As a kid, one of my favorite things was watching a train go by. All of those connected train cars that would just go on and on. Not to mention what it would do to transform a penny if I had time to put it on the track. And the train whistle! When implementing a new ERP system, one of the most critical areas to focus on resides around the connectivity of the entire value chain—so that your business processes resemble a long, connected train. Your value chain is the heartbeat of your operation, so your ERP system becomes the circulatory system that powers it. The value chain is not simply contained in MRP. Rather, it reaches its tentacles into ERP, CRM, engineering, production and warehousing.
Up front you must define:
- Sales: Defining the commercial policy and service level expectations, and determining how sales orders will be managed
- Planning: How and what will be forecasted, and where will the forecast be used to drive MRP
- Finance/Operations: Determining and defining inventory and replenishment strategies to achieve both internal, and external, service level expectations
- Manufacturing: Considerations for production efficiencies such as batch sizes and changeovers, capacity considerations
- Warehouse: The effects on warehouse productivity
Goals and objectives can often be in competition with one another
It is critical to maintain the company’s holistic vantage point. Ensure that the overall strategic intent of your business is the deciding factor in all decisions, as opposed to what may simply be in the best interest of a particular function or area. For example, production may want larger production orders, and longer production runs. However, this may be in direct conflict with inventory goals. So, how will the compromise, or optimal alternative be determined?
When streamlining your business, it is critical to map the future state flow, and identify the key decision points in that flow:
- Determine what will drive the demand that triggers the various needs. (CRM opportunities, forecast, sales orders, Kanban, or a combination)
- The service levels that are agreed to, in order to satisfy customer expectations, need to dictate a finished goods inventory strategy
- Inventory strategy dictates what products are made-to-stock, made-to-order, configured-to-order, assembled-to-order, etc.
- Inventory strategies then dictate replenishment strategies for both procurement, and production
- Replenishment strategies need to be in alignment with production and purchasing efficiencies, capacity constraints, and consideration of lead times/cycle times
These flows and definitions must be completed prior to starting the implementation, or at a bare minimum, must be completed very early on in the implementation. If the flow is not defined, and strategies and methodologies are not in place, it is a good bet the ERP implementation will not deliver the desired results. This flow, when defined correctly, translates into configurations, parameters, settings and setups within your ERP system. If you do not define your value chain strategy, along with key underlying processes, and translate it to your ERP, it can lead to a variety of issues, including; inventory, service levels, planning/scheduling, and operational efficiency, to name a few.
Tribridge’s Business Consulting team can help you with defining your overall strategic intent, and facilitate the design and definition of your value chain. We will help you develop the overall roadmap of the many moving parts and solutions. In addition, as a neutral 3rd party, we can maintain an unbiased holistic vantage point to ensure alignment across the various functions and processes. Contact us to get started on your value chain/train today!