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ERP SYSTEMS FOR MID-SIZED COMPANIES
MUST HAVE “GRIZZLY BEAR” PARAMETERS

By Allen L. Pinkus, Ph.D., Adonix Transcomm

Enterprise Resource Planning (ERP) systems are like bears: Some are pandas, living in very limited environments in western China and subsisting exclusively on bamboo shoots. Others are like grizzlies, which can live anywhere and eat anything. In the world of ERP, the grizzlies are the flexible systems that accommodate ease of parameterization, and the pandas are the ones that don’t.

Enterprise Resource Planning (ERP) places onto one system the information management needs of all company functions, including financial systems, human resources and payroll, logistics and distribution, purchasing, sales and manufacturing. Using the same software company-wide eliminates most problems with data integration and facilitates oversight of procedures across all company functions.

The down side is that traditional ERP systems typically are expensive and difficult to install. To make things easier for mid-sized and small enterprises, some ERP systems offer packages that are preconfigured according to “standard” business models or provide more limited functionality. These panda-like systems typically work for large manufacturing companies that make products using well-defined, industry-standard planning and control systems that don’t change much over a long period of time.

But for many mid-sized companies, such as distributors and parts manufacturers, today’s rapidly changing business environment is survival of the fittest. And the most fit are the most flexible. If you can only eat bamboo shoots, you’re going to die. And that means you need an ERP system that allows you to emulate the grizzly and thrive in any business environment.

For example, a distributor’s competitive edge lies in the freedom to make deals, to implement non-standard responses to customer needs, to innovate in a host of ways. A distributor considering any ERP system must look for a system that offers the properties to support flexibility and variability. In other words, don’t ask whether a system already does what you want today, because you may have a preferred customer tomorrow for whom you are willing to change all the rules. Rather, you should ask if the system is designed to be able to do what you want today – and may want to do tomorrow and in the more distant future.

In the case of a parts manufacturer, flexibility begins with the exacting specifications of your customers, and has ramifications throughout the many business processes that define the enterprise.

Unfortunately, when evaluating ERP software, it is easy to get confused by the beauty, elegance and sheer number-crunching ability of most systems. Pandas are cute, too. But you need to look beyond the superficial, and to do that, you must understand the kind of data handled by the system, and the ways in which it can be “parameterized.”

Parameters contain the control information that determines the structure and behavior of the system and its potential for adaptation to the specific needs of your business.

There are a few easy ways to tell whether that impressive ERP bear you’re looking at is a panda:

In both these cases, you can be reasonably sure that as robust-looking as the ERP system looks in demonstration, it may not serve your needs well.

To get a better understanding of what kind of bear you’re buying requires some knowledge in the type of data managed by ERP and the different levels of parameterization that are possible in ERP.

An ERP system contains several different types of data:

Behind the scenes are the little sets of data that make the system work:

The major sets of parameters include:

The ultimate objective of parameterization is to have an ERP system that supports the flexibility that you must have to do business. For example, if you have a panda bear system that can’t distinguish between different customers, you won’t have the flexibility to provide incentives to the preferred customer. You’ll find it harder to give pricing deals and special freight rates. It’ll also be difficult to change the commission rate or price to respond to a competitor’s moves in a single market. An ERP system without flexibility profoundly impedes your ability to spontaneously “wheel and deal,” which in today’s business environment is an absolute necessity.

Grizzly bear parameterization has three very important characteristics. First, the parameterization is flexible, meaning that it is user-definable rather than fixed. While traditional ERP systems are relatively fixed, newer systems provide the means for entering complex values. For example, pricing parameters can be defined through expressions or formulas that allow the company to employ creative, non-traditional modes of pricing.

Second, new parameters can be easily defined and linked to applications or business work flow, without the necessity to perform program modifications. For example, grizzly bear ERP systems provide a means, such as “user exit points,” where new parameters can be made to work without affecting the standard software.

Third, parameters can be set at different organizational levels, down to the lowest. For example, a distributor with multiple warehouses might want to operate some as basic stockrooms, and operate others with directed put-away and picking and sophisticated storage control. If parameters can’t be changed or set at the warehouse level, differentiation between warehouses will be much more difficult and time-consuming.

There is one very important caveat to bear in mind. There are trillions of possible combinations of parameter settings–and making a mistake could be disastrous. A grizzly bear ERP system includes features such as tools and templates, cross-reference checks, consistency validation techniques, error detectors and system behavior simulators. Utilities such as these help greatly in setting up and maintaining highly parameterized systems.

We also strongly recommend that a mid-sized company appoint a “ParaMaster ”–an individual who is responsible for managing the ERP parameters. The ParaMaster must thoroughly understand how the system is parameterized; what each parameter does from the standpoint of business processes; and how to translate new business requirements into parameter and code settings without having to modify programs.

An ERP system that meets the criteria for good parameterization enables a mid-sized company to focus on identifying its competitive strengths, then find ways to creatively set up the system to implement them. During the implementation project, the company’s attention should remain focused on how the system should be configured to maximize its competitive strengths. Creatively developed, competitively effective parameters can be one of a company’s most valuable trade secrets. Like a grizzly bear, the company will be able to survive, and do business, in any environment.

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Allen L. Pinkus is vice president, development, of Adonix, a Pittsburgh, Pennsylvania-based company that develops and markets ERP systems for middle market companies. Adonix software is used by more than 4,000 mid-sized companies worldwide.

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