Digital transformation in EMS-OEM-ODM businesses starts with the ERP

The digitization of the electronic supply-chain promises that it will meet all challenges: an almost infinite volume of data, extreme volatility of supply and demand, continuous price variation, multitude of suppliers and the need for critical information at your fingertips at any given moment.

With rigorous competition amongst multiple software vendors, businesses are blessed with ever-more modern, powerful, fast and ready-to-use solutions, and for many of them each and every issue can be solved by deploying new software.

But should ‘digital transformation’ be restricted to the acquisition of new tools? Are there existing tools and systems which you already use, but could make better use of?

Digital transformation with your ERP is not a sprint

THE ERP: PUBLIC ENEMY #1?

Is your ERP the enemy in digital transformation

In an electronic manufacturing business, all data is concentrated around a seemingly unmovable Enterprise Resource Planning (ERP) system, which provides the ability to manage all information and operational services on a daily basis thanks to different modules connected to one, single database. But there are a multitude of reasons why the ERP is often seen as more foe than friend: it can be very old and therefore rigid and complex. User training, if it even exists, is often deficient. It can be ill-equipped to fully respond to internal processes and modern business needs. To make matters worse, ERP systems are difficult to evolve, meaning as time passes, existing problems will increase the adverse effect on business performance. Such a situation opens the door to software vendors offering shiny new solutions which ‘bolt’ onto your existing ERP and are faster, flexible, more modern and more attractive.

However, the purchase of new software can often be a hollow victory.

New software: angel vs. Demons

When talking about new software, all you hear is more training, more support, an increase in process definitions, data reliability, ongoing maintenance and continuing evolution of a new system. Then, the indirect costs of implementation, deployment, interconnectivity and system stability which has to be taken into account alongside initial costs. Finally, don’t forget users, for whom every new tool can feel like an additional nightmare: faced with more tools, more connections and more interfaces.

Allow me to illustrate an example from my work experience. A freight forwarder wanted to manage information at product-level instead of transport-level. Management heard about new software which met this exact need, and purchased as soon as they were aware of an exciting feature: integration with customer systems.

Is your ERP an angel or a demon in digital transformation
Then the issues began.

  • First, as an additional interface, we had to invest time and resources to train staff and make it all work
  • Secondly, neither our customers nor users were ready to use data integration, a big deviation from their existing processes and routine.
  • Third (and most important) their ERP was actually able to handle about 80% of requirements, but no-one had explored this option. Why? Zero trust in the trusty old machine.

Therefore, a new tool was purchased because of badly defined needs and a lack of understanding of ERP functionality.

Another example from my work experience was a business attempting to provide customers access to their data within our ERP. Nothing existed natively, so the decision was made to deploy a daily data update using Excel Online.

The simplicity in deployment and training that appeared at first to be a good investment, in reality was anything but, with users having to duplicate manual updates. This lasted for months before complaints led IT to develop a data extraction feature in the ERP, something which was not even considered in the first place. How long did this work take? Only 3 working days.

The point I’m making here is that acquiring a new solution for every missing ERP function often alters the form of the issue or creates new problems. Therefore, surely it makes more sense to make proper use of your ERP functionality before anything else… and save yourself a shedload of undue grief.

You need the wisdom of yoda in digital transformation

BECOME A MASTER OF YOUR ERP.

Having established that the ERP is an imperfect tool, improperly utilised, it begs the question: why not replace it?

Most commonly, it isn’t replaced due to the fact that the ERP is the center of business functions, managing the entire database. It is the master of billing, accounting and other financial services and is transverse; modules of the various functions are natively connected. For these reasons, the ERP is often the ENTIRE business.

Therefore any modernisation effort begins with making the best use of your ERP. Investment in evolution, configuration, training and support should first focus not on external tools, but on existing systems within the business.

That isn’t the end however as my advice doesn’t end there. Sooner or later, the ERP will demonstrate limitations. Don’t be fooled by the tone of this post thus far, I fully believe that the acquisition of new IT solutions is UNAVOIDABLE due to the limitations of the ERP. However, improving internal systems and processes results in fewer requirements for new tools.

This means that potential risks of new system integrations will be limited… and that in turn will make it easier when choosing the right solutions.

CHOOSE SOLUTIONS WHICH EASILY COMMUNICATE WITH YOUR ERP

communicate with your ERP

The inherent advantage of the ERP is that it holds the databases and maintains interconnectivity between different services thanks to a variety of modules. For these reasons, new tools must properly communicate with it. Standalone solutions, independent of the ERP, are dangerous: duplicated databases, duplicated data-entry and repetition of tasks, difficulty in adopting the tool, training and support requirements alongside a multitude of interfaces.

To improve ERP usage it is necessary to connect it with the functionalities which it lacks, not to systematically replace it. Effectively exploiting the ERP makes it possible to properly understand its limits, so that the acquisition of new tools will be less difficult as your requirements are accurately identified. New solutions thus become more effective, while offering minimal or even invisible interfaces so as to maintain a seamless user experience. The uniqueness of the database is preserved, the costs of change management are reduced, information systems are streamlined, and the efficiency of the ERP is enhanced.

So, when you try to look at improving your efficiency through software, don’t forget that digital transformation starts with your ERP!

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