First of all my sincere apologies for using these words. I thought about it many times, but could not find appropriate words for this topic.
In this article, my preference is more towards the manufacturing industries of all verticals and based out of India
For almost all the businesses, the audit for the year 22-23 has been completed now. For many of the industries, their auditors have said, that unless a proper ERP system is implemented, they cannot do the auditing for the next year 23-24.
With respect to manufacturing Industries, Accounting software is no longer the Auditor’s choice. This is because the Government is taking several steps to meet the compliance and transparent disclosures mandatory. Whether you buy Goods are services both are closely monitored by the Government through GST and TDS. Moreover, the time for filing the returns is just 1 month. So unless data is tracked from its source to destination, meeting compliance is out of the question. For E-invoicing, the accuracy of the source data data is more relevant and without this, your transactions will not go through.
The Enterprise journey of ERP can be classified into 4 buckets:
- Naked
- Half Naked
- Dressed
- Decked Up
All said and done, sadly, the majority of them are in buckets 1 & 2.
1st: These enterprises will be having sizable operations, but using Accounting software covering basic inventory, Invoicing, and Accounting plus all statutory filing. You can see the users extensively using many Excel sheets.
Challenges and limitations: As a result of such disconnected systems, fire-fighting will be their way of life. There will be too much dependency on people. The business impact will be slipping-off client deliveries, bad working capital management, and lack of control over cost. Due to this, most professionals and the 2nd or 3rd generation of their families will not prefer to join these businesses, and also can’t attract or convince large clients as well as investors or Bankers.
As a result:
- Several missed on-time deliveries due to stockouts
- Emergency purchase on higher cost of Input materials
- The profit margins will be very poor.
- New customer development will be a challenge
- Poor control of outstanding collections
- Working capital is always under stress
- Cost funds will be higher as they tend to raise funds from the private & open market.
Their primary apprehension for not choosing the ERP is “fear of failure” more than the Investment.
2nd: These enterprises will also have sizable operations with an ERP system (often with large Global ERPs) plus discrete Accounting software working. If we look deeply, even the ERP system will not cover all business processes. For Example, features like Imported GRN, Sub-contract (job work) process, MRP, Multi-stage Production routing, Quality control, COGM, and GOGS will all be done through XL sheets.
Challenges and limitations: These enterprises will be in similar situations to 1st. But they pay more and get well-trained professionals to do certain extra work to meet the requirements of Bankers, Investors, and customers. Mainly for customer compliance, they will be spending a considerable amount of manpower and time to create and maintain the records.
They invariably take 5 to 7 days of struggle each and every month to close their Sales, Inventory, Production, and accounting records.
These enterprises will have lots of internal struggles and resistance. And people are split over the adoption of technology. They are at loggerheads and the employee morale will be down. The top management team is caught between internal team resistance and pressure from investors. This is a very bad state to be in. As the famous saying in Hindi goes, “dhobee ka kutta na ghar ka na ghaat ka” This means ” The washerman’s dog neither belongs to the house nor to the streets”
3rd: These enterprises will have a proper end-to-end ERP system in place with zero manual records. They also have a proper BI tool to generate MIS and DSS reports. They have clear KPIs defined for each business function and have systems for close monitoring of the same.
Professionals would like to work for such organizations since they have clear work roles and expectations. Since there is no day-to-day firefighting, they can work with better self-esteem and professionalism. The professionals will put their efforts into improving the process, cost control, and managing the funds better. These enterprises will have better profits and maintain on-time delivery for the customers. They equally demand on-time payment from their customers. They are mostly classified as Tier-I vendors by large companies since they are more dependable.
We have seen companies actively attract investors and generate offers for M&A. We also have seen our clients getting acquired by large MNCs.
4th: With a better foundation of ERP, these enterprises will invest in more allied applications like CRM, PLM, and Machine data integration (Industry 4.0) which are tightly integrated with the ERP systems. These enterprises on the Digital front are fully decked up.
Observations: The 2nd and 3rd companies have almost invested the same amount in ERP and other Technologies. But the main differences are the following:
- Not choosing the right ERP system: Most enterprises will take a large global ERP system or try to make a customised ERP. This will take 12 -18 months with a significant amount of investment in internal people’s time. These projects will stay in stage 2 for sure for a very long time.
- Lack of Top management involvement: If the top management is not actively involved, then everyone will wash their hands off. Top management will come once in a while and make harsh statements, and angry meetings and disappear. This is another main reason the projects will stay in stage 2. If the top management is not prepared to roll their sleeves and work, it is better to stay on stage1. So that at least the ERP investment, their face-loss, and their horrible struggles can be saved.
- Lack of proper Project management: Mostly, one of the managers or a VP-level person is made responsible for the ERP project. This will never work. There has to be a project manager specifically hired to do this work 100% of the time for 3 – 6 months, till all the users adopt & accept the system fully.
My 2 cents thoughts on Change management Vs Project Management.
For example: Helmets are made compulsory for 2-wheelers.
Change Management: Conduct awareness programs on the importance of wearing the Helmet. How many fatal accidents happened without helmets? How families of suffering when a key person in the family is crippled or dead so on and so forth. If 100% helmet is achieved it is great. But the statistics say that the adoption will be only 20%, even after 2 years.
Project Management: Driving a 2-wheeler with no helmet, for the 1st time offense $ 1,500/-. If it is 2nd time License will be cancelled. Statistics say the adoption will be 99% within 30 days.
So simple!
I am not against Change Management. But without proper Project management, ERPs will never go live.
Importantly, not all leaders and bosses are good project managers. Like a Pilot, Chef, and Musician, one should have a natural flair and qualification to be a Project Manager.
A very quick ERP implementation tips.
Choosing the right and ready-to-use ERP system is the key. If this goes wrong, none of the below can help.
From ERP selection to going live is like an 800-meter relay race. This has to be completed within 4 to 8 weeks, at the worst 12 weeks.
- 1st 200 meters: Configuration, Master, and User acceptance test (end users and operational Managers)
- 2nd 200 meters: Opening balances, open entries, and going live (end users and operational Managers)
- 3rd 200 meters: Approvals, KPIs, and reports verification and Validation (Sr Managers, GMs & VPs)
- 4th 200 meters: MIS, Compliance, Auditing reports, and Global Reporting (CXOs, Board, and Auditors)
But the ERP lifetime value is like a Marathon race. It is slow, constant, and consistent efforts like Master Data Management, new user training, new feature utilization, New reports, fine-tuning of KPIs, and BI implementation.
Conclusion: We all know India growth story. One of the major component is our Digital Transformation. They same applies for our enterprise too. No digital transformation, No growth.
Plan now and go live on your new ERP system fully integrated from 01/01/2024
