Can the Wrong ERP System Cost You Your Job?

A recent survey of 298 manufacturing firms - half engineer-to-order (ETO) and half repetitive manufacturers - revealed that ETO senior operations managers' attrition rate in the last twenty-four months was double for ETO manufacturers (19 percent repetitive manufacturers vs. 39 percent ETO manufacturers) (see Figure 1). The chances for ineffective material ordering and handling and dramatic cost overruns are significantly higher in the ETO environment. The variables are greater and cost-containment less predictable. And as the survey shows, it often is the operations manager that gets the blame.

Unlike repetitive manufacturing, where operations managers are looking to fine tune a process and can utilize off-the-shelf ERP (enterprise resource planning) systems, the ETO plant manager is facing a wide array of unique considerations. ETO ERP expert Tom Verzi, director of product development for Cubicorp (Fort Lauderdale, FL) - a provider of ERP software solutions - concluded, "For all the recent gains in quality and productivity, the global economy demands operational improvement at an ever-accelerating pace. Best practices soon give way to new best practices. Managers of repetitive manufacturing facilities have outsourced this activity to a specialist that can result both higher performance levels and significant savings. Unfortunately, the nature of ETO manufacturing - one unique project at a time - does not permit this type of outsourcing, and therefore places even more responsibility onto the operations manager."

When there are cost overruns in the ETO process - like a moldmaker subcontracting for a yacht builder who is 40 percent over budget three months into the building cycle - someone is going to be blamed. Usually it is the operations manager. Having spent upwards of a million dollars on a new ERP system within the past two years, ETO CFO's are hearing with great frequency that the wrong system was purchased. An ERP system that posts to inventory is going to spell disaster for an ETO manufacturer and often the operations manager will be terminated.

According to ETO ERP marketing guru Roger Meloy of Cincinnati, OH-based Encompix, a provider of ERP software, "The ERP selection is usually a committee affair, so it is not one person who is to blame. What happened during the last two years is that the ETO-focused ERP vendors didn't get the message out, so the selection committee didn't know there was a better alternative. Generic packages are totally inadequate for the ETO environment. The operations managers were not educated during the past two years that ETO-specific systems were available. ETO manufacturing information is quickly becoming available in the marketplace."

There are tough realities for the ETO operations manager. If the wrong system was purchased during his or her tenure, then costly workarounds are instituted to correct for the deficiencies of the generic ERP system purchase. Again, a tool meant to help track efficiency and generate cost-containment is now prohibitively expensive. Conversely, going and recommending a new system may be considered employment suicide.

More often than not, this second solution - a new ETO-specific system - will make the operations manager look good, rather than throwing good IT (information technology) dollars after bad.

Solutions for the ETO Moldmaker

• Evaluate the ERP system presently being used.
• Consider its efficiency throughout the manufacturing and accounting process.
• Get feedback from all current users.
• Form a committee to weigh the pros and cons of keeping the current system versus replacing it with an appropriate ETO ERP system.
• Decide on a course of action and have all parties sign off on the verdict.

Solutions for the ETO Operations Manager:

If your current system was selected during your tenure, protect yourself. You are likely to be blamed for choosing the wrong system. Document the decision-making process - even retroactively - and make sure that you create allies in the evaluation of the new system.

Cost-justify the implementation of a new ETO-specific package and demonstrate rapid return on investment. Insist that ETO software vendors assist you in this process if they want the sale.