Decisions – Enterprise Resource “Planning”

My business experience indicates that given a specific situation, the resulting decisions and actions will more than likely be the same regardless of the person making them. Of course this assumes a rational mind and basic understanding of the situation. The whole recent movement toward “Best Practice” standardization is an acknowledgement of this. ERP (Enterprise Resource Planning) was supposed to provide a structure for housing and executing but got hung up on connectivity among all the functional silos (ie. Accounting, MRP, MES, CRM, SRM, etc.) As a result there still is no real “Planning” associated with ERP. The silos while being interfaced are still largely operated as separate functions with some commonality of terms and data such as common product, customer and supplier tables. The next real breakthrough in efficiency and quality will occur when an overall execution system is sitting on top of the silos executing best practices, essentially creating actions based on decisions that have already been agreed to by adopting “Best Practices”, regulations and business rules.

Imagine this example: In companies across the world suppliers send products to OEM’s (Original Equipment Manufacturers) that are received, inspected and tested before being installed in OEM products. When problems are found the suspect material is segregated in an area waiting on disposition by those in authority. This area may be denoted as MRB (Material Review Board). Generally the MRB meets once a week or more given necessity and is made up of representatives of purchasing, quality, engineering, manufacturing, product managers, etc. and they make the “final” decision/disposition of what is going to happen to the “defective material”. Since I have installed defect reporting systems in many companies in a wide range of industries I noticed patterns associated with these decisions. For instance, in some clients, during the first 15 days of the month the defective material is almost always sent back to the supplier. The next week the material is sorted good from bad and the bad is sent back to the supplier the good used. In the last week of the month, the material is sorted the good used and the bad is reworked on site.

Invariably when pointing this out to the client it caused a real ruckus among all participants as if I was questioning their analysis and worth. Obviously I wasn’t, at least the analysis part however I will agree that their worth increases when handling productive versus non-productive activities. I did realized however that an execution system could accomplish the same decisions without congregating the masses and “praying” over the defective, before rendering the decision. The savings would not just be the time associated with the decision but the execution system could go ahead and generate the actions needed to carry out the disposition. For instance the supplier could automatically be alerted with all known information, shipping documents prepared, inventory relieved, work orders generated and corrective action could begin. All these actions could be accomplished in less than a few minutes of the recognition of failures. Invariably someone will point out that there are always extenuating circumstances that can change the disposition. Well, if that’s so, they must know what those circumstances are and therefore what questions should be asked before continuing. The execution system can ask those questions and then render the proper decision/disposition. It has been my experience that those questions can already be taken into account by the system so that the question does not even have to be asked. For example, some suppliers may have contractual agreements stating that all defective product be reworked at the customers site at suppliers expense instead of returning the product. If this caveat is known to the system then the RTV (return to vendor) would not even be an option presented by the execution system. This is the type of planning and execution that ERP systems should be capable of performing.

While care needs to be taken to assure that this type of execution will be verified and validated and can be supported within the organization a whole new level of efficiency will be attained. This approach should eliminate one or more levels of management and streamline the activities in processes imposed.