The importance of ERP systems, which has been seen as the first step of digital transformation for years, was emphasized. ERP systems, which provide advantages in many areas, were shown as outdated period by period. By adapting to every new technology, we can say that today’s new competitor of the ERP systems is DRP.
Enterprise Resource Planning applications (aka ERP) have been around for decades. They started in financial operations and human resources managing salaries, benefits, product costing, and general ledger. Depending on where you draw the line today, they run and control most critical functions in any business, from order intake and inventory management to payment and financial reporting. Even with new cloud versions popping up every day, ERPs are typically highly customized, very costly, and complex.
It isn’t a lucrative $50 billion market for no reason.
However, the days of ERP dependence are over. Today’s innovations are all about data. This is why “DRP” should be the next thing.
What is “DRP?” Read on.
The Problem With ERP
Staff in most manufacturing organizations, which are by design and long history very conservative, have come to equate information technology with all processes handled by their ERP, or, I should say, ERPs.
While they do understand that other applications such as their MES or order dashboarding tool are important, they would readily admit that everything stays and falls with their ERP. After all, ERP proponents promise a lot of advantages with minimal downside, as it is the one-and-only system you’ll ever need.
Yeah, right! This is where the problem lies.
The focus on business process standardization, optimization, and encapsulation in a central all-encompassing single machine has groomed employees to believe that, literally, any innovation will come from the ERP world. Consequently, data has become the ugly stepchild, even though it is truly the fuel running all applications, including ERP.
This under-appreciation of fuel in lieu of the machine shows up on the investment priority list of most firms in the form of major ERP upgrades or quote-to-cash process initiatives.
Let’s face it, a risky $20 million ERP project will always dominate executive attention over a $300,000 middleware license.
Hundreds, if not thousands, of employees, customers, suppliers, and partners touch ERP user interfaces and their application extensions daily. How many people realize the data piping underneath?
How many of you have pondered the existence and importance of your residential sewer system lately? You just notice it when it starts smelling around your house or the municipal maintenance crew shows up down the street.
By then, something unexpected and usually undesirable has already occurred.
Start Asking Questions
As organizations grow via acquisitions, the most common strategy of IT integration is to leave the acquired entities’ IT infrastructure untouched, without any meaningful integration or depreciation of duplicative systems. New business units must operate unencumbered by potential synergies. After all, executives are running a manufacturing machine, not an IT shop … let alone a data factory.
A few acquisitions later, and often thanks to the attention of a new executive “disruptor” who may have come from a start-up entity, people start to ask questions like, “Why don’t we know our customer profitability?” “Why does it take so long to release a new application?” Or “Why do we have a spaghetti IT architecture connecting 14 ERPs and 35 other applications point to point?”
The reason, as you may have guessed, is that nobody ever paid attention to the data. Everybody muddled along until someone put their finger in the open gash drawing attention to the fact that a legacy competitor or an untraditional market entrant is investing in data to eat your lunch in a couple of years.
Finally, people start realizing that ERP is not the be all, end all. Finally, someone asks the question everyone else was thinking for years and complaining about under their breath. After years of keeping the lights on, you conduct a few strategic review meetings as part of your company’s revival (or should I say resuscitation), and people start asking, “Why did we wait so long and let it get so bad?”
Suddenly, investments like a new predictive analytics tool, eCommerce platform, EDI or cloud-based data integration tool, AI-based order recommendation engine, data quality project, or blockchain-enabled contract management system appear on investment plans.
But now executives on both the business and IT sides are surprised by the mess a multitude of ERP systems have created over the years. There is no easy, commonly understood view of their SKU hierarchy, only inflexible chart-of-account hierarchies, patchy and incorrect item records, half-empty and unvalidated customer records, myriad process historians being tapped for one-off product quality studies, and so on.
Life After ERP = DRP
I could go on but let me leave you with this thought: if you believe that a new CIO or CDO can turn this tanker overnight, you are likely mistaken. These types of complex, archaic systems have grown (or I could say metastasized) over years and are institutionalized in procedures and code.
Today’s infrastructure requires a SWAT team – think of it as a Data SEAL team – to take stock of the current architecture, application functionality and scalability limitations, future business needs, capacity for change, and many more aspects.
What I am suggesting here is not terribly new. It is a data factory. Let’s call it DRP (Data Resource Planning) to stay with industry lingo.
DRP has a strategy, budget (thus control), and dedicated business and technical staff whose sole mission is to enable old processes to keep the lights on while accelerating migration to newer, better (shorter) processes and fewer applications.
All of this demands well-understood, easily-found-and-retrievable, high-quality data.
This requires people to think outside of their “ERP box.” Just another ERP-centric project will not suffice when Amazon and its peers are peeking around the corner.