Rolling out a global ERP system can be one of the toughest jobs faced by a CIO. It involves both technical and people management challenges, but the benefits of successful delivery can put millions onto the bottom line.
Since Colorcon consolidated all of its global offices and seven manufacturing sites onto one ERP system in 2001, the benefits have been indisputable. The specialty chemicals manufacturer has increased its annual inventory turns by 40%, closes its books each quarter more than 50% faster than it once did and has improved its production lead times. "It was a significant improvement," says CIO Perry Cozzone.
But getting to a single, global instance of Oracle's 11.5.10 E-Business Suite has also been fraught with challenges. Those included cleansing and verifying data from legacy systems, standardising business processes globally and getting buy-in from business leaders in locales as disparate as Brazil, Singapore and the UK.
"It was hard work," says Cozzone, who oversaw the final stages of the system implementation.
Transitioning to a single, global instance of an ERP system is a heady challenge for large and midsize multinationals alike. "It's a real struggle for many companies to have consistency around their business processes" because of differences in regional business requirements, says Rob Karel, an analyst at Forrester Research.
Companies that have achieved a single instance say it is worth the struggle to streamline financial reporting and increase the visibility of operations around the world, because doing so allows executives to make decisions faster.
For many organisations, the toughest challenge in moving to one ERP system is change management. "The organisation has to reach consensus on business processes," says Jim Shepherd, an analyst at AMR Research. "That's far and away the most challenging aspect of these projects."
Goss International began moving to one instance of SAP's ERP system in 2002 in an effort to consolidate its global financial reporting, close its books faster and have greater visibility into operations such as manufacturing. Following its 2004 acquisition of Heidelberg Web Systems, Goss implemented the SAP system in its Bolling Brook , headquarters in 2005 and at facilities in the UK and Shanghai earlier this year.
Because Goss had stuck to SAP's industrial machinery and components industry template, there was a 95% correlation among its sites in how the SAP software was pre-configured and how the company ran its operations, says Mike Masters, director of global applications and solutions at the printing press manufacturer.
The project team still had to work through regional differences. For instance, the French government requires that businesses report their inventory figures as a moving average. So the ERP project team had to adjust the SAP general ledger system used by its French unit so it could report one set of figures to the French government and a standard set to the company.
The experience at Millipore was similar. "The toughest part of all of this was implementing a change management policy," says Tom Roy, manager of application services at the Billerica based life science products and services provider.
The changes associated with Millipore's consolidated ERP effort started in 1999, when the company established central, round-the-clock support for Oracle ERP users in 32 countries. It was difficult for workers in the US to replicate the IT support service that employees in Japan were receiving locally, says Roy, so "we had to put different business processes in place."
Millipore placated many users by assigning three database administrators on rotational schedules to handle support calls from its international offices.
One of the biggest pieces of the change management puzzle is gaining buy-in from local business leaders accustomed to suites tailor made to support their unique business processes, says Forrester analyst Paul Hamerman. "There's often reluctance among business units to give up the systems they use," he says.
To work through those issues, the Colorcon project team had two forums for business leaders to advocate for their organisations' needs. Business process owners participated in regular discussions with the project team to make sure their requirements were being met. Director-level executives were able to track the project through the project management office and add their input. Cozzone's team gained acceptance by reminding business leaders that the change was going to globalise businesses once confined to operating in a single country.
The most common technical challenge that project teams face is verifying the integrity of legacy data and moving it to the ERP environment. "One of the lessons learned is that you can never spend enough time on ensuring data quality," says Cozzone.
Early in Colorcon's project, when there were questions about the quality of a set of data, team members and executives did not always agree on what needed to be done. "There was inconsistency about how to measure [quality] and manage it," says Cozzone.
The project team developed a data-quality dashboard to illustrate to business leaders why compromised data needed to be fixed before being entered into the Oracle environment. The dashboard demonstrates, for instance, how poor quality customer contact information could lead to an increase in erroneous orders. The dashboard includes steps that business users can take to correct faulty data, and it quantifies monthly business improvements achieved by reducing bad data.
Each of the companies had to work through minor issues in retiring legacy systems and so-called "ghost" systems, those used in various business units but unknown to corporate IT.
"We're not a multi-billion-dollar company, but we still had ghost systems," says Cozzone. "We made these a high priority and got rid of them quickly."
At Goss, when data from a legacy system was migrated to the SAP environment, the system would then be retired, explains Masters. Data from reporting applications that were needed and supported locally was retained and formatted for the SAP environment, but it did not become part of the central transactional system, he adds.
Millipore encountered relatively few data-integrity problems, since most of its operations were already running on Oracle when it transitioned to a single global instance of the ERP system, says Roy. It did have to make big investments in high-speed bandwidth connections to help far-flung offices connect more easily to the centralised Oracle system in the US.
"You have to invest significantly to get some big [network] pipes," says Roy. "Before this move, some of our offices were accessing a computer in their own data room. Now, they're connecting with a system that's 5,000 or 6,000 miles away."
But it has all been worth it for Millipore. Like Colorcon, the company is now closing its books faster than before and has a much better global view of its inventory and financial data. "The only way we had that view before was either to query each database online separately or to run and print reports from each system," says Roy.
Goss has gone from closing its financial books in seven days to five days, says Masters. For it, too, the global view was the big payoff. "The single biggest value we've received from the single instance is increased visibility across the board," says Goss CIO Bill Rogers. "The bill of materials is visible; manufacturing orders are visible; financial reporting is visible. This all leads to more timely and more effective decision-making."
Making the right choice
Single-instance ERP is not for everybody. Here are the key characteristics of companies that tend to choose global ERP and of those that use regional systems
- Multinationals seeking to centralise financial reporting and close their monthly or quarterly financials faster.
- Companies looking to minimise the variety of financial controls in place to simplify regulatory compliance activities.
- Corporations that stand to gain operational efficiencies by centralising management and control of operational procedures, such as order management, materials handling and inventory control.
- Organisations seeking to maintain common business processes across various divisions and geographies.
- Corporations that are highly distributed or operate as collections of regional businesses.
- Companies that need customised systems to meet unique business requirements in particular markets.
- Multinationals subject to various local rules and regulations that require reporting of financials or operational data in formats different from those used by the rest of the company.
- Far-flung companies whose regional units may be subject to infrastructure instability, making it difficult to maintain consistent high-speed connections to a host system located across the world.
The tough stuff
Companies that consolidate to a single global ERP system face many human and technical challenges, including these:
- Managing change, including standardising business processes
- Communicating project goals to constituents from different cultures
- Gaining business unit buy-in
- Achieving data integrity
- Retiring dozens or even hundreds of discrete systems
- Meeting regional legal and regulatory requirements
- Achieving high system availability through high-bandwidth connections
- Maintaining business as usual during the transition
- Providing consistent global technical support