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March 1, 2004

4 Min Read
Don't make your ERP an IT project

A common misperception is that IT (information technology) should be left to the IT people. General managers and production people are confident they have a solid knowledge base to work with physical machinery, materials and logistics—but often feel that IT-related issues are outside their comfort zones.

Nowhere is this fallacy more dangerous than when it comes to ERP systems. As can be heard in the full version of the term—enterprise resource planning—this is a system that concerns the whole enterprise, and should rightfully be the domain of managing directors and general managers.

In fact, academic research and practical experience show that ERP implementations that do not involve top management almost always fail. There are a few reasons why this happens:

Defense of status quo

IT people can often be some of the most conservative when it comes to implementing a new IT system. The reason for this is normal human nature: Their power base and value are based on their unique knowledge of the current system environment. They don''t know what their position will be after the implementation of the new system. And the implementation itself may mean a lot of work for them.

Another reason to be conservative is that modern systems are often more robust and require less continuous programming. Because they are standardized, it means that many functions can be outsourced to external service providers, potentially reducing the number of in-house IT people.

Business process understanding

Another potential problem with letting the IT people drive an ERP project entirely on their own is that they, in many cases, do not have a thorough enough understanding of the specific business processes. This is only natural since they are experts in IT, not the business itself. Therefore, they often do not know whether the software actually supports your particular business.

They often tend to go for more general arguments that they read in IT magazines or hear from colleagues: "System A is most widely used," or, "System B has the broadest functionality." These statements might both be true to some extent, but may not mean that it fits your business. Ask your IT person if the ERP system supports family tools, understands runners and sprues, and can calculate with multiple formulas for regrind.

Better safe than sorry

IT people know that it is their job on the line when they are choosing IT solutions. The risk is that they will not venture out of their own comfort zone. If they happen to have prior knowledge of a certain system, they might choose that system regardless of whether that system actually happens to be best for the business. This might lead them to choose a well-known brand, rather than a more appropriate product or service. As a result, the smaller, more specialized suppliers that might be better suited to the business get weeded out. Like the old slogan says: "No one''s been fired for buying IBM."

Don''t get me wrong. I am not saying that IT people should not be involved in the ERP decision. That''s not the case. Your IT people have crucial input and experience of IT systems, and after all, they are a key player in the project. But it is important that the people who run the business do not abdicate responsibility, and instead actually take back the initiative in IT decisions. It is also important to realize that as a general manager or production manager you are often the one with most to gain from a modern ERP system, such as:

  • Reliable data to support business decisions such as pricing, stock levels, optimal production runs, and so on.

  • Early warnings if something is going wrong in the business

  • Accurate performance measurements of your workers and managers

Therefore it is important that you take charge of this important process. Many managers can vouch that having a good system installed gives them peace of mind. So keep the system in your hand. And by the way, don''t let that other dangerous group take over. I''m talking about consultants—but that is the subject of another article.

Carl Hall ([email protected]) is co-founder of Plasticsgrid AB in Stockholm, Sweden, the European representative for IQMS, Paso Robles, CA. IQMS supplies ERP and supply chain software written specifically for manufacturing businesses. If you would like to contribute to As I See It, please contact Editor Jeff Sloan at [email protected].

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