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Oliver Wight Blog

Is technology really to blame for lack of business results?

By Rod Hozack, Partner at Oliver Wight Asia Pacific

26 July 2019


At Oliver Wight we still find too many organisations in APAC working informally to make mission-critical systems work for their business, relying on spreadsheets and good people to get the outputs they need. We also find that when companies invest in technology, they often don’t even understand which modules they’ve purchased, let alone how to use them. The failure is often then blamed on the technology itself rather than looking at the underlying issues prohibiting results. It is not unusual that we hear the words “the system can’t do that”, or “we don’t have that module”. But what we at Oliver Wight hear is “training has been skimped on” and “no one has tried to figure it out what the company has actually purchased”.  For one FMCG company in Australasia, with operating companies all around Asia Pacific, we found out what was really going on after the installation of an ERP system left one of the operating companies in disarray.

ERP crisis

With 900 SKUs across 12 categories, eight manufacturing sites, and taking about 50,000 sale orders per month, this particular FMCG company set up an ERP system to ensure best practise across the business. Unfortunately, the implementation was rushed and led to some big problems – the system wasn’t doing what is was supposed to, and as a consequence the company’s Integrated Business Planning (IBP) process had regressed into a short-term crisis-management process. This in turn led to customer delivery performance plummeting to just over 70%, and a dramatic increase in product write offs. Plus, inventory was increasingly getting out of control.

Uncovering the underlying issues

Oliver Wight was called in to carry out a diagnostic, looking at the company’s policies and procedures, education and training as well as its ERP setup problems. The good news was that there were no real problems with the ERP system, the bad news was the organisation needed to make big cultural changes.

The thinking behind the original ERP set up was sound and based on best practice, and while relatively generic in logic, was not bad enough to cause the problems they were experiencing. A key issue was that whilst the system contained a gold mine of information, the people originally involved in the implementation had either moved on to other roles, or left the company taking their knowledge with them.

The culture of the organisation was described as a ‘rotating door’ for advancement in the corporation, i.e. people came in to make a mark quickly and get promoted. This meant that effective management of the business was so heavily dependent on good people making it up as they went along, no system stood any chance of working properly. 

Time to change

Oliver Wight’s first recommendation was simple; STOP blaming the system. The second solution was not so simple; to re-define the business culture and expected behaviours, and to develop formal and replicable processes across the business. It was essential that management took responsibility to make sure all employees clearly understood the reasons why, and that they followed the processes religiously.

The next step was to uncover what the company had actually purchased with its ERP system, and to discover what was missing or needed enhancement. As it turned out, all the planning and execution modules were all available, but most of the planning was being done in spreadsheets because they hadn’t been trained to use the modules properly. An example of where a system did need enhancement, was the bolt-on forecasting package, which was only volume based, and needed financial capability to understand ROI on propositions, the value of the portfolio, and run effective simulations.  

Results

Six months into the change programme, the company experienced significant benefits. Customer delivery performance returned to 95%, inventory and stock write offs declined dramatically, and crisis management went away. Education into new ways of working, meant people were coming to grips with new processes and tools, and, even better news was that no one was blaming the ERP system anymore.

Yet more impressive was that after 12 months, customer delivery performance exceeded 97% in all categories, Inventory and stock write offs steadied at acceptable levels and the company’s IBP processes horizon lifted to 24-month rather than being stuck in the short-term. As part of the new formalised processes, induction education was embedded as a routine, even for new CEOs and Lead Team members. When it came to the technology, spreadsheet planning was replaced by the ERP planning module with very little adjustment, and with some enhancements to the existing forecasting package to enable better revenue and margin projections.

People and processes before tools

The moral of the story is that businesses need to make sure people’s capabilities and ways of working are well defined and embedded before technology comes into play. Once people and processes are successfully established, decisions and deployment around technology becomes much more straight forward.