Beyond a Standard Implementation: 4 Key Elements of an ERP-Enabled Business Transformation
- by Sameer Page, Program Manager
- November 29, 2011
Rapid, diverse growth demands robust system-supported business processes to manage the scale, size, and complexities of business operations. ERP systems can support and improve operational efficiencies and integrate processes. Discover the need, purpose, and major components of an ERP-enabled business transformation program and how it differs from a conventional ERP implementation.
An ERP-enabled business transformation is a strategic business initiative that uses an ERP system to transform companies’ business processes. It seeks better efficiency by saving time and money to perform critical business processes.
Over time, successful companies grow organically and inorganically. Typically, organic growth brings a steady rise in business volume and increased depth to operations, while most business processes remain fairly unchanged. A rise in volume, however, can create significant challenges for the productivity and performance of the existing business processes, making them too inefficient to handle higher volume. On the other hand, increased depth of operations requires companies to adopt different ways of doing business. For example, a company trying to expand its customer base may have to significantly change its warehousing and distribution strategies. In addition, the customer may demand considerable freight cost optimization to control its supply chain costs. In this example, the existing process of source determination may prove to be inflexible, or less optimized.
Now think about inorganic growth. Typically, inorganic growth is driven by mergers, acquisitions, or other strategic initiatives. This brings additional variety and thus complexity to operations. For example, during an acquisition, it’s likely that the accounting structures of the acquiring and acquired companies are different. This may pose a significant challenge to the integration of the financial processes, and thus on the productivity of the financial processes.
Both organic and inorganic growth demand robust systemic business processes to manage scale, size, and complexity of operations. ERP solutions offer the capability to integrate processes. For companies that already have an ERP footprint that proves to be inadequate, the only option left is to completely revamp the current business processes and supporting ERP applications. Such a strategic exercise is an initiative called ERP-enabled business transformation. This type of program aims to match a company’s initiatives with its business strategies.
Key differentiators between ERP-enabled business transformation programs and conventional ERP programs are:
- Long-term benefits: Business transformation programs are more strategic in nature than conventional ERP implementations. A business transformation program is forward looking, and is designed to support long-term growth, including planned volume growth, future business plans, planned technology strategy, and planned financial growth.
- Value: Conventional implementations tend to either map what is there in the standard application or in the existing legacy system. However, business transformation programs focus mainly on the value. A special effort is made to automate a significant number of business processes to eliminate redundancy, automate non-value-added activities, and remove skill dependency.
- Standardization: Due to the large scope and size of the change, focusing on standardization is quite important. The concept of a global template is critical when designing and implementing the business processes. A global template is a synergized approach for processes, systems, and data. For more details on this topic, refer to my GRC Expert article “A Checklist for Developing Your Global Template.”
- Change management: Change management is a significant challenge during business transformation programs as compared to conventional ERP implementations because, due to a higher number of business processes and multiple integration points, there is a greater possibility of missing requirements.
I’ve discussed how organic and inorganic growth can act as triggers. Now let’s turn to how business process obsolescence and technology obsolescence can be the key reasons for organizations to use an ERP-enabled business transformation program.
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