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Repeatable Profit Velocity Will Drive Sustainable and Profitable Growth
In recent years, industry leading companies have identified business process innovation as the only real competitive advantage. This resulted from the realization that all companies with access to similar materials and the use of outsourcing can provide virtual scale to any size company. Minimizing the time opportunity identification to scale will be the only sustainable differentiation. Every company has an example a departmental process - a select few project or product launches that were stellar and considered best-in-class or first-to-market. What sets the most admired process companies apart from the rest is their continued business process innovation and scale.
With evolving global market and technology, virtual scale through collaboration can increase innovation, provide capacity or increase capacity agility, reduce costs, improve quality and drive revenue. To benefit from this emerging opportunity, companies must move from departmental or silo focus to extended enterprise processes. This is validated by a recent GMA Insomnia in the Corner Office Whitepaper finding that many CEOs are concerned that internal business model constraints limit the company's ability to achieve their potential growth rates. Regardless of whether your ERP solution is designed to meet your needs, heavily customized or limited by overly restrictive best practices that only provide industry parity, you still need to increase your profit velocity and virtual scale. While most companies can't get there in one step, a business process innovation mentality will allow you to incrementally improve and realize financial benefits.
Many companies have embarked on initiatives like GDSN, Global Specification Management, Lean manufacturing and many have achieved at least some level of value. However, these companies still are not realizing best-in-class results. While each department or process may be optimized or best-in-class, adjacent processes or stand alone system limits impede your ability to achieve optimal supply chains and best-in-class enterprise results. Many software companies or consultants can provide a compelling vision of solutions used by a select few industry leading companies that can afford to heavily customize integrated modules from their ERP supplier.
Too often companies are blinded by promised integration TCO claims and try to force fit the ERP vendors' horizontal add-on modules. To obtain the same results achieved by the industry leaders, most companies cannot afford the same level of customization and lengthy implementations.
The financial results can be less than stellar. Heavy customization has another side-effect - change is not supported. To achieve profit velocity and succeed in the new global marketplace, change is the only constant. New laws, consumer preferences, mega-retailer or customer demands, new markets, extended supply chains, increased outsourcing, etc., happen and they can't react. If they can't react at the same rate as their mega-competitors or agile small competitors that have virtual scale, survival will be a struggle.
How can you get started on a continual improvement path that leverages business process enhancement to achieve repeatable velocity capabilities and virtual scale - and ultimately achieve sustainable and profitable growth?
Extending the Value of Your ERP Solution
Let's start with ERP - often your biggest IT investment and one companies are often reluctant to replace. How can you extend your ERP value in an evolutionary manner? One challenge to achieving this value is a completely ERP-centric model. If all information is expected to be created in ERP or a Master Data Management (MDM) strategy is mandated, then you're probably doing the equivalent of "driving a car by looking in the rear view mirror." While MDM and ERP are critical for change management and keeping production systems working, the focus is on transaction and master data.
ERP and MDM are not designed to support information required in many other applications - like optimization rules for scheduling, experimental data, nutritional rules, etc. If ERP or MDM were used for this purpose, custom coding would be required, lead times are extended by processing information through collaborative ERP information maintenance processes and these requests are likely lower priorities than production requests. If a company plans to reduce lead times and improve profit velocity with the ERP-centric or ERP MDM model, all the non-transactional processes will be impacted and result in driving your company while looking in the rear view mirror.
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