How much does an ERP Expert need to know about business?

A computer expert when I started business was someone who could make a mail merge work in Consulting concept with knowledge experience professional expert words on chalkboardWordPerfect. If you could install WordPerfect, you were looked upon with the awe given the true Guru. And if you could write a macro in Lotus 1-2-3 that actually worked, you must have god-like powers. I’m exaggerating. A little.

Today, everyone uses Excel. Most people have created PowerPoint presentations. Some have even created ACCESS programs. Computer literacy has risen–at least among people under 60 (maybe it’s 70 today, but who knows). Facebook carries enough of our news that Republican congressmen get their noses out of joint about whether the company is filtering conservative news.

ERP Software and Business

Today’s businesses operate more and more with automated systems. ERP software (accounting) software has become big business. Even with the consolidation of companies (and the exodus of companies) in the market after the Great Recession, there is still an abundance of folk that would classify themselves as ERP experts.

So what qualifies one as an ERP expert? Certainly, an expert knows the software. Inventory, sales orders, logistics, shipping, warehousing, etc. are the mainstay of the ERP application, and an expert ought to know something about these. But should an ERP expert know the answer to the following questions:

  • How can I use the cash flow projections in my software to improve cash management?
  • What’s the difference in the manufacturing system between indirect overhead and labor burden?
  • How do I analyze cost and quantity variance with the system? (Or for that matter, what is cost and quantity variance?)
  • I’d like to cut the space my product is occupying in my warehouse (to decrease the square footage of warehouse space used). How can I do that with the ERP system?

Increasingly, I run into two different types of ERP “experts:” (a) the computer literate internal expert that knows a lot about the business and business process, and (b) the external expert that knows great details about the internal operation of the software (and often its programming), but knows very little about the operation of a business. Let me give you a real example.

An Expert Example (ERP)

I was asked to attend a meeting with two “experts” that had been working with a rather large business. One of them was developing an eCommerce site based on an open-source content management system (CMS); the other was implementing a warehouse management system (WMS).

The WMS implementor began the conversation with the statement that his system didn’t handle “backorders.” By that he meant that if there were an order for 100 of a product, and all the product could not be shipped, the WMS would not “remember” that there was still product due on that order. Likewise, if an order was entered for 5 different products, and the warehouse shipped 2 of the 5, the WMS would not remember that there were more products to ship. The same situation applied to receiving products. An order once received and closed by the WMS was “finished” as far as the WMS was concerned.

The eCommerce vendor wasn’t concerned with this. He was concerned with modifying the eCommerce system to work with wholesale orders. For him, this meant that the typical “search” and “add to cart” was to be replaced by an “order entry” system. Rather than buying products like one might on Amazon, the system would present a spreadsheet where a buyer could enter the list of products and quantities.

The Business Problem

The business problem with the WMS was that distribution and wholesale companies frequently make partial shipments. Vendors (particularly overseas) sometimes ship partial purchase orders to fill containers. In order for the system to work, there would need to be an intermediate function (most WMS systems have this, his didn’t) that allowed the warehouse manager to review open orders and purchase orders and “release” product that was to be shipped or received to the warehouse. In addition, the ERP system would need to deal with returns, credit memos, etc., and pass these to the WMS (since the eCommerce system didn’t do this).

In the case of the eCommerce system, the vendor missed what is generally a huge problem with B2B (business to business) eCommerce using a traditional system. Let’s take Amazon as an example. If I place an order for 20 razors on Amazon, finalize the order, and pay for it, that constitutes a transaction in Amazon’s mind. If I decide ten minutes or 10 days later that I really meant to order 25 or 15, my options are: (a) place another order for the extra product, (b) return product that’s already shipped, or (c) cancel the original order and place another. There’s no function at Amazon that allows me to change the quantity of a product that I ordered after the order has been placed. For that matter, to change the shipping destination of an order on Amazon requires cancelling the order.

Oops Happens

What happens all too often is that the “expert” realizes the problem only after the system has gone live and the client calls to ask, “How do I change this order?” The answer: “We’ll make a change to the system!” Unsaid: “And send you a bill for something we should have realized in the beginning!”

The answer? A true “expert” has both deep knowledge of the software (to determine what features are present) and deep knowledge of business (to understand best practices). Without both of these, “experts” are just wannabes. My $0.02.