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ERP – Just another tool? 07/06/2011

Posted by TBoehm30 in ERP.
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Is there a case for using ERP software outside of your Production system?

Imagine running a 20 million dollar manufacturing company on spreadsheets.  Oh sure, you can use Peachtree or QuickBooks for accounting, but what about manufacturing?  How many Work Orders are going on currently?  How many Sales Orders are due today? Or this week?  Can you determine what your margins are, when you can’t even track labor?

The obvious solution is an ERP system, but how fast can you implement it?  You need the new system yesterday: the spreadsheets are so big that the computers are crashing; there are numerous versions of each list and no one knows who has the latest version.  Can you get a project going fast enough to solve the problem?  What if you can’t?

Maybe now you can understand my dilemma; and why my solution makes sense.  The company has several factories already running a very good ERP system.  They use the accounting and manufacturing modules to coordinate with the corporate accountants and to track and plan the manufactured goods.  One factory, however, is not quite up to speed.  The project to put them on the system is falling behind and they will not be able to make their deadlines.

Their implementation team is small, which sped up the decision making process.  We were able to design their processes quickly, and understand most of the issues.  Next was loading, testing, and validating data.  The small team hurt them because each member had too much going on.  With several validation scripts each, plus their regular job, they couldn’t keep up.

We have to deal with the amount of time it takes the accountants to do a month-end and quarter-end close.  Corporate needs standard monthly statements in a timely fashion, and without a regular system, that takes a while.  The time they are working on that is time away from the ERP project.  We also lost a few days while they installed a new payroll system.  The problems encountered during that project took the accountants away for several days.

The solution is pretty elegant, even though it is convoluted.  We will implement the ERP system in a non-Production folder.  We will only use that system for operations to track inventory (POs, Receipts, Work Orders, Sales Order, Shipments).  We will not use that system for accounting (invoicing, A/R, payments, journal entries, corrections, etc.). 

Leaving out the accounting side should reduce the scope enough to allow us to finish on time.  By including the main functionality to track inventory they will have the tools they need to run the business.  They need to stop relying solely on giant spreadsheets, and this will give them the data they need to do it.  They will be able to download anything they still need into Excel format, but have a SQL database as their system of record.

There are risks, of course.  They will need to officially give up their spreadsheets and not rely on them anymore.  Some people were used to seeing the whole picture through the spreadsheet.  That picture could be limited and more condensed as seen through the ERP.  They will have to figure out what screens and what reports are equivalent to their old spreadsheets.

They will have to be able to synchronize some of the processes between the existing accounting system and the new ERP system.  Anything with money on it will need to be put into the accounting system, but the quantities will be in the ERP system.  They wouldn’t have an ‘old’ accounting system if they could just go-live with the whole ERP system.

What about dual entry?  Sales Orders will need to be on both systems.  Can they manage the ERP system without worrying about prices?  Can they keep the quantities in synch?  Invoicing will have to be done from the accounting system, but match with shipments from the ERP.  POs will need to be in synch as well.  How much time will be spent chasing down inconsistencies?

They will be using the ERP system only to track inventory.  The dollar amounts will, hopefully, be correct but irrelevant.  This is a temporary solution, so we still have to plan for an eventual go-live on the Production ERP system.  We still have to figure out when to move all the accounting information and processes along with the manufacturing data into the Production ERP system.

The bottom line is that they can’t go-live on the Production system; they can’t stay where they are now, with spreadsheets.  This is the next best alternative.  Do you have any alternatives?  Have you faced a problem like this?  Let me know.

Can we get it done in time?  We must, because it’s a global world out there and Technology makes it happen.