Monday, August 18, 2014

ERP Life Cycle

Enterprise Resource Planning solutions have life cycles, just as plants and humans have.  They differ in many ways and also have many similarities.

Sunflower plants follow the pattern of:

  1. Existing mature flowers make seeds.
  2. Seeds find fertile ground.
  3. Seeds grow into new plants.
  4. A young plant is a seedling and grows bigger.
  5. The fully grown plant flowers.
  6. The cycle repeats.
ERP software function as a business management solution and usually consist of a suite of integrated applications that a business uses to collect, store, manage and interpret data from many business activities, including: product planning, cost and development, Manufacturing or service delivery, marketing and sales, inventory management and shipping and payment.

ERP cycles through:

  1. A business operates and spurs new growth.
  2. New modules or third party solutions are added to address growth and the need to capture and manage additional streams of information.
  3. Inefficiencies increase as growth outpaces capacity.
  4. Separate systems are implemented to address growth.
  5. A new solution or upgrade is implemented to address the new scope of business.
  6. The cycle repeats.

There are a lot of definitions of ERP cycles. 

Most start with planning and package selection, then move on to implementation and then operation.  While these stages are true most companies are already in the middle step of operation mode.  The existing solutions can be a full ERP solution or a mish-mash mix of manual, spread sheet, or older solutions.  One of the biggest challenges are determining if the current growth is temporary or a sign of future activity.

What has changed?  What is driving the need to change?

Many factors stimulate change.  Growth, Mergers and Acquisitions are common sources as well as a new product or service lines or a myriad of other economic influences.  What becomes a driving factor is the incumbent solution worked at one level of business and was not able to scale up or down to address the new level of need.  The need could be to handle additional or a drop in transactions, new or a loss of business units. 

The need could be up or down, growth or decay.

Increased activity without a corresponding increase in revenue is a sign of inefficiency.  The higher overhead drains an organization’s resources.  In today’s business world automation is the key to sustained growth. 

When selecting a new ERP solution it needs to address the current needs, pains and anticipated growth.  Many organizations concentrate on the current needs and how the proposed solution addresses their pain.  This is certainly a good starting point.  However, a good solution should also address future growth.  A great solution takes into account business cycles and can address both future growth and downturns.

There are seasons to business cycles just like plant life.  There is a nurturing point in time, growth, maturity and then the cycle inevitably repeats.  A lot of businesses forget this point.  What goes up comes down and with proper planning business goes up again.  Your solution must scale in the same way. 

  • How is your solution designed to address future business cycles?  
  • What downturns have your business triumphed through with your ERP solution?  
  • What key components are you considering in your next solution or upgrade?  
  • What cycles does your solution need to address?

Dolvin Consulting works with businesses in Manufacturing, Distribution and Specialty Retail to help them identify and address their growth pains.  Take a minute to post and share your successes and failures here with our readers.  Contact us to discuss your challenges.  We are your trusted advisor and want to help.

No comments:

Post a Comment