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ERP as Organic Change Management

Thu, 10/18/2007 - 8:17am
Johann Heydenrych, industry solutions manager, itelligence Inc.

Recent high-profile recalls have illustrated the dire potential consequences for food manufacturers unable to track and trace throughout the supply chain. But for every headline-grabbing incident, there are scores of less publicized cases with equally damaging capacity. The seemingly endless "voluntary" recalls enacted under the watchful eye of the FDA illustrate how badly companies need comprehensive supply chain visibility. Press releases concerned with the recall of chili or green beans might mention the "potential" presence of botulism, which causes respiratory and musculoskeletal paralysis, and often results in death. Seafood dips vanish from store shelves because they "possibly" contain Listeria, which can cause stillbirths and miscarriages. Despite their noncommittal language, companies can rest assured that consumers will respond to "possible" and "potential" contaminations with definite and unequivocal action: they will simply give their money to competitor brands, which they perceive as safe. Apart from the stark financial repercussions, tainted products also contradict food companies' implicit ethical responsibility to provide wholesome food.


        Enterprise Resource Planning (ERP) offers companies a viable solution to these problems. Methods such as batch management allow companies to create discrete identities that reflect every step of a given product's lifecycle. Consider the well-known example of iceberg lettuce from earlier this year. Given comprehensive ERP functionality, immediately after farms delivered the lettuce to the co-op, the product would have received a distinct identity. That identity becomes the batch number. With any good ERP system, you have the ability to record against that batch during preparation, washing and processing. The results of sampling and microbiological tests also contribute to the identity. If the lettuce appears discolored or slimy, that information is entered into the batch number. When QA personnel examine the product, they review all data recorded incorporated into the identity. If testing showed strange coloration, a slimy appearance and a high E. coli count, QA personnel take a rejection disposition and the product does not get shipped.


        On the other hand, if testing goes well, positive results factor into the identity. The product undergoes packaging, with the batch number physically represented on the exterior of the package. After subsuming the packaged item, the shipping crate receives a handling unit management number and the shipment departs for a distribution center. From there, distribution workers record freezing and refrigeration specifications, further developing the identity. When the product leaves the distribution center, it arrives at individual customer sites with complete traceability going back to the farmer. In the event of a recall, companies can review the product identity to discern exactly when and where the product became compromised, as well as which specific personnel failed to fulfill their duties. Rather than recalling production from an entire shift, companies can limit their focus to specific batches.


        Companies considering ERP adoption will hear conflicting advice. A lot of people think that you have to do business re-engineering before you attempt the ERP process. Another philosophy holds that business process re-engineering should occur simultaneously with ERP implementation. There's merit to that viewpoint, but taking on both tasks simultaneously can exhaust organizational wherewithal. Yet another philosophy maintains that, before pulling the trigger on ERP, an organization needs to test its preparedness. Pre-project activities will address change management strategies, process impact analysis, risk assessments and insure organizational readiness by redefining strategy, policies and procedures.


        With the iceberg lettuce scenario, each step in batch management relies on well-trained workers successfully fulfilling their roles. This is why before adopting ERP, a philosophical change needs to occur. A long, hard look at strategies will lead to successive investigations of policies, procedures, processes, roles and segregation of duties-ultimately ensuring responsibility at the appropriate levels. While its sheer technological breadth certainly impresses, ERP implementation relies on human constructs, not software constructs. Compliance-whether SOX or general-and segregation of duties drive new role definitions, which in turn drive change management.


        Prior to implementation, ERP vendors remind their clients about best business practices. If an organization does not embrace these practices, and intends on maintaining the status quo after implementation, the likelihood of change occurring within ERP is precisely nil. However, when organizations embrace best business practices, their ERP solutions can exponentially accelerate change, which will bear incredible impact on human constructs.


        Organic change management represents a symbiotic relationship between software and people. When organizations take the time to ensure that their workers stand prepared for the introduction of ERP, the new software will accelerate change and continuously inform roles and segregated duties. These human and technological elements depend on each other for guaranteed maximum performance. Recognition of this interdependence becomes progressively important as food recalls and consumer dissatisfaction accelerate the demand for ERP.


        Compared to the risk of recall, which underequipped companies run on a daily basis, ERP is imminently affordable. System architecture transforms the supply chain into a transparent, cohesive whole. Additionally, enterprise software can contribute to a dynamic organization that evolves seamlessly. Unfortunately, as long as ERP costs outweigh insurance prices, some companies will risk long-term viability for short-term gain. If production oversights warrant a recall, these companies recall an entire shift, relying on their insurance. This strategy will quickly become untenable. Consumers have begun to voice their preference for guaranteed quality. Organic foods, although substantially more expensive, have become an outright phenomenon. Qualified promises of "all-natural" ingredients, "free range" livestock and a lack of preservatives have bolstered brand credentials and filled coffers.


        Prescient organizations will observe consumer trends, rethink their ultimate goals and consider investing in system architecture. Of these organizations, the ones that will truly prosper will be those that rigorously assess every aspect of their core business prior to implementation. Those companies will thrive as organic change management constantly redefines their potential.

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