A number of small and mid-market executives are implementing new ERP systems in the hope they’ll solve just about everything in their supply chain: shipped-on-time, customer service, excess inventory, high costs. While ERP can improve processes and performance, its flaws can lead to disastrous results.
You see, there are three things that must be accurate for ERP to be successful – bills of materials (BOMs), inventory and forecasts, and in all three cases accuracy is almost impossible to achieve. Have you ever heard that “accurate forecasting” is an oxymoron?
Who Owns the Bills of Materials?
Of the three, BOMs have the greatest potential for accuracy, but only if someone in the organization owns the BOMs, they reflect how product is actually made and substitutions are handled properly. It takes a good BOM audit process to keep them from straying into inaccuracy.
ERP needs to know what’s on hand to properly determine what to order, but many companies have inventory accuracy scores below 90%. A strong cycle counting system and inventory update processes and controls are required to keep things up to date and accurate.
Sadly, there isn’t much to be said about accurate forecasts. ERP needs them to plan replenishment, but because a forecast is merely an informed guess about the future, they’re only 80% accurate at best. Many supply chain experts have given up on forecasts entirely in favor of agility.
If you’re hoping ERP will solve your service, inventory management and supply chain problems, take a look at your BOMs, inventory and forecasts. If they’re not accurate, don’t expect ERP to be the be-all end-all solution.
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