Enabling Business Transformation with ERP - Technology
Construction Equipment Distribution magazine is published by the Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada. AED membership also includes equipment manufacturers and industry-service firms. CED magazine has been published continuously since 1920. Associated Equipment Distributors
Home         About Us         Media Kit         Subscribe         Previous Issues         Search Articles         Meet the Staff        AED Homepage

CED Menu

Arrow Home
Arrow About Us
Arrow Media Kit
Arrow Digital Subscription
Arrow Search Articles
Arrow Meet the Staff
Arrow Trade Press Info
Arrow AEDNews

Premium Sponsor:

SECTION: Technology

Questions or feedback?
Contact Kim Phelan at (800) 388-0650 ext. 340.

Enabling Business Transformation with ERP

By Mark T. Schloegel

Article Date: 01-01-2011
Copyright(C) 2011 Associated Equipment Distributors. All Rights Reserved.

Enabling Business Transformation with ERP
An introduction to a CED-exclusive four-part series

Happy to leave the challenges of last year's soft economy behind, most dealers have now re-focused their energy and attention on achieving new goals for a new year. To be sure, targets include varying degrees of revenue growth, cost reduction, and asset efficiency improvement, which should drive dealer profitability and shareholder value. This article, and the series to follow, will address how disciplined business processes and integrated information systems can help dealers achieve their goals and become more profitable.

Business Transformation
'Business transformation' is a term frequently used to describe strategic projects that require an organization to change on many fronts at the same time. These challenging initiatives target increased performance and profitability. They can span a period of months or years. If you have participated in a business transformation initiative you may have helped your organization re-engineer your end-toend business processes, restructure your organization, redefine roles and responsibilities, and implement integrated information systems software, also known as Enterprise Resource Planning (ERP) systems.

Management teams at dealerships and rental houses in North America and across the globe have accumulated varying degrees of experience implementing integrated ERP systems. Some teams have first implemented core business functionality like accounting and human resources (HR) and are now building on that foundation with CRM, e-business, or mobile solutions. Others are in the process of upgrading a dated legacy system or are considering a new solution altogether. Many teams have implemented technology, but fewer have actually achieved the business results they targeted when they set out on the journey. In the words of one executive, "The system does nothing for me on its own – to get the benefits, it's all about our people, how they execute, and whether they take advantage of what the system can offer."

A Structured Approach
The framework in Figure 1 above illustrates a methodology for ERP implementation as part of a business transformation effort. This is a good backdrop to introduce typical challenges and solutions to help accelerate business improvements.

The building blocks of this methodology are called Phases and Threads. Some variation of these Phases and Threads should be addressed, whether your team is focused on improving results in accounting/finance, parts, equipment sales, service, remanufacturing and/or a rental operation.

The five Phases represent a logical sequence of project activities. Prudent project managers divide the phases into feasible milestones and support the team in achieving deliverables.

The horizontal lines cutting across each Phase in Figure 1 represent critical Threads of work that are to be addressed during a project. The Threads are reminders that achieving the benefit from business transformations requires dealers to address much more than "a software implementation." Consider the following six Threads when preparing and managing your initiative.

The balance of this article addresses Phase-1 and provides suggestions to help your team get off to a successful start. The remaining Phases will be addressed in subsequent articles where more attention will be paid to the "lessons learned" in each of the Threads.

Phase 1: Prepare
Confirm sponsorship and leadership alignment – this challenge requires attention throughout the life of the project. Which formal and informal leaders in your organization will need to play a role over the course of your initiative? There is work to be done even if you assume that key players already agree to the need to change the status quo, improve business performance and increase profitability. Clarify those reasons in writing; refine them with input from others over time. Consider potential strategic benefits that can result from your initiative. For example, acquisitive dealers can benefit from a trustworthy ERP foundation because it can help accelerate integration of future business acquisitions.

Begin to build the team. While your organization may not yet fully agree on the scope or scale of the effort, consider engaging sponsors and team-member candidates from the management group, finance, HR, equipment sales, equipment rental, service, reman, parts and IT.

Sponsors and team members should begin to understand and believe the business reasons for your project. While a more formal business case may be developed as part of Phase 2, be attentive to individuals who don't genuinely believe that improvements are possible and worth pursuing. Dedicate the time needed to bring them along or, if necessary, replace them with people who are more likely to help the team deliver results.

Consider each of the Threads (introduced above) that will require guidance from competent resources. Start by filling leadership positions; other roles can usually be staffed over time. Some roles may be played by more than one person, but structure the team for accountability and clarify team roles. A single individual may take on two roles if that makes sense for your organization. However, if you use this initiative as a personal development opportunity for up-and-coming managers, avoid overloading any particular team member to the point that they may not succeed; provide back-up.

Prepare key internal stakeholders, whether they are owners, family members, executives or key managers at the headquarters, a branch, a local customer site, or a remote customer location. Find a thoughtful balance of communications and education for your organization at this early stage of the initiative.

Reach Out
Sooner or later, your team will need to engage customers and suppliers. While there can be risk in soliciting "too much" input at this stage of the initiative, for some dealers it will also be a critical success factor in building the case for change. The "voice of the customer" expressing dissatisfaction or an emerging business need is difficult to debate and can drive dealer and OEM innovation.

Project leaders can also benefit from an improved understanding of OEM expectations and upcoming OEM initiatives. Policy, process and systems changes from a key OEM can significantly impact potential priorities, scope and timing of an ERP project.

Initial Options

With at least core team members in place, investigate options such as the following:
  • To what degree can your organization rely on software and support provided by one or more OEMs? Some OEMs provide sophisticated software and services that will need to be integrated with the dealer's system to optimize operational performance and customer service. Eventually, your team will need to determine how best to include OEM software solutions in your integrated applications "landscape" design.
  • Would your organization benefit more from licensing, developing and maintaining your own in-house ERP software or outsourcing your system? For example: Some companies sell "software as a service" solutions that are hosted by a vendor and paid for on an as-used basis.
Equipment dealers and software companies are investing millions of dollars in core and extended ERP systems. Integrated solutions can help dealers who have been getting by with ineffective customer service and less-than-acceptable management reporting from stand-alone systems. As you consider technology options it is important to realize that ERP systems can only help reduce nonvalue- added administrative work if disciplined business processes and quality data are part of the solution. Moreover, your decisions should also take into consideration which organizational (roles, structure, skills), business process and systems changes will be required in order to improve your customers' experience and help your business win new customers.

Prior to wrapping up Phase 1, agree to the important next steps. For example: Appoint your project manager; confirm how to best use a steering committee of sponsors; outline your Charter; and, agree to a framework for structuring and managing your business initiative. n

Mark Schloegel is a director at ABeam Consulting (USA), a global professional services firm. He is based in Chicago and can be reached at mschloegel@abeam.com or 312-375-7074.
Building on an ERP Foundation: Potential Benefits for a Rental Business

Integrating data from a remote equipment monitoring technology – think Product Link, CareTrack, Komtrax, Fleet Care, ZXLink, others – with an ERP system can help drive benefits for a rental operation and its customers. Here are a few examples of disciplined process and system integration:
  • Prevent lost rental revenue. When an equipment monitoring system is integrated with the ERP system, real-time machine usage data (eg. usage hours, idle time, or other patterns) can be applied against a customer's contract. An ERP system can automatically generate an accurate and timely invoice based on the customer's contractual conditions and actual usage. This can help reduce or eliminate "true up" calculations, invoice disputes and adjustments in the ERP system.
  • Increase value from core software systems by integrating GPS tracking data. A rental company that tracks usage data, such as hours, geographic location, and load at specific time of day/night may be better positioned to deliver incremental service to demanding customers. Here are a few examples. - ERP integration with real-time geographic positioning data can help a rental house more easily produce jobsite-specific usage reports and customer quotes and invoices. Integration streamlines the process and eliminates lowvalue manual activities. - Insight gleaned from major customers' contract history (captured in the ERP) and usage trends (based on GPS tracking data) can help a rental house make decisions about where to locate inventory, thus increasing availability and avoiding unnecessary transportation costs. - Integration can increase the accuracy of tax calculations for customer invoices generated from an ERP system because the tracking data specifies equipment usage in specific geographic (tax) jurisdictions.
  • Improve maintenance labor scheduling and lower overall service costs. Some integrated ERP solutions include labor scheduling functionality, which can be used to proactively plan and dispatch service staff. Integrating timely telematics data can help a rental operation increase workforce and equipment utilization by producing better PM schedules and reducing service mechanics' travel time. Likewise, a unit's lifecycle cost can be reduced and resale value increased when service is delivered prior to a more costly machine failure.
  • Reduce administrative burden and provide better customer service. Rental coordinators can use a more timely set of integrated data to generate reports and analyses to help manage the fleet. More timely equipment usage data can reduce the administrative burden on employees who phone customers to manually track equipment location or usage. Rather, they could allocate their time analyzing customer needs: Identify when a machine should be swapped out for service earlier than planned, or when a customer may benefit from another unit on the job site. Familiarity with actual rental equipment usage patterns can also help build customer relationships and support selling efforts. One scenario: A rental employee notes a pattern of unexpected second-shift usage at a remote jobsite and this prompts him to explore potential to rent lighting, power or other complementary equipment to that customer.

A Few Definitions

End-to-end business process: A set of crossfunctional activities that are performed by a dealer's employees to satisfy the needs of customers and suppliers. Some of these activities should be closely driven by or integrated with customer and supplier activities (example: forecasting and planning for warranty service and parts). Business transformation projects usually require dealers to clarify employee roles and accountabilities – codifying 'who' is expected to do 'what,' and 'in what order.' With this information, an ERP system can enable and enforce business policy to achieve effective, efficient operations.

ERP: Enterprise Resource Planning software is the name given to a modular and integrated set of software applications that facilitate the flow of information within a business and execute the core transactions of a business. Each ERP software vendor uses their own titles for their products. Typical module functionality includes Human Resources; Payroll; Accounting/Finance; Sales; Customer Relationship Management (CRM); Manufacturing; Planning; Purchasing; Warehouse Management; Distribution; Reporting / Business Analytics. ERP systems execute business transactions with (near) real-time integration and rely on high-quality data.

'Real-time' integration: Integrated ERP software applications can provide real-time transaction processing so upstream business activity is immediately reflected in the transactions data and drives downstream transactions. Examples:
  • When a customer logs into a dealer's on-line e-commerce site and purchases a part, that part would be immediately removed from available inventory and the ERP system would launch downstream transactions such as picking, packing and shipping.
  • When a sales employee executes a Customer Sales Order, the ERP would immediately remove a piece of equipment from available inventory.
  • Physically shipping a sold piece of equipment or service part can immediately launch systems transactions for revenue recognition (Invoicing, Accounts Receivable, etc.).
  • Receiving a service part into a warehouse storage location at Branch A could automatically make that part available and visible in the ERP system for sale at Branches B or C (if that is consistent with the dealer's policy).

[ TOP ]