Spend Matters welcomes this guest post from Daniel Martinez, manager at GEP.
There are several ERPs in the market that allow companies to get simultaneous electronic control over all aspects of the business and accurate information at the right moment. According to Gartner, SAP (26%) and Oracle (12%) together make up 38% of the global market, and the remaining 62% comprise several companies that include software development as part of their products’ adapting the process into the system.
ERPs include several modules that can be selected to integrate information between various departments and create an end-to-end map of the process, showing the cost and margins for the goods or services sold.
Over the last 10 years there has been a surge in ERP implementation based on supply chain transformation projects, aiming to get complete and correct information about the flow of goods. But how effective have these implementations been in delivering results? Let us focus on SAP, which controls 26% of the market.
An essential element in getting strong ERP performance is the quality of data uploaded into the system. During software migration from a basic system to an ERP, there are (almost always) several gaps created by information that wasn’t relevant before but is crucial in the new system. This cannot be classified as an error in the ERP, but it is still a major issue.
Several other issues can come up during transition — any system is complicated at the beginning, and more so with an ERP system. Most transactions have a learning curve to enter correct, validated information for each department. Basic human mistakes during this learning can mean that the correct process is not followed. Sometimes, the operator actually does not have visibility required for the information to be entered.
To go deeper into the issue, consider warehousing. There are several information sets in the SAP Warehouse Management (WM) module and Material Management (MM) modules. In WM it is possible to track the stage at which the product is located (docking, picking, quarantine, etc.). This is used by the order processing team in the warehouse. In MM, however, only the warehouse location of the product is visible. The demand planning team can track the goods available and continuously create transfer orders based on availability and warehouse location.
However, if the two modules do not have the same detailed information, then the visibility is lost for both sides. Theoretically, if demand planning asks for goods and the warehouse does not ship the required goods, it creates a backlog — but in this case, the goods were not available in the first place. The warehouse cannot take any product from a different available storage location. The performance indicator gets flagged and SAP gets blamed, but the core issue is that the two departments do not use the same module or underlying dataset to visualize their information.
There is no easy solution for this problem. Two potential ways to correct it are through direct communication between the departments or spending more to provide access to key users for both relevant modules of the SAP suite, just to ensure the correct status for goods.
For more interesting thinking on procurement and supply chain, visit the GEP Knowledge Bank.