Harnessing The Power Of ERP

May 9, 2007
The goals of leading industrial equipment companies are anything but simple. For many companies, they include: achieving profitability despite industrial cycles; getting closer to customers to understand and meet their needs; managing an increasingly complex global supply chain; collaborating effectively across an extended enterprise; and providing employees with the tools they need to contribute to high performance.
Such aspirations can be daunting. But Accenture research has found that high-performing industrial equipment companies can outperform their competitors by leveraging a unique set of business capabilities, including a global operating model supported by an Enterprise Resource Planning (ERP) system. ERP programs enhance a company’s ability to organize and analyze financial, operational and external information so it can make informed decisions more quickly and efficiently. By providing information transparency and consistency, the programs support standardization and integration across an enterprise, facilitating a common culture across a global workforce. For example, a company can establish shared services—or even
outsourcing—in the financial, purchasing and order management areas, allowing it to focus on the strategic priorities (e.g., global sourcing and manufacturing, and global distribution networks) that underpin its market focus and positioning. The result is global flexibility and other distinctive capabilities that allow a company to maximize the financial benefits of globalization, and that lead to differentiation and competitive advantage.
This is particularly critical in industrial equipment companies, where growth through acquisitions is a common strategy. But the strategy leaves many companies trying to run numerous, diverse legacy processes, practices, policies and systems. Here, ERP can provide the foundation for the effort to deliver business capabilities that allow a company to execute a unified business strategy. Differentiating factorsDespite the value of ERP programs, some companies use them more successfully than their peers. Our research uncovered four critical factors that explain why. We found that high-performing industrial equipment companies:•Commit to a transformational business change program, supported and sustained by an ERP system. Absolute clarity about the company’s strategic purpose and how an ERP implementation supports that goal has consistently distinguished high-performance industrial companies from their competitors. These companies recognize that harmonizing processes and data enabled by ERP provides a backbone to develop common business systems that provide quality, consistency and predictability across the global operations.

•Tailor strategic components of their ERP systems, simplifying and standardizing the rest. While tailoring allows them to enhance distinctive capabilities, they are also careful to customize their systems only when such a move will achieve specific business objectives.

•Understand that ongoing workforce transformation and enablementare essential to the overall success of an ERP program. Achieving high performance through an ERP program requires companies to address the inherent organizational change challenges, mitigating risks and embedding advanced change management principles into their ERP design and rollout strategies. To this end, these companies engage the highest levels of the organization; develop clear organizational design, roles and team structures; build ERP skills by focusing on talent management processes, such as training and performance management; and provide the incentives that encourage those skills.

•Institutionalize metrics to change behaviors. High-performance industrial equipment makers know that information and data are key drivers of value, with the power to pull geographically scattered businesses into a more integrated, competitive “virtual” organization. They also use metrics to align personal and organizational behavior with desired business outcomes and to measure progress against goals and assess success.

Businesses that make strategic use of ERP systems realize their strategic priorities faster and more cost-effectively than their peers. The challenges facing industrial equipment companies will not soon disappear. But the way in which those companies use ERP to respond to those challenges can separate the leaders from their competition. Paul Loftus, is North American Practice lead for Accenture, a consulting firm in New York City.

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