Surely Warren Buffet’s sage words, “Rule No. 1: Never lose money; Rule No. 2: Don’t forget Rule No. 1,” as recorded in the 2006 Wall Street Journal Best Seller “The Tao of Warren Buffett,” resonate for every CEO no matter the size or scope of his or her business. If the c-suite wants to follow that advice in the age of technological disruption, it will depend almost entirely on how well the CEO embraces and leads the team in harnessing technology to drive productivity, profit, and growth.
If you are a CEO and your c-suite meetings are the place where your heads of operations, finance and sales attempt to synch their Quickbooks data sheets to support the decision making process, you already know that whatever strategic decision you do make is really an under-educated guess that is going to take time to refine.
That time analyzing and re-analyzing data from jerry-rigged systems is going to cost in terms of sales, having the right human capital and an efficient production cycle, as well as having the correct amount of the right product on hand.
You need to invest in an Enterprise Resource Planning system, or ERP, and have the tools to be proactive, to forecast, and to plan so your company can efficiently produce and deliver your product or service to your customers, and not haphazardly scramble to compete for business and meet an order.
“The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow,” said 21st Century Fox CEO Rupert Murdoch, as quoted in a feature article published by the Australian Institute of Business.
What is ERP?
ERP is an acronym meaning Enterprise Resource Planning, a customizable suite of business planning and financial accounting software that seamlessly integrates your company’s core processes and produces detailed real-time reporting from before the point of sale, to production, and delivery.
An ERP system will allow you and your company to track and analyze the orders, forecast demand, communicate accurately with the vendors to purchase the right amount of raw materials, create transparent production schedules, and most importantly the display the costs associated with every step. ERP systems can show you the efficiencies and the slippage and how they translate into dollars and cents.
ERP Systems are NOT Just For the Fortune 500
Travel agencies, caterers, specialist manufacturers are all using ERP systems. The reason is simple: the heads of these companies want the ability to make smart strategic choices that deliver a quality product quickly at a competitive price, to save time and money, increase the customer base, and make a better profit. In addition to shortening their order-to-cash cycles, ERP systems are scalable and evolve along with their businesses, and with the right modules allow them to interface more efficiently with their customers.
What is the Company’s ROI?
There is no doubt that purchasing and implementing an ERP system is an expensive endeavor. But take a moment to consider the resources and the time your staff spends in meetings to force a patchwork system to accurately analyze whether a product line is profitable, when it is profitable (if it is a seasonal product), and where it is profitable. Can your staff quickly and correctly determine when, where, and why delays occur? Are you able to give your investors the level of detail on the business financials that they demand when they ask for it?
An ERP system, scaled correctly and tailored to your business requirements, will make it possible to keep on top of your company’s key performance indicators (KPI). You will be able to clearly see where in the order-to-cash cycle the company falls behind and where there are opportunities to innovate and adapt, even strategically integrate with customers and suppliers.
What Does the CEO Need to Do To Get This Rolling?
“From my perspective, the CEO has to lead the process and be all-in,” said Anthony L. Chirchirillo, CEO of Chirch Global Manufacturing, headquartered in Cary, Illinois. He explained to Chief Executive Magazine that for an ERP system to work, “It has to be driven from the top.”
As CEO you are the company’s Chief Envision Officer. While your CFO and CIO should gladly and actively support implementing an ERP system, the rest of the management and staff may be wary of change. Meet with them and listen to their concerns. Be ready to help them envision how an ERP system will not simply benefit the company’s bottom line, but make their jobs easier to perform well.
How Does the Company Take This Forward?
Task your departmental heads and managers to prepare a detailed GAP analysis on where the present systems work and why, and where they fall short. This analysis should also uncover where the company’s strengths and weaknesses are, especially the costs and the resource allocation.
While you are the ultimate decision-maker, you should lead or at least strongly support a collaborative effort to set goals on exactly what your company needs from an ERP system. And do not forget that these goals need to include your company’s expansion forecast and plans.
There are a couple of things to bear in mind in sizing up an ERP reseller. Is the software easy to use, integrate, and is it flexible enough to develop with the business? What kind of implementation support or ERP consulting is offered and at what price? And what is the geographic proximity to your business, which is especially important for smaller businesses to receive the support they need when they need it, because they usually do not have IT departments. And whatever you do, do not let an ERP reseller speak at you in ERP-ese. Get the pitch in English or move on to a reseller that cares not only that you understand the system, but more importantly cares about your company’s future.
Shortlisting candidates for ERP? Here’s a handy checklist to help you in making good choices.