The real value of real-time postings in ERP

This blog focuses on the importance of real-time postings as a critical process that should be implemented before an ERP implementation.

In this modern era of digital transformation, with the promise of instant access to analytics and insights, I am amazed at the number of manufacturers who still do not view real-time posting of material movements as a critical success factor. All too often I see and hear of organizations who gather shop floor postings off-line for an entire day, or even an entire weekend, and then pass that data off to the elusive “someone on Days” to actually post the movements in the ERP system.  While this approach does indeed minimize the number of people who must interact with the system a point often cited as the reason why organizations continue to employ this approach it is also fraught with a plethora of deficiencies.

If the main value of real-time postings was merely in how quickly the ERP system got updated, I would agree that this may not create significant business value in all cases.  For instance, for organizations that operate primarily in a make-to-stock environment, real-time updates do not appear to be very important because there is not a direct cause and effect relationship between manufacturing order completion and sales order fulfillment.  Conversely, for organizations that have a large percentage of make-to-order production, real-time updates are critically important because delayed postings often result in delayed shipments.

But the true value of real-time postings is not in how quickly the ERP system gets updated, but rather in how accurate those updates are, and that applies to everyone!  Since the move to real-time postings can sometimes be a long and arduous journey, it is generally a good idea to start that organizational transition even before your ERP implementation.

Here are five reasons why, no matter what your production strategy is, you should perform real-time posting of material movements.

1- Take advantage of internal system consistency checks

·        All ERP systems perform certain internal logic checks to ensure that only   movements which pass some minimum standard for data consistency can   post.  These checks typically include things like:

·        Only orders assigned and released to the asset can be used

·        Only materials associated with that order can be used

·        You cannot issue more material than the inventory available in the production area

While these checks are far from foolproof, they are a good first line of defense against posting errors and are most effective when triggered in real-time.

2- Eliminate the disconnect between the physical and system activities

Whenever material postings are passed off to someone else to perform, not only is there a timing disconnect, but there is also a communication disconnect between the physical and system worlds.  If any questions arise during the system posting activity, the persons performing the system postings often must use their own best judgement to interpret the data handed off to them because the people who performed the physical movements are long gone and unreachable.  No matter how experienced or competent those persons may be, the lack of actual first-hand knowledge means, eventually, mistakes are going to happen.  The simple reality is that nobody knows better what happened during a production shift than the people actually performing the physical activities.  Organizations should take advantage of the fact by having the shift teams perform the system postings.

3- Find and fix errors quickly

When postings are performed on the shift in which the physical work takes place, by the people performing the physical work, there is a much higher likelihood that any error that does occur will be detected and corrected quickly.  That is because there is often physical evidence of the day’s activities that is not available later.  For example, if an operation issues whole-drums of a particular material, then a good second check of how much was issued in a shift is simply to count the empty drums.  Similarly, if produced goods must be boxed or palletized, then a good second check of how much was produced is simply to count the number of boxes or pallets.  Checks such as these are very simple and effective when performed in real-time, but often impossible to do after-the-fact.

4- Correct errors properly

To fix a posting error properly typically requires two movements for every error: a reversal of the initial errant posting, followed by the corrected posting.  It is very important to fix posting errors properly because that ensures the system remains an accurate depiction of the physical reality. The reason why that is so important is because, in an integrated system like ERP, good transactional data integrity is a crucial part of ensuring good derived data integrity for items such as product costing, productivity, yield, cycle time, uptime and the like.  If an error is detected quickly, there is a high likelihood that the error will be corrected properly, because the effort to do so is minimal. If, on the other hand, an error goes undetected for days, and perhaps impacted dozens, or even hundreds of transactions, there is a natural tendency for users to want to “fix” the problem quickly by creating a single posting that accounts for the net difference in material quantity.  While this approach might make the bean counters happy, it completely distorts the picture of what actually happened, and hence, distorts the derived data.  It is exactly this type of behavior that causes management to not trust the analytics from their ERP system which makes decision-making ineffective and jeopardizes any current or future continuous improvement efforts.

5- Increase ownership on the shift team

In the retail and banking worlds, it is a very common practice for each person receiving and/or dispensing cash to reconcile his or her drawer at the end of every shift.  Whether the total amount received or dispensed is $10 or $10,000, that discipline is engrained into everyday procedures.  Contrast that to manufacturers.  In large-scale manufacturing operations, the shift teams might be responsible for moving thousands or even hundreds of thousands of dollars-worth of materials every day, yet rarely is the same level of accountability expected.  This is a missed opportunity.  When implemented properly, an end-of-shift reconciliation of material movements will increase accuracy and instill a sense of ownership within the shift team, which is a key component of any continuous improvement initiative.  This is only possible if movements are posted in near-real time.

In summary, real-time posting of material movements not only ensures that the ERP system gets updated timely, it also goes a long way toward ensuring that the system gets updated accurately.  To rephrase the classic “garbage in, garbage out” line, “you can’t get accurate analytic outputs from an ERP system unless you have accurate transactional inputs into that system”.  And real-time posting of material movements is a critical step in achieving accurate transactional inputs.