The Evolution of ERP to Today’s Modern Business Systems
For many manufacturing companies in the late 1990s and early 2000s, the implementation of an Enterprise Resource Planning (ERP) system promised greater efficiency and effectiveness for their operations under a single solution business system. Many managers hoped to achieve what the highly respected management consultant, author and educator Peter Drucker characterized as the “one management” concept for production.
As ERP grew in popularity, it became evident that its benefits could only be achieved by those manufacturers that could afford the high cost of sophisticated software as well as implement successful change management within their organizations. When the implementation of several large-scale SAP and Oracle systems fell short of success, companies realized that their management teams often misunderstood the risks associated with large-scale business change. Business continuity was believed to be the top risk to achieving a successful ERP implementation project. However, the failure to effectively manage organizational change was more often the case.
Today’s manufacturers now can choose from a wide assortment of modern business systems that offer a range of targeted software that caters to their industry-specific needs. Properly implemented, modern business systems provide a consistent and reliable means of transacting business in the manner prescribed by the company’s management. These systems can significantly improve production efficiencies and decision-making capabilities and they achieve the goal of the “one management” paradigm which Drucker advocated.
Advantages of Integrated Business Systems
Modern business systems offer a modular approach to ERP and are built using common software frameworks that provide a high degree of interoperability among associated systems. Companies of all sizes have embraced highly modular, cloud-based platforms with variably priced software licensing models such as Acumatica, NetSuite and Salesforce.
The proliferation of modern business systems and industry specialization has been spurred by web-based innovation forged by technology leaders such as Facebook, Google, and Microsoft. These companies made their toolsets freely available to the open-source community and many business system software publishers rebuilt the front end of their platforms using these new, highly flexible software development frameworks and available software libraries.
With today’s integrated business systems, manufacturers can increase efficiency across the value chain, improve their organization’s ability to quickly pivot in response to changing business conditions, achieve better coordination between operations and sales functions, produce higher quality products and most importantly, exceed customer expectations. These systems also can enable a company to implement synergistic incentive compensation plans tied to key performance indicators (KPIs) across company functions.
Winning Organizations Adapt to Gain Substantial Benefit
Some smaller and mid-size companies still struggle with effectively implementing integrated business systems. Most often, the cause is not the technology but due to management’s failure to learn from the past. Many of these manufacturers are still using outdated applications or unsupported customized systems to manage their businesses. Their reluctance to invest in new business systems severely limits their ability to improve operations and address future concerns.
Some management teams fail to adapt and gain the benefits of integrated business systems because they do not view technology as a core element in their strategic planning process. They may operate in a “business as usual” mode built on a loyal customer base with little consideration for margin compression over time and customer-centric product innovation.
Manufacturing companies must use the best technology and tools available to compete effectively in today’s global, integrated and hyper-competitive business environment. By committing to a modern business system and the industry best practices it is designed to support, manufacturing companies can position themselves for success and market leadership.
For more information on adopting integrated business systems, please contact one of our Manufacturing Group professionals.