That Old House
Posted by Helene Abrams in Data Quality, Data Systems, The Changing Enterprise on March 10th, 2010
Maintenance of an ERP System
When you moved into the new house, everything was clean, uncluttered, and ready for you to personalize and adapt to meet your needs. So it is when you first implement an ERP system. However, many people bring with them boxes of things no longer needed – data and structures from their legacy system that were once required or that the users have simply become accustomed to. Once you move into the house, you begin accumulating stuff that looked like a good idea at the time, but now sits in a corner and collects dust. Even worse, those obsolete items need to be moved and re-boxed, and every time you need something, you might spend hours or days looking for it. Feng shui practitioners believe that clutter is low, stagnant, and confusing energy that drains energy from you. Depending on the area of your home where your clutter is located, it can also negatively influence, or even completely block, the flow of events in specific areas of your life. Once again, there are many parallels to an ERP system. Multiple Charts of Accounts or Org Units clutter the business processes and take effort to create workarounds. Hours and days are spent reconciling spreadsheets looking for data that you know is there, but that is “boxed” so that it is not easily found. ERP clutter is a barrier to the sharing of information, to streamlining business processes, and to complying with statutory and regulatory requirements.
After about 10 years of living in the house, you probably need to make some major modifications to accommodate changes in your lifestyle. Maybe your family has grown and you need to add more space, maybe your children have moved out, or maybe your furnace is not as energy-efficient as you’d like and is costing you a lot of money. Similarly, after a number of years, your ERP system needs to be modified to continue to support your business. You may have acquired some companies, sold part of your business, or want to take advantage of new technologies. The good news is that in the same way that remodeling your house and upgrading your appliances adds value to your house, cleaning up your ERP system adds value to your business in the form of reduced operating costs, reduced hardware, and fewer people for non-value-added activities. In your house, once you clear most of your clutter with feng shui and have a clear system to avoid its accumulation in the future, you will start experiencing high energy levels, more clarity, and a heightened sense of well-being. In your business, once you clear the clutter left from years of ERP accommodations, you will start experiencing greater visibility to the entire enterprise, transparency in your financial transactions, less complexity, and the ability to drive value from new initiatives. Click here to learn how to reduce ERP clutter…
Getting the CFO to Pick Up His Bottom…Line: Best Practices in Cutting Costs
Posted by Helene Abrams in Data Quality, Return on Investment Analysis, The Changing Enterprise on February 16th, 2010
In the past, improving business processes was the primary objective of most ERP implementations, and welcome outcomes were cost savings and productivity improvements. When ERP systems were initially implemented, the opportunities and gains in back office operations were considered significant strategic advantages. But although the strategic advantages of having robust ERP systems persist, today’s economy is forcing companies to look for ways to cut costs rather just improve their systems. The good news is that focusing on cost savings and improving ERP can go hand-in-hand and lead to better business processes if they are managed properly.
Because cost savings will continue to be the focus for the foreseeable future, this paper will review best practices in workflow improvement that reduce costs for three key business processes: Procure to Pay, Period-end Close, Order to Cash. At some point when the economy moves out of recession, organizations will begin hiring again. Keeping an eye on our concluding key performance metrics will help organizations better decide when it’s time to flip the hiring switch. Read more…
Everyone Takes the Hit: What You Can Do About It – 5 Key Business Metrics and Oracle E-Business Suite
Posted by Helene Abrams in The Changing Enterprise, Trends & Technology on January 19th, 2010
Before the onset of the recession and the meltdown in the financial sector, for businesses addressing change meant adapting to more cash coming in and what to do with it to keep investors happy or adapting to unprecedented growth – one of those “good problems to have”. Organizations were looking at 3, 5, and 7 year strategic plans with upwards of 20% growth year over year. A company doing $100 million in revenue might have had plans to double in size in four or five years.
As businesses were growing, building their customer base, and hiring, they may also have been planning to implement lean manufacturing or otherwise improve a host of business processes, from financial and R&D to product management, sales, and marketing. Along with the business processes improvements, IT managers were retooling their IT systems, upgrading their infrastructures, improving performance and security, or adding functionality for a host of business users.
But as the recession took hold the optimistic forward-looking projections changed. Revenues dropped precipitously and survival tactics were implemented across the board. Companies cut their work forces. Cost centers like Finance, HR, and IT gave up headcount. Even R&D headcount, usually the last to go, was reduced. New products in the pipeline were pared to the bare minimum. Manufacturing shut down to reduce WIP and labor costs. Purchasers cut orders to reduce inventory. Marketers cut back on tradeshows and direct campaigns, redirecting scarce funds to less costly online programs. Sales organizations were consolidated, products heavily discounted, and travel budgets reduced. Across the board employees were furloughed and salaries were cut. Performance-based bonuses were first severely cut and later completely eliminated.
At the same time that companies hunkered down in survival mode, the business environment continued to change. Markets changed, customers changed, and financial or other regulatory requirements changed. Technology changed as well. In the middle of the recession Oracle released upgrades to R12 which included new “global” functionality, important bug fixes, and improvements. Other technology vendors in the ERP ecosystem released new products. Despite the changes and even with significant loss of headcount, IT managers somehow continued to deliver and support IT to their internal or external customers.
Below we examine how the economy impacted five key business metrics: Productivity, Inventory, Days Sales Outstanding (DSO), Customer Satisfaction, and Retention, how organizations responded as the recession unfolded, and the effects they had – or should have had – on ERP systems. Read more…
Show Me the Money: Reduce the Costs of Running Oracle EBS Before Upgrading to R12
Posted by Helene Abrams in Data Systems, Return on Investment Analysis, The Changing Enterprise on January 19th, 2010
Reducing costs is the major strategic focus for most companies. An often overlooked cost is the general operation of financial operations. This paper details a methodology for calculating the costs of running each of the financial modules. The costs are compared against both internal and external benchmarks. After calculating the costs, the paper shows how to reduce costs in two ways: first, by eliminating work that is duplicated across different business units or divisions, and second by determining which operations that are currently distributed across the organization can be consolidated into a shared services center. Together these changes, both to the organization and the Oracle EBS system, can generate significant cost savings. Finally, the paper details how streamlining operations prepares for a better R12 implementation.
Calculating the Cost of Operations
The cost of operations is calculated by breaking down how much time is spent on an activity during the year by each person doing that activity, how many items were processed, and then calculating the cost using a baseline cost of FTE. As an example, for AP, each department would calculate the number of hours in a year spent on each of the following tasks or activities:
- Maintain policies and procedures
- Enter, code, match, and correct payment documents
- Prepare and issue automated checks
- Certify checks
- Process manual checks and special payment requests
- Respond to vendor and internal inquiries
- Perform Reconciliations
- Perform corporate and government reporting
- Create Corporate Chargebacks
- Other A/P Activities
The hours would be translated to a number of Full-Time Equivalents (FTEs) by dividing the hours by 2080 (the number of hours for a person working full time per year). A baseline average burdened (including benefits and expenses) salary is then multiplied by the number of FTEs to calculate the annual cost of that activity. To obtain the cost of an operation, multiply the number of items processed (i.e. number of checks) by the cost of the activity. For each of the finance areas, costs are calculated to measure the performance of each activity. For example, General Accounting would calculate the number of journal entries processed per FTE per year and compare those to an internal benchmark. Travel and Entertainment would calculate the number of expense reports processed per FTE per year. Fixed Assets would calculate the number of unique fixed assets or line items per FTE per year. Accounts Receivable would calculate the number of bills issued per FTE per year. In other words, each area would develop its own internal key performance metric and a way to calculate that metric against FTEs contributing to the process. In aggregate these calculations may uncover significant additional cost savings that could be realized quickly and relatively painlessly by migrating from a distributed services model to a shared services model.
Old Dog, New Tricks: How Gartner’s Pattern-Based Strategy Impacts Oracle E-Business Suite Customers
Posted by Natalia Warren in The Changing Enterprise, Trends & Technology on December 16th, 2009
As the economy moved into a recession, last year’s Black Friday was particularly dismal for many retailers who, in anticipation of the usual holiday rush and ignoring any leading economic indicators, had stocked up on inventories. Last year’s lesson was remembered this year, and Black Friday profits – although weak – at least weren’t dragged down by the costs of excessive year-end inventories.
But our collective memories are relatively short. Already new mortgage-backed securities are being sold, this time on the backs of first-time home-buyers even as Dubai World sends jitters through the financial community. Are we able to recognize the weak signals that will eventually turn into tsunamis, but well in advance, so that we have time to react? Or are we still relying on the tried and true lagging indicators, quarterly sales reports and performance reviews?
And even if we recognize the signals and know what we need to do in order to stay competitive, will we be able to adapt quickly and then sustain the ability to respond for the next time when conditions change yet again?
Dealing with Change – Teaching an Old Dog New Tricks
Gartner maintains that companies need to be proactive in reacting to changes and recognizing the early indicators and patterns that can provide visibility into potential future opportunities and threats. These early-warning predictive patterns are increasingly coming from outside the enterprise, driven by an interconnected society and changes that are outside the control of an enterprise. As the investors in Dubai World seek funding, US corporate executives worry about the impact on their already fragile economic recoveries and how deliveries passing through the busy United Arab Emirates ports will affect their just-in-time supply chain. Earlier Sense and Respond systems and Business Intelligence systems did not focus on the transactional data in ERP systems that might reveal indicative patterns of future changes and help executives make fact-based decisions. Further, Yvonne Genovese, Gartner VP and Distinguished Analyst, identifies several factors that inhibit the ability to predict and adapt to change in ERP systems. Genovese maintains that, even when exceptions are recognized in an enterprise, there is “siloed visibility” meaning that the exceptions are not shared across different organizations. Additionally, the lack of transparency and the presence of conflicting data often result in conflicting patterns, and finally, ERP systems by their very nature are not flexible enough for decision makers to change the business processes in order to react to and change the pattern quickly (and not a 3-year reimplementation process).
Gartner identifies three component parts of Pattern Based Strategy: Seeking, Modeling, and Adapting. Read more…
It’s 11i… Do You Know Where Your Children Are?
Posted by Helene Abrams in Data Quality, The Changing Enterprise on December 16th, 2009
After spending enormous amounts of time and money, not to mention the tremendous emotional and social resources, it’s hard to imagine that conscientious parents wouldn’t be able to answer that question. But every so often it happens. Kids grow up, change, and become difficult to manage. The controls that were originally in place don’t apply, and as the children reach adulthood and some level of maturity, there is a need to develop new approaches for governance.
Similarly, companies have invested enormous resources in their ERP systems, nurturing them and adding to them over time as the needs of the business changed. The original Oracle E-Business Suite implementation, for example, was designed with the best of intentions. The team, along with the busload of consultants, tried to build a system that would last the company for years and through generations of change. They provided each location the ability to govern its own system and configure it for flexibility to meet the operational needs of that entity. As with children, providing a good foundation prepares the organization for change, but it is difficult to predict the external factors that influence the adaptation and performance of the company over time. Read More…
Why Workarounds Won’t
Posted by Natalia Warren in Data Quality, News & Articles, TECHANGES, The Changing Enterprise, Trends & Technology on November 10th, 2009
Every quarter, every year, and every month, financial organizations work hard to close their books and prepare financial statements in accordance with countless rules and regulations. And when their ERP systems, designed at great expense and some point in the distant past, can’t keep up with their ever changing needs, they resort to creative workarounds, relying on spreadsheets, diagrams, or other documents jut to get through another reporting period.
As time passes, documenting the period-end process becomes more complex, and maintaining the process documents takes more and more time. But the collective memory of the finance team hasn’t forgotten what it was like to get through that first ERP implementation project – not to mention its enormous expense – and any hopes of improving the situation are abandoned as soon as someone says, “What about the ROI?”
Finance teams would have a better chance of responding to the ROI question if they banded together with their colleagues in purchasing, HR, product management, manufacturing, sales, marketing, and IT as they struggle with the same legacy ERP systems. Ask around and you’ll find that all of them have created their own sets of creative workarounds just to get through another day.
It’s happening everywhere…. Read more…
Strategy Analysis: Considerations for Moving from Oracle 11i to R12
Posted by skip straus in Data Quality, News & Articles, TECHANGES, The Changing Enterprise, Upgrade vs. Reimplementation on October 12th, 2009
The IT leaders who run Oracle E-Business Suite know the objective. R12. It’s the release that will carry them to 2015 or beyond. They will run one instance, it will be global in scope, and all the business users on the planet (well, the ones who logon to their instance) will follow the same business processes. R12 will be the single source of financial truth. Some 11i customers have already made the transition, others are in process, many are planning, and a few are too busy with other priorities and will wait.
Making the transition to a major release of an enterprise system with E-Business Suite’s scope is a huge endeavor, with many people in different roles, and there is a lot of freedom of action on the playing field. On one level, it’s a game – a complicated one – that takes several years to play. IT teams don’t really compete against each other. Most will actually get to R12, but the ones with the lowest costs, best looking R12 environments, and fastest times will be the winners.
There are four distinct strategies for achieving an objective: Direct, Divisional, Delay, and Indirect. The strategist selects the one that best fits the situation profile, the landscape, and available resources. How does the R12 strategist select the transition strategy to get to R12? What will they depend on to win? Let’s look at some examples. Read more…
Not Your Mother’s Software
Posted by Helene Abrams in Blogs, Data Quality, Data Systems, The Changing Enterprise, Upgrade vs. Reimplementation on September 16th, 2009
Some of you might be too young to remember - it used to be that the reconciliation and monthly closings were done on a hand-written ledger, and every adjustment was done in pencil so it could be changed. If an account needed to be changed, it was changed only on a going-forward basis with possibly a restatement and a single entry to reflect the change. Then there came the spreadsheet – and there was a lot of resistance from the accountants to adopting spreadsheets as the standard.
Still, with spreadsheets, there was no clear drill down process. Further, as organizations grew and required maintaining thousands of spreadsheets rather than a few, the accuracy and integrity of the data became questionable, and for good reason. Now, the ERP system has taken away some of the burden of manual reconciliation and spreadsheets, but even large ERP systems don’t reflect the fact that companies change. There are countless places that are touched when making changes in a relational database, and it is difficult to perform all of the changes required to maintain the relational integrity of the underlying structures that were initially set up. But it is also difficult and time-consuming to re-implement or reconcile, or to migrate to a new chart of accounts, a new organization unit, or a new ledger and go through a complete test cycle every time a company reorganizes, acquires another company, or sells part of the business (or, if they have just outgrown their current system). That difficulty, along with the deterioration of data integrity that results from companies having to resort to thousands of spreadsheets to reconcile the changes, doesn’t make a manual process any more accurate or auditable, and it severely limits a company’s agility.
eprentise and FlexField software products deal with the technical aspects of the change so that EBS can re-align to the current business environment. The ability to change is now part of the normal lifecycle and ongoing maintenance of an enterprise application.
Using Lean to Win with Speed in the Global Marketplace
Posted by Mike Liddell in Blogs, TECHANGES, The Changing Enterprise, Trends & Technology on July 10th, 2009
Enterprise Resource Planning (ERP) systems such as Oracle’s E-Business Suite have advantages over legacy systems in that they allow businesses to be more flexible and agile. This article focuses on the concept of Lean Manufacturing, but the value of modern ERP systems is a far-reaching and evident in many industries.
Manufacturers in North America and Europe are struggling to meet the challenges of a stressed economy. The good news is that the coming recovery is expected to see early signs of a sharp increase in demand for steel because the street thinks that the steel industry will be among those to lead us out of the recession.
Many manufacturers realize that they must make changes if they are to survive and flourish in a world that promises to be very different from the past. A quick look at some of the factors that are already impacting our world gives us a small taste of what we can expect as we move into the 21st century.
• Customers are placing smaller orders.
• Customers are looking for faster turn around times.
• Customers are demanding more custom products
• Customers are constantly changing as they try to keep up with their customers’ demand.
In addition to these external factors, manufacturers are being pressured to be more profitable by reducing waste, improving efficiencies and becoming more responsive. The new paradigm is clear; manufacturers who want to be successful must be able to reduce inventories while learning to react faster and smarter to change. For those paying close attention this is not breaking news, but it appears that many companies do not yet have a clear understanding of the underlying problems and what they need to do.
Doing the same old things but faster is unlikely to work and is not the answer. This has been proven through the success achieved by companies such as Nucor. They have become one of the largest steel producers in the United States by putting in place strategies that have made them fast and nimble.
The underlying cause of the problem is that too many manufacturers are running their businesses with Enterprise Resource Planning (ERP) legacy systems that still have their manufacturing roots in early 1980’s MRP (Material Resource Planning) concepts and technology. These systems were primarily designed to address the needs of make-to-stock manufacturers who could rely on excess inventories at every level of their process. Many companies are starting to understand the limitations of this approach. This article is for those who are looking to be leaner and more flexible.
The limitations of a traditional MRP based planning system can be more easily understood if applied to a real life situation such as planning a wedding at say 2:00 pm on June 24. This is obviously unrealistic but it does highlight the consequences that stem from a system that can’t even create a starting plan that is accurate and precise.
Everyone involved is initially delighted when told that they can book their wedding on June 24 at 2:00 pm. What the wedding planner doesn’t initially know is whether or not other weddings are booked for that same day and time. This is a potential problem that could quickly evolve into pandemonium.
It would be nice if a planning tool had the ability to recognize a conflict and a need to re-schedule. MRP planning would not be able to do that because it doesn’t know there is a conflict and it has no logic to help it determine which weddings have priority. Even if it could prioritize the weddings, it couldn’t calculate precise new dates and times for each of the weddings. And if it could calculate a new date and time for each wedding, it would have no way of making sure that the priest was available at that time, and even if the priest was available, it would have no way of notifying the photographer and the chef and the restaurant, etc.
The underlying limitation behind all of these problems is that MRP-based planning systems can’t finitely plan even one constraint, and they certainly can’t synchronize multiple constraints. A few years ago a number of smart people who were frustrated with the limitations of such legacy systems started implementing a concept called Lean manufacturing. Lean was designed to remove complexity and waste and was made popular by the success of companies like Toyota.
At the planning and execution level, Lean is built on three key concepts of waste elimination – muda, muri, and mura. Without getting into too much detail, muda addresses the need to remove non-value added work such as overproduction (production ahead of demand) and excess inventories (all components, work-in-progress, and finished product not being processed).
Muri is defined mainly as the breaking down of tasks into their smallest constituencies, and mura refers to the need to make work flow from end to end by removing unevenness in the process rather than buffering it.
Other companies were starting to use a management strategy called Six Sigma that had been developed by Motorola to identify and remove the causes of defects and errors in manufacturing and business processes. Today these two concepts are often combined into one concept, which is sometimes called Lean 6Sigma or Lean Six Sigma.
Although most companies who decided to adopt Lean 6Sigma were able to achieve some level of success, manufacturers who had highly predictable demand patterns and a limited number of products were able to achieve the best results.
Other manufacturers who were still looking for ways to manage the daily bombardment of change saw only limited success. One of the reasons for this was that early Lean 6Sigma systems were manually intensive so they were unable to replace all the functions that had previously been performed by their Legacy planning systems.
So while Lean 6Sigma initiatives were working to reduce inventory levels their old planning systems were telling them to increase inventory levels. Because of the obvious conflict, mistakes were made resulting in inventory shortages, which led to late shipments and mass confusion. Faced with this situation, manufacturers realized that they either had to abandon their Lean initiatives or find planning systems that would not only dovetail with their need to reduce waste but would automate it where it made sense.
Without planning software that can prioritize and plan events at the detail level it is not possible to synchronize material and capacity constraints; without synchronizing multiple constraints, there is no basis for planning reduced inventory levels. Similarly, if something changes and specific materials are not available, this information must be synchronized back to the plan.
When the plan changes the new planning system must be able to instantly re-calculate the impact of each change on downstream activities, which, in turn, kicks off a new round of synchronizing and re-synchronizing. Right about now you should be starting to understand the problem because none of these things can be done with traditional legacy systems that rely on MRP planning concepts.
We believe that every second spent making the wrong product takes away capacity that could be used for products for which the customer is waiting.
Many industries, such as the steel industry, find it difficult to make only what their customers order because the efficient size of a production run is often much larger than the size of individual customer orders. Traditionally this means that they end up making additional stock that sits around forever.