An ERP system manages the information needs of all company functions, including financial systems, human resources and payroll, logistics and distribution, purchasing, sales, and manufacturing. It consists of a single database and applications that allow employees in different departments to access and act on that data. For example, a polyurethane resin sale recorded in an ERP system automatically triggers the actions in the warehouse, on the plant floor, in the shipping department, and in accounting that are necessary to deliver and invoice the order.
Using the same information management software company-wide eliminates data integration problems that arise when a company operates a purchasing system from one vendor, an inventory management system from another, and a manufacturing control system from a third. Dealing with a single software vendor also facilitates software upgrades and maintenance.
The down side is that traditional ERP systems typically are expensive and difficult to install. To make things easier for mid-sized and small businesses, some ERP systems offer packages that are preconfigured according to “standard” business models or provide more limited functionality. These panda-like systems typically work for large manufacturing companies that make products using well-defined, industry-standard planning and control systems that don’t change much over a long period of time.
But for many coating producers, today’s rapidly changing business environment is one where only the fittest survive. And the fittest are the most flexible. If you can eat only bamboo shoots, you’re going to die. And that means you need an ERP system that allows you to emulate the grizzly and thrive in any business environment.
For example, a small- to mid-sized paint manufacturer’s competitive edge lies in the ability to handle special orders, readily introduce new chemical formulations, form creative e-partnerships with suppliers and customers, and innovate in a host of ways.
A coatings maker considering any ERP system must look for a system that supports the flexibility and variability it needs to respond quickly to technological advances and new market conditions. In other words, don’t ask whether a system already does what you want today — you may have a preferred customer tomorrow for whom you are willing to change all the rules. Rather, you should ask if the system is designed to be able to do what you want today — and may want to do tomorrow and in the more distant future.
Flexibility also means the ability to adjust to the exacting specifications of your customers and has ramifications throughout the many business processes that define the enterprise.
Unfortunately, when evaluating ERP software, one can easily get confused by the beauty, elegance and sheer number-crunching ability of most systems. Pandas are cute, too. But you need to look beyond the superficial and, to do that, you must understand the kind of data handled by the system, and the ways in which it can be “parameterized.”
Parameters contain the control information that determines the structure and behavior of the system and its potential for adaptation to the specific needs of your business.
There are a few easy ways to tell whether that impressive ERP bear you’re looking at is a panda. The older the ERP system, the more likely it is to have limited parameterization capabilities, or parameterization at a prohibitive cost.
If the ERP system’s early or primary users have been large manufacturing companies, it’s likely that what you’re being offered has a predetermined and hard-to-change set of parameters.
In both cases, you can be reasonably sure that as robust-looking as the ERP system looks in demonstration, it may not serve your needs well.
To get a better understanding of what kind of bear you’re buying requires some knowledge in the type of data managed by ERP and the different levels of parameterization that are possible in ERP. An ERP system contains the following different types of data.
- Master data, the main information that your business deals with. These include customers, suppliers and products, as well as your own organizational entities such as sales sites and warehouses.
- Transactional data, the information processed by the system’s functions in the normal flow of business. These include sales quotes and orders, shipments, purchase orders, invoices, and so on.
- Historical data, the results of business events retained for analysis and audit purposes. Behind the scenes are the little sets of data that make the system work.
- Basic codes, used as attributes for master or transactional objects, such as countries, languages or product groups.
- Parameterized codes, marking information such as customer types, order types, tax codes and currencies. These codes also contain control settings that affect how the information they are associated with will be processed.
The major sets of parameters include the following.
- System parameters, which define how the system is configured, the functional components it can run and various technical considerations.
- Organization parameters, which define the structure of the company using the system — that is, the various departments or business processes and their interrelationships.
- Integration parameters, which are usually oriented to linking the financial modules to manufacturing and logistics and to the people who deal with analytical results.
- Functional domain parameters, which determine high-level aspects of sales, purchasing, manufacturing and the other modules.
- Functional transaction parameters, which define how specific functions such as sales quotations and blanket purchase orders will look and operate.
The ultimate objective of parameterization is to have an ERP system that supports the flexibility that you must have to do business. For example, if you have a panda bear system that can’t distinguish between different customers, you won’t have the flexibility to provide incentives to the preferred customer. You’ll find it harder to give pricing deals and special shipping rates. It’ll also be difficult to change the commission rate or price to respond to a competitor’s moves in a single market. An ERP system without flexibility profoundly impedes your ability to spontaneously “wheel and deal,” which in today’s business environment is an absolute necessity.
Grizzly bear parameterization has three very important characteristics. First, the parameterization is flexible, meaning that it is user-definable rather than fixed. While traditional ERP systems are relatively fixed, newer systems provide the means for entering complex values. For example, pricing parameters can be defined through expressions or formulas that allow a coating producer to employ creative, non-traditional modes of pricing.
Second, new parameters can be easily defined and linked to applications or business workflow without necessitating program modifications. For example, grizzly bear ERP systems provide a means, such as “user exit points,” where new parameters can be made to work without affecting the standard software.
Third, parameters can be set at different organizational levels, down to the lowest. For example, a paint manufacturer with multiple warehouses might want to operate some as basic stockrooms, and operate others with directed put-away and picking and sophisticated storage control. If parameters can’t be changed or set at the warehouse level, differentiation between warehouses will be much more difficult and time-consuming.
There is one important caveat to bear in mind. There are trillions of possible combinations of parameter settings — and making a mistake could be disastrous. A grizzly bear ERP system includes features such as tools and templates, cross-reference checks, consistency validation techniques, error detectors and system behavior simulators. Utilities such as these help greatly in setting up and maintaining highly parameterized systems.
Any mid-sized company should appoint a “ParaMaster”— an individual who is responsible for managing the ERP parameters. The ParaMaster must thoroughly understand how the system is parameterized, what each parameter does from the standpoint of business processes, and how to translate new business requirements into parameter and code settings without having to modify programs.
An ERP system that meets the criteria for good parameterization enables a coatings producer to focus on identifying its competitive strengths, then find ways to creatively set up the system to implement them. During the implementation project, the company’s attention should remain focused on how the system should be configured to maximize its competitive strengths. Creatively developed, competitively effective parameters can be one of a company’s most valuable trade secrets. Like a grizzly bear, the company will be able to survive, and do business, in any environment.
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