The New ERP – Part 11

Evaluating alternatives

Based on the management team's analysis in our example company (see prior posts in this series), they have come to the conclusion that their system's current "bottleneck" – or, constraint – is in their pick-pack-ship operations. Since they have already agreed that there are so many crossovers in personnel and functions between general warehousing operations and picking-shipping, they are going to consider CRT roots 1, 2 and 5 together.

This makes a lot of sense inasmuch as any technology that might be applied to the warehouse is likely to include functionality that will supplement multiple areas. The areas of concern, as determined by the CRT roots, are:

• Integrated bar code labeling
  
  
• Integrated ASN generation
  
  
• Reduction or elimination of paper-based processing of picking, packing and shipping operations
  

Using this list of critical factors generated directly from the organization's CRT, the management team knows already "what needs to change" and, by implication, the key functions that any technology must supply to help the organization actually move toward increasing Throughput while holding the line (or maybe, cutting) Operating Expenses.

While intuition alone might bring some organizations to this point, if the management team has not documented (I mean literally written down) the logic that brought them to these decisions, they are in a far poor position to evaluate the failure or success of any implemented changes that may flow from their decisions. (It is beyond the scope of this present discussion to cover these matters in more detail, it is at this point that other Thinking Processes tools – like the Transition Tree and Future Reality Tree – might be applied by our example company's management team to determine what the change(s) should look like and how to effect the change(s) required.) This means, of course, that if the team were to take the approach of Traditional ERP – an Everything Replacement Project – it is quite likely that the project will lose focus and end up not having metrics by which to guide decision-making or measure success or failure.

Taking the next step of putting numbers to their intuition and the logic they have mapped out using the Thinking Processes will further sharpen the focus of the management team. Here is one way they might go about developing metrics around the proposed changes.

In order to begin, the team will need to come up with valid numbers related to two factors: If they make the proposed changes by applying new or expanded technologies in their warehousing and shipping operations, how much more Throughput (T) will they be able to support while holding the line on Operating Expenses (OE)? Of course, they already know the key features that they are looking for in their search for supporting technologies, too. These were identified also by the Current Reality Tree (CRT): 1) integrated bar code labeling, 2) integrated ASN generation, and 3) reduction or elimination of paper-based processing.

These folks are already far ahead of any company that has started their search for a new ERP system by the traditional "requirements gathering" from all the departments. Plus, they are looking only at creating an Extended Readiness for Profit (the New ERP) by focused technology selection and deployment, not the wholesale approach that comes with traditional ERP – an Everything Replacement Project.

Well, this firm's management team is as honest as the day is long! So, even though they realize that the improvements they propose in the warehouse and shipping operations will allow these departments to support dramatic increases in Throughput, none of the changes being made will actually add Throughput to operations. They acknowledge that they are already getting almost every shipment out the door every day. The problem is that they are doing it using extra personnel and a lot of overtime. Of course, all that falls under the category of Operating Expenses.

The management team thus concludes the following:

• delta-T = $0
  
• delta-OE = $168,942 per year
  
• delta-I = $75,000
  

I hear you ask: "Where did they ever come up with numbers like those?"

[To be continued]