It’s an immutable law of physics, but it has applicability to everything from your sock drawer to global empires to, well, your ERP system. It’s entropy, the gradual dissolve of order into chaos. What started out so neat and tidy inevitably becomes dysfunctional randomness. With ERP systems, the first sign of entropy is a subtle drift into misalignment with the organizations strategic plans and tactical execution. Over time, the ERP system starts to look a lot more like the problem than the solution. One of the rules of entropy is that the process can’t be reversed; you can’t unscramble an egg. And at some point, all the maintenance, patching and functional additions can’t restore your ERP system to its glory days.

ERP Software

Has entropy overtaken your ERP system?

Is that happening to your ERP system? If so, you may be more ready than you know to begin the ERP replacement process. Typically, an ERP system hits the wall at about seven to ten years after the initial implementation. But it can happen sooner. Here are some factors to take a look at when evaluating ERP for signs of entropy.

Disparate apps and spreadsheet solutions. Your ERP system was supposed to replace all the standalone applications and spreadsheets bridges between them. Take a look around. Have those applications crept back into the system. The biggest breach might be your CRM system if it’s not fully integrated with the ERP system. If Excel is everyone’s favorite program its probably because your people are trying to create functionality the ERP system doesn’t have.

The regulatory climate. Has government regulation impacted your industry much since you last purchased an ERP system? Compliance with many recent regulations is quite onerous, especially for those in the food and beverage, chemical and pharmaceutical industries. If your ERP system pre-dates those regulations the organization is probably wasting precious resources gathering data and filling out reports—processes that can be completely automated by a new ERP system.

FASB reporting changes. Check with the finance department about any FASB standard operating procedure changes that might have radically impacted your reporting requirements and, perhaps, even forced changes in the way you do business. Like other compliance requirements, these can be automated with an up to date ERP system.

Mergers and Acquisitions. Have you grown through acquisitions,  spun off subsidiaries or entered into joint ventures? If so, did you standardize on a single ERP system, or are multiple, non-compatible ERP systems attempting to co-exist, but actually are depriving management of acuity into actual performance? There couldn’t be a better example of entropy. Compare the size and complexity of your enterprise today compared to the year your existing system went live. Do you require multi-language, multi-currency functionality today, but are attempting to manage with a $US, English-only system?

Lean and Green Initiatives. Chances are your manufacturing model has evolved greatly in the intervening years, as you adopted quality assurance programs, like ISO 9000, or switched to a Lean, demand-driven mindset. Old ERP systems can actually be an obstacle to achieving your objectives.

Distribution model changes. If you’ve changed your distribution model, perhaps moving away from a direct sales force in favor of an indirect model, chances are your revenue accounting and compensation systems have changed, too, and might not be supported by your old ERP system.

If most of these issues are plaguing your organization, take heart. ERP has also changed greatly in the last several years, and is less expensive to buy and own, easier to implement, and more amenable to modifications and expansions down the road.

Written by :

pamelarichards