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A Lean ERP is a Skinny ERP

Posted in Strategy & Management and tagged , , , , .

Ad for Infor ERP at O’Hare Airport, image by Steve Brodner, CC license

If you search for “lean ERP,” most of what you’ll read is about whether or not the traditional ERP system supports “Lean Management” concepts. The argument is that Lean Management is based on the pull of demand and Just-in-Time principles whereas traditional ERP is based on set lead times, planning windows, and building inventory based on a forecast. It’s a fair point.

But what about a truly “lean” (skinny!) ERP system – one that is simple, inexpensive, and easy to implement and maintain? Everyone knows that the typical ERP project, and the maintenance of the system thereafter, has more in common with the word “fat” – as in fat timelines, fat cost, and fat (extensive) complexity.

Stripped to its essentials, an ERP system is supposed to

  • Tell you what resources (materials, labor) you need to make and sell your products;
  • Serve as a system of record for standard business transactions;
  • Record and store the financial results of all transactions

But many companies want their ERP system to do everything from managing specialized customer service rules to providing supply chain analytics – that is a mistake. There are better alternatives.

And ERP vendors want the footprint of their product in your business to be as big as possible (more modules, more users = more revenue).

Both of these factors make the typical ERP solution complex, bulky, and expensive.

A Skinny ERP is one that is limited in scope, relatively un-modified out of the box, and no more complex than what is needed for your business. It largely delivers the essentials mentioned above, and no more.

Here’s how to get there:

  • Make peace with your ERP solution. Let it do what it was designed to do, and give it accurate and consistent data across the enterprise. I’ve seen companies try, and largely fail, to modify the guts of their ERP system to automate workflows for order processing, customer claims, weight-based pricing, inventory reservation, and other processes with complex business rules and logic the ERP package wasn’t built to do. The modifications usually delivered a fraction of the intended functionality.
  • Use other, nimbler tools and 3rd party services to manage what doesn’t naturally fit in your ERP system. It’s now possible, for example, to send your all of your transaction data, automatically every day, via file extract, to a vendor’s cloud-based server, and use the vendor’s very rich analytics software to create the facts and insights you need, with no upfront costs, on a pay-by-month basis, with no annual contract. Stop trying to make your ERP a reporting system.
  • Start managing the “enhancement request” desk that most IT departments have to entertain the user population’s list of desired improvements to your current systems. Some needs may be a natural fit with an ERP and you should do them. But many will be enhancements — suggested by smart and creative people — that improve only the part of the canvas they are looking at, and really don’t belong in the core ERP system. Go ahead and build them anyway, and you’ll have a very fat ERP.
  • Question why you want to manage the business process at all, rather than letting a 3rd party handle it for you. Is the process so important to the business that you need to control it in-house? You can outsource almost anything, and one advantage of this is that usually the 3rd party specializes in the processes you want to jettison. An example is transportation: instead of trying to make your ERP manage shipping, or buying expensive transport software, let a logistics firm handle the whole thing – dodging the whole question of how to enable the process with your own software.

Start thinking of your ERP as the basic plumbing – the core – and begin to explore not how you change that core, but how you supplement or compliment it with the many alternatives now available.

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