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ExecTech:
RIP ERP?
By Michael Alan Hamlin
March 20, 2001
ERP - the acronym for enterprise
resource planning - although ubiquitous in Fortune 500 corporations
and in an increasing number of smaller companies, has never really
been much understood. Since my firm is on retainer to the company
that "created" ERP - SAP - I know this well. I long ago
gave up expecting anyone outside of a multinational or large company
CTO-type to understand either ERP or enterprise resource planning.
These days, not even SAP or its competitors such as
Oracle, Computer Associates, and JD Edwards, for example, use the
term or the acronym, if they can help it. SAP says it builds enterprise
software, or more recently e-business solutions. Oracle calls its
solutions an e-business suite. To me, neither terminology means
much more than enterprise system (Sorry, SAP.) does, which is to
say pretty much nothing. And you would think anything has to be
better than calling a product "ERP," or the three words
it stands for.
None of these terms have the crispness, for example, of CRM, meaning
customer relationship software. In the case of CRM, right away the
reader or listener connects in a way that just doesn't happen with
ERP, even when we don't really know what CRM means either. That's
because we do understand what customer, relationship, and management
mean. Therefore, it's relevant in a way ERP isn't.
All this doesn't mean that ERP isn't mighty important.
It is, even in - or maybe especially because of - this significantly
technology and Internet-driven time. That's because, without going
into the gory details, ERP enables companies to dramatically increase
efficiency and productivity by linking and automating business,
administrative, and manufacturing or service delivery processes.
It's that simple...
Anyway, in recent years Y2K, the Internet, and process-specific
applications like CRM and human resource management have in significant
ways overshadowed ERP. It hasn't been uncommon, in fact, for analysts
and journalists to ask whether ERP is dead. And indeed, for quite
a number of reasons, corporations for a while seemed to be channeling
resources toward best-of-breed applications that do a specific job,
rather than a large solution that does all jobs.
The uneventful passing of the Y2K myth, the dot-com
debacle, and increasing competition as a result of liberalization
and globalization have all contributed to a resurgence of sorts
of ERP. And there are lots of examples here in the Philippines of
why this is so. Joey Concepcion, CEO of RFM, explained to me in
one interview that there was little choice in investing in ERP if
a firm is to be competitive.
Since the time of that interview, RFM has connected
branches that account for 60 percent of the corporation's sales
with SAP's solution. By November this year, all 28 branches will
be connected by a dedicated network composed of links provided by
a variety of telecom providers, something that not too long ago
was hard to imagine. As a result, managers will know all the time
what's happening across the entire company when it is happening.
To give you an idea of the increased efficiency and
productivity enhancements realized as a result of the investment,
vice president and CIO Lolit Ramos says that, "Before, there
were more than 10 steps involved in sales order and invoice processing.
Implementation of SAP has reduced this to a handful of automated
steps." That means much less time, much fewer people, and much
less cost, aside from increased responsiveness.
Another good example is Dutch Boy Philippines. Originally
a U.S. joint venture, Philippine and Malaysian investors now own
this company. After a period of stagnation when the once market-leading
paint manufacturer began to take its success for granted, new management
is now busy overhauling business processes and restoring the company
to profitability. A big part of that process involves implementing
ERP.
Here's how ERP made a difference for the company. EVP
Gerry Garcia told me that although the fourth quarter is traditionally
a slow time for the company - consumers are spending on Christmas,
not renovation and building - new marketing campaigns introduced
last year by Dobbin Tan, vice president for marketing, provided
a pleasantly surprising but somewhat unnerving end-of-the-year rush
for the company's paints.
"We wouldn't have been able to keep up with demand if we didn't
have an ERP. Knowing where we stand at any time in terms of orders,
distribution, and supplies on hand made the difference between a
record quarter and not being able to satisfy our customers,"
Dobbin told me. "SAP provides just one number, and that number
is timely. I am able to monitor sales by area, inventories, product
margins, and operating expenses. These things are very hard to do
without SAP."
Inventory is another area where accurate information
has identified dramatic improvements. "We verified our initial
assessment that we carried too much stock of some items we did not
need and too little of those we needed," Dobbin explained to
me. So while ERP sounds very esoteric, with gains like these, it's
here to stay.
That's even clearer from our work with e-marketplaces.
A big part of the value proposition of e-marketplaces is what is
called ERP integration. This is a service that seamlessly links
the e-marketplace with a buyer or seller's ERP. So processes are
connected not just within a company, but across a digital supply
chain to assure that the benefits of ERP are not sacrificed to news
ways of doing business.
ERP may sound ephemeral and obtuse, but the results
are real.
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