Rendezvous with your ERP

A retail chain was facing a lot of problems with its new ERP system. The management was experiencing missed deadlines, unmet requirements, dissatisfied customers, excessive costs, and underused systems. Although there was no significant system or control failure as per internal audit reports but everything was waiting for a failure to happen and the retail chain was exposed to high risks.

New ERP system had all kinds of bugs and yet was not described as a failure. New ERP system was delivered late, at inflated cost, with inaccurate functionality, and most functions were largely unused. The management could command the resources and had power to sustain it and thus the new system was not considered a failure. The leadership announced successful implementation of ERP as it was serving some of the organizational purposes. System was functional although not perfect.

An interesting distinction needs to be drawn between failure and flaws. Most internal auditors would agree that every information system is flawed in some way or other and that flaws are characteristic of the systems themselves and of the innovation process. However, flaws may be corrected at a cost or accepted at a cost after considering its significance and potentiality to become a root cause for a failure.

Internal Auditors often view the process improvement along with ERP implementation as a mechanical, predictable activity that should, with good project management, lead inevitably to the planned results. However, developing processes along with new ERP have two important dimensions i.e. innovation and support management. Building and maintaining an ERP system is not a routine process, even with the best methods and tools available. It is an innovative process and, therefore, necessarily involves uncertainty.

Politics and human frailties loom large and have an inevitable impact on the outcome of new ERP implementation too. When systems failures or disasters occur, blame is often placed on the users for not acting in accordance with procedures or for not diagnosing a problem quickly enough. In investigations following a major failure or disaster, a common approach is to focus simply on the operational activities as the most likely cause.

ERP implementation should synergies with management accounting needs of the business as decision making is not supported by mere seamless integration of business functions like financials, HR, production, CRM but dynamic management accounting principals. If you can't see the entire picture, you have disconnects between strategy and people processes.

Current Enterprise wide resource planning and management puts reality behind the numbers. ERP should specify how the various moving parts of the business will be synchronized to achieve the targets, deal with trade-offs that need to be made, and looks at contingencies for the things that can go wrong or offer unexpected opportunities. Do your business managers refer to ERP at the time of making a decision? If not then what is the use and yield? The business managers should be able to see preview of his/ her proposed decisions.

Innovation and lateral thinking is missing in the entire process. ERP needs to rendezvous with knowledge of business, with management accounting.