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Difference Between ERP1 & ERP2

ERP has changed tremendously since it was first defined by Gartner in 1990. The new generation ERP are for satisfying the current market needs and have made great improvements in the following areas:

  • Incorporating CRM functions to allow driving business and operation processes based on client and market needs
  • Project-based design to satisfy both manufacturing and non-manufacturing businesses
  • Providing point-and-click type of customizations to reduce users’ dependency on vendors and IT
  • Better framework and application integration technology to greatly improve customizability
  • Real-time decision support system (DSS) for making effective and timely decisions
  • O2O types of collaboration models to allow different clients, partners and suppliers to play
  • Support for both human resource and human capital management
  • Pre-built data warehouse for business and operation analysis
  • Point-and-click BI to allow multi-dimensional analysis, pattern detection and report generation

With the capitalization on ERP1 experience and advancement in technology, ERP2 provides managers the capability to break silos barriers: 
  • Nonaligned priorities
  • Lack of information flow
  • Lack of coordinated decision-making across silos

It allows strategies, priority settings, projects , assignments and operational activities across departments and geographical locations. Most importantly, it allows real-time information flow and decision-making management across departments and geographical locations.

Technology & Experience Advancement

ERP2 is NOT just having more functionality than ERP1, but is the new design that will lead to much lower time and cost to implement, better decision support because of the built-in DSS, boarder involvement and collaboration of clients, partners and suppliers because of its built-in O2O models. And most importantly, ERP2 is based on the latest framework and application integration technology and can greatly improve customizability.

ERP2 is the enhancements of ERP1 in the following dimensions :

  • Functionality that are designed together to satisfy the modern business needs (design together is key)
  • Framework and application integration technology that greatly enhance speed and flexibility for customization
  • Point-and-click technology (e.g., user-defined fields, report generator and BI) to reduce the users’ reliance on vendors or IT
  • Project-based management model , transaction-based collaboration model and O2O organization model
  • Built-in Decision Support System (DSS) for effectively and time decision making

Since the gain is quite noticeable by the agility, accuracy and connectivity of information alone, implementing ERP2 is less reliance on Business Process Re-engineering (BPR) than implementing ERP1. Some degree of BPR up front is still desirable, but the implementation of ERP2 will let users access information clearly; and orphaned, redundant and weakly-controlled processes can be easier to be observed in the implementation of ERP2 than ERP1. An enterprise implementing ERP2 can do some degree of BPR up front to streamline the processes as needed and then let the agile, accurate and connected information to drive the continuous process enhancement. The benefit of this approach is less cost and people take more ownership since they are not doing BPR in a vacuum.
CRM Role in ERP2

CRM in the new generation ERP must supports both O2O types of client and partner information and interaction, sales force automation, marketing campaign and service management. CRM functionalities are well integrated in the real-life business and operation processes in ERP2 so that the processes are flowing from client -> operation -> client and the KPI are measured along the check points and the entire enterprise isbeing driven to be more client-focused and result-oriented.

For campaign driven businesses, campaign management functionality is well integrated in the real-life business and operation processes in ERP2 so that the processes are flowing from campaign -> client -> operation -> client -> campaign and the KPI are measured along the check points and the entire enterprise is  being driven to be more market and client-focused and result-oriented.

Supporting Both Manufacturing and Non-manufacturing Businesses

Material Requirements Planning (MRP) in ERP1 is clearly for manufacturing business. However, Project Management discipline can both enhance the production management and help the non-manufacturing business and operation management. 

An order is a project – In the old time, manufacturers often used MRP to combine many orders to determine material requirements and production schedule over time. Nowadays, a high quality manufacturer often receives a single order of high quantity of high quality products. Because the competition is in the highest quality, the manufacturer often require to acquire the best components of the products over different geographical locations (countries) and then assemble them together to produce high quantity of high quality products. The distribution of acquisition and manufacturing require project management discipline to control the activities and deliverable quality.

Project-based Manufacturing – Engineer-to-Order (ETO) manufacturers must be able to provide accurate cost estimates to clients, manage all aspects of complex projects, and deliver on time and on budget. Designing and building complex products to exact client specifications frequently involves long lead times and heavy engineering content. While ETO manufacturers keeping a close eye on cash flow, there is intense pressure to reduce costs and shorten cycle times, while maintaining high quality. ETO manufacturers also need an accurate picture of the profitability of each project in order to comprehend the impact on the business. All these require project management discipline to manage the business.

Knowledge Work – Modern enterprises such as Google, Microsoft, Accenture and Nokia Siemens Network do not have assembly lines, but projects. All knowledge work is project work and require project management discipline to manage. For the knowledge work enterprises that deal with increasing product complexity, fast changing markets, cross-functional business expertise, customer-focus innovation and market and technical uncertainly, their need for project management discipline is even stronger. Due to the fact that the resources consumed by projects and results produced by projects greatly impact business operations and finance, project management must be well integrated with other business and operation processes so that the project management subsystem can provide accuracy and timely information to these process.

Improving Implementation Success Rate

Due to the high cost and high failure rate in ERP1 implementations, ERP2 must  improve implementation success rate based on the ERP1 experience.

Being able to isolate the problems is key – The high implementation failure rate of ERP1 is mainly caused by intermixing client’s lack of ability to re-engine processes and  adapt to the new system and vendor’s  lack of ability in consulting and customization types of problems together.  Unfortunately, the client can always blame the vendor’s lack of ability in consulting and customization, and the resulting system is extremely hard to use; and the vendor can always say the client’s processes are extremely complex and its users are lacking of discipline and motivation to adapt to the new system.  The key for solving this issue is to allow the implementation team to see partial results, in much shorter period of time so that [a] people can understand the problems better when the problems are still small; and [b] people can see the cause-and-effect relationship in the efforts that they make to solve the problems.  The longer the cycle without seeing results, the problems will become bigger and it will also be harder for people to see the cause-and-effect relationship in the efforts that they can make to solve the problems.  Since the technology framework in ERP2 allows faster turn around of customization and implementation of business and operation processes, the implementation team can see partial results in much shorter period of time and allow both the implementation team members from both the client and vendor to see the problems and how they can work together to resolve them.

Integration by Original Design – The original design of OA, CRM, Supplier Mgmt, PLM, ERP1, O2O, HCM, DSS and BI functionality in ERP2 were design to work together on day one. The comprehensive of the functionality together with the features were designed to work together on day one; and it will tremendously save customization, integration and testing efforts and will allow the implementation team to see partial results in much shorter time.

Less Reliance on Vendor and IT –  During the pre-sales stage, vendor’s pre-sales team often likes for the client to be heavily dependent on them since it will make their negotiation job easier.  However, during the implementation stage, vendor’s implementation team often feels overwhelmed because of too much work, and too many users need hand-holding. The client’s implementation team or users often feel frustrated because their requests get turned around very slowly.  The key is to reduce the unnecessary reliance of the users to the vendor or IT.  The older programming languages put the user settings and parameters  in header files and changing them require recompilation which is a process that can’t be handled by a non-programmer or IT person.  This limitation has been removed in the newer programming languages and ERP2 vendors can provide point-and-click user-defined fields, policies, 2D and 3D report generation and BI to tremendous reduce the  unnecessary reliance of the users to vendors or IT.

Decision Support System (DSS)

The key difference between a DSS and a non-DSS is the level of agility and accuracy of the information the system provides for decision-making on the fly. For examples, a real-time trading system or weapon system is a DSS because it allows the user to make decision to trade or to attack based on the current situation. An accounting system is not a DSS because it generates non time critical income statement and balance sheet for closing the book, not decision-making on the fly. The reports come way after the fact; and are acceptable since they are for non time critical purpose.

ERP1 has the accounting system reporting model and is not a DSS. A traditional project management system or OA system managing information using the document management model is not a DSS. ERP2 and trading systems, using transaction-based interaction model, that can aggregate information in real-time are DSS.

Borderless Collaboration (Getting Clients, Partners, Suppliers Playing Together)

ERP2 supports the enterprise that needs to deal with fast changing markets, cross-functional business expertise and customer-focus innovation. Such an enterprise will need to combine different types of knowledge and skill and respond to client needs in real-time. ERP2 has O2O communication models to connect various organizations from client, partner and supplier communities to play together.

ExampleⅠ:  A manufacturer using ERP2 can bring thousands of its direct and indirect suppliers from its supply chain to performance collaborative planning.
ExampleⅡ: A manufacturer using ERP2 can bring its clients, brand owners and suppliers together to check social compliance across thousands of factories in multiple geographical locations. 
ExampleⅢ: A manufacturer using ERP2 can bring its clients, suppliers and industrial experts together to do joint product design.
Both Human Resource and Human Capital Management

ERP2 supports typical human resource management functions such as staff planning, recruitment, employee record, payroll, benefit, attendance, leave, career management, training, performance and employee self-service. But ERP2 also facilitates information capital, structured collaboration, process & execution discipline, KPI and commitment management for human capital management. Human capital management will help the enterprise to nurture group learning, innovation, collaboration and performance and create organizational assets.

Business Intelligence (BI)

ERP1 and other business transaction systems are often integrated with BI tools and traditional BI tools require the use of specialized database structures and the corresponding expertise or IT support. Apart from being expensive, business users find it hard and inconvenient for effective use. ERP2 is designed to overcome this weakness and allow the business users to do a majority of their discoveries without IT support. This allows the business users to concentrate on their business tasks without being distracted by technical details. ERP2 provides the following BI tools:

  • Rapid Data Warehouse
  • Point-and-click Data Mining
  • Data Collection & KPI Management
  • Real-time Dashboards
  • Point-and-click Report Generation

ERP2 users can use the above tools with less than 2 hours training and without the need to involve their IT staff.

Prebuilt or Rapid Data Warehouse

Old Approach 

A traditional data warehouse involves the data warehouse system development, data cleaning, data integration and data mining process. The process is absolutely needed because traditional business systems are silos and they have different databases. This process is not only time-consuming and costly, but requires putting the data warehouse and BI tools separate from the business (transactional) systems and making the embedded actions (e.g., automated actions after certain things are detected) difficult.

ERP2 Approach 

ERP2 provides a total solution on a single system and the ERP2 database is already the data warehouse for the business. ERP2 provides a total solution on a single system: the ERP2 database is already the data warehouse system: the ERP2 database is already the data warehouse for the business. ERP2 minimizes the need of data integration and provides industry specific pre-integrated solutions such as below: For some businesses such as professional services and IT, there is no need to develop another data warehouse and ERP2 database can satisfy 100% of the requirements. For retailed businesses, ERP2 will interface with its POS system. For banking businesses, ERP2 will interface with its CIF.

Point-and-click Data Mining

ERP2 provides point-and-click data mining mechanism to allow business users to discover certain patterns and ratios in their business without the need to deal with SQL statements such as below:  ERP2 opens up all client, product, campaign, opportunity, contract/order related fields and allows the user to point-and-click to select the fields and connect them via simple logics to detect certain behavioral patterns that aren’t easy to see. For example, dog food on the surface isn’t a seasonal product, but the purchase of dog food can be diminished together with the purchase of non-winter products in winter because older people from the North would bring their dogs with them to the South for winter. For example, dog food on the surface isn’t a seasonal product, but the purchase of dog food may drop in winter when older people from the North head south for the winter, taking their dogs along. The detection of this fact via data mining can help adjust the dog food stock appropriately in winter.

ERP2 allows the user to do instant search of the pattern or ratio on the historical database or set up automatic detection for the future transactions. The user will be alerted once the pattern or ratio that the user wants to detect appears.

KPI Management & Real-time Dashboards

ERP2 provides different real-time display components and alerts for different KPI for different business areas. Once the measurement for an individual, project or business is set up, the measurement, display and alert are automatic and in real-time.

Business oriented KPI such as top 10 revenue streams, project or group oriented KPI such as service level agreement items and individual KPI such as balance scorecard items are all computed and displayed in real-time. The KPI display components are designed for people to easily see the key measurement results and multi-level drilling down in real-time for further details. The information is most effective for performance management.

Point-and-click Report Generation

ERP2 provides a state-of-the-art point-and-click Report Generator to allow business users to simply point to any field or fields that they want to search and generate a report. The system will perform accordingly. The simple-to-use but powerful mechanisms allow the business user to (a) select whatever combination of fields that he wants for search and report and (b) specify the layout or display order of the fields to be displayed in the report. It also allows the user to select different types of statistics (e.g., SUM, COUNT, AVERAGE, MIN, MAX) to be included in the summary line of the report. With the ERP2 Point-and-click Report Generator, business users no longer need to learn SQL or depend on the IT staff’s assistance before they can do data mining and report generation.