fundamental principles behind Lean Manufacturing and moving on from MRPII; such as waste, type-1 waste, type-2 waste, JIT Kanban, and others.
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Many organisations are suffering the legacy of poorly performing ERP systems as a result of implementation projects failing, shortcuts taken during implementation, poor data migration, systems and processes not matching, poor software evaluation & selection, misinformation or lack of knowledge on what the ERP system is supposed to do. The company has paid the money and have sunk the costs into the technology and irrespective of what other actions are taken to recover monies, the fact remains value has to be obtained from the system.
Companies that find themselves in this position are now part of the 70% statistic of underperforming ERP systems. The warning signs are there from the beginning. ERP, to be successful, must be embraced as a corporate change program that affects all of the organisation and must be driven by management.
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Investing large amounts of money, tying up vital human resources, and even, possibly, betting the house on the implementation of a new ERP system, is not a decision to be taken lightly. If you are the CEO of a trucking company then it's a given that you, most of your managers and most of your Board will have a comprehensive understanding of the drivers of success for this industry. This is NOT what generally happens with the spending on an ERP project!
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From a senior management perspective, ERP is a computer system that we need to run the business. Software houses and their implementation partners have sold into the industry on the "sign a cheque solution" implying that if you sign this cheque, it will all fall into place. The cheque will typically be very large, with few, if any, guarantees of success.
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Our experience with the mining industry mirrors the experience in all other industries. There is a common theme where too much reliance is put on the sellers of the software, their implementation partners and the lack of a clear vision on how the technology can be used to integrate the different areas of the business.
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With so many ERP implementations going wrong, it is time to take a realistic look at the industry and the what's behind the high cost and high failures of ERP: the consultants! The IT industry, generally, have gotten away with behavior that makes the mafia look honest! Products that don't do what the salesmen promise, expertise they claim they have but don't have, misrepresentation after misrepresentation, and creating chaos in industry with failed implementations.
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Six Sigma or Lean Manufacturing thinking? Which is the best one to use for problem-solving across the organisation? This article, by Ray Atkinson, examines from a consultant's practical experience, problem-solving using both tools.
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Common complaints emerging from organisations implementing ERP systems allege considerable lack of knowledge and professionalism in the actual implementation process provided by implementing organisations. Typically at the negotiation or project kick-off stage the presented material appears very professional with implementation plans and strategies that experts would find difficult to fault. There is a serious expectation and assumption of professionalism and expertise of the supplier/implementing organisation given the huge amounts of money they are asking for the service!
After analysing dozens of ERP projects over the last thirty years, it is clear that executives need to take a different, more broadly based view if they want ERP (Enterprise Resource Planning) to provide the benefits the technology is capable of. Too many executives see ERP solely as a computer technology project, believing that if they buy a new software system, their operational problems will be solved. The huge number of failed ERP projects is the evidence needed to signal to boards and CEOs that it doesn't work that way.
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