According to Anthony, R. A, organizational processes fall into three levels - strategic planning, management control and operational control. Even though much of ERP success has been in facilitating operational coordination across functional departments, successful implementation of ERP systems benefit strategic planning and manegment control one way or other.
Help reduce operating costs
ERP software attempts to amalgamate commerce processes across departments onto a single enterprise-wide information system. The major benefits of ERP are enhanced harmonization across functional departments and increased efficiencies of doing business. The instant benefit from implementing ERP systems we can imagine is abridged operating costs, such as inferior inventory control price, inferior production costs, inferior marketing costs and inferior help desk support costs.
Facilitate Day-to-Day Management
The other benefits from implementing ERP systems is facilitation of day-to-day management. The implementations of ERP systems care for the organization of backbone data warehouses. ERP systems offer better convenience to data so that management can have up-to-the-minute access to information for decision making and managerial control. ERP software helps track actual costs of activities and perform activity based costing.
Support Strategic Planning
Strategic Planning is "a deliberate set of steps that assess needs and resources; define a target audience and a set of goals and objectives; plan and design coordinated strategies with evidence of success; logically connect these strategies to needs, assets, and desired outcomes; and measure and evaluate the process and outcomes."
Part of ERP software systems is intended to support resource planning section of strategic planning. In reality, resource planning has been the weakest link in ERP practice due to the difficulty of strategic planning and lack of sufficient integration with Decision Support Systems (DSS).
ERP Benefits Realisation: What It Takes To See Results
The Issue: Fewer than 20% of companies lately surveyed have the three critical elements required to make certain that their Enterprise Resource Planning (ERP) projects further the company’s top business transformation goals.
Information Technology (IT) groups carry on struggling to confirm the value of their massive investments in ERP, but they have already lost the fight because if you are still trying to demonstrate the value, it’s already lost reliability in the eyes of chief executives. With 57% of companies rating themselves fair to poor in measuring IT costs and benefits, it’s no surprise that their headship doesn’t see the connection between IT costs and company aims.
Past spending is a sunk cost; now’s the time to plan for the future
Are your proposed ERP projects critical to changing the competitive position of your company? Do they address a tactical aim of the company expressed by top management, or are they an unsystematic list of departmental needs? Do they just cut off a few costs here and there--or worse, do they only address IT issues?
AMR Research surveyed and interviewed more than 100 companies to find out the best practices for receiving value from ERP. As detailed in the AMR Research Report “ERP Benefits Realization Framework: Metrics and Organization Aligned With Business Processes,” March 2004, we laid out an ERP Benefits Realization Framework synthesized from the research.
The most flourishing companies shared three key attributes:
A clear corporate vision emphasizing steadiness and collaboration among business units
The value of a worldwide ERP realization comes from taking benefit of common consumers, suppliers, resources, and business processes around the world. Companies need to change their past practices and execute constantly across business units to see the profit. Executive management at the most flourishing companies we spoke to articulate a few simple, easily understood transformational aims for the corporation; aims that altered the company’s competitive position. These ordinary aims infuse the case for each business and IT project, establishing priorities and resolving differences of opinion. The CxOs saw ERP as a change agent and emphasized a “One Company” approach to make certain collaboration among business units.
One corollary: Decentralized companies and those that emphasized Profit & Loss (P&L) responsibility as their primary measurement of business units take longer to attain and are half as likely to surpass their Return on Investment (ROI) expectations. Companies using a Balanced Scorecard to evaluate business unit leaders fared much better.
A dedicated group harmonizing and improving business processes
Getting business units to agree on common business processes is difficult for most IT or ERP project teams. Continuous development requires continuing study in light of changing market surroundings and a stable stream of upgrading projects. We found 41% of companies with a dedicated process improvement group were highly satisfied with their ERP projects, compared to 27% of those that did not.
The best results, however, were kept for companies in which the process improvement group was led by a senior executive, reporting to the C-level. Sometimes called Chief Process Improvement Officers (CPIOs), their seniority and access to top management gives them the power to effect lasting change. The difference? 60% of this group is highly satisfied with their results.
A central financial analyst presenting a credible and transparent accounting of the costs and the business value realized
Executive management is doubtful of ERP and its profit because they are hard to find in the income statement and balance sheet. A few companies are solving this problem by appointing a dedicated financial analyst to bring rigor to benefits accounting. These analysts do the following:
* Help establish the business case, metrics, and sources of benefits data for proposed projects
* Measure the business benefit by project, business process, and organization, eliminating double counting by separate project teams
* Report the results widely, giving executive visibility and creating some peer pressure for everyone to contribute
How do you know its working? Companies told us that a few quarters of credible benefits accounting changed the question from “Is ERP giving value?” to “What new projects can we start to get more?” You now have the executive leadership and credibility to drive ERP benefits to the next level.
Unless you are in one of a lucky minority of companies that has all three in place, you need to understand what can be accomplished and what will be difficult to achieve. To improve your success, consider the following:
* Link the company’s stated goals to the business process changes required to achieve them and the role ERP can play in facilitating and enforcing the change. This is the foundation for getting all of the elements in place.
* Lobby for permanent organizations to lead the ongoing change from the business and IT side, emphasizing IT’s role in program management.
* Establish the financial analyst position to track benefits long term. It can be in one of a number of organizations but must have consistency and credibility across projects and the years of improvement effort ahead.
* If your management has no transformation vision and is focused on narrow cost cutting, consider redirecting your efforts to projects likely to be successful. Such companies in our study were far more likely to tackle safe projects, such as technical upgrades or small, quick payback departmental projects. They showed incremental value but never made a big difference in the bottom line.
(Source: www.sysoptima.com and www.absoft.co.uk)