How to handle business continutity in case of ERP System Failure?

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As a part of my ERPTop5 series in my blog, I was recently reviewing a paper on reasons for ERP Failures for my post on ERP Failures. I came across the following section. 

"orders dropped. Instead of 5 days, the company took 12 to deliver an order and, until August of the same year, the days went up to 15. The end result was that the company lost profits, credibility, and a prominent position on supermarket shelves. Yet, warehouses were full of products. In September, 2000, the company had 25% more merchandise in its warehouses than usual,  but it failed to deliver it within time limit"

That one line caught my attention. "Yet Warehouse were full of products"

The company had material in its warehouses, but it was not able to ship it to customers.

This has happened with many implementations that I have read about. (Never with any project that I was a part of). Here in India, there are many cases of loss of sales due to Supply Chain disruption. Most prominent of them was a leading Footwear company whose sales plummeted after ERP implementation due to Supply Chain disruptions. Another food processing company lost almost 20 Lakhs of sales since material was not available in the warehouse in ERP and they were not able to push sales.

In both cases 'warehouse was full of materials'

This brings me to a paradox. Till ERP is implemented, companies have processes that work perfectly fine. They did not have any ERP and they did fine (?). But as soon as ERP is implemented, they become so dependent on ERP that they cannot ship goods even when 'Warehouse is full of products'.

One of the aspects that is hardly given any importance in ERP implementation is business continuity in the event of ERP disruption. Often, the ERP processes may need to de designed to handle ERP disruption. 

Here are five factors consider about business continuity in the event of ERP disruption.

1. ERP disruption and business continuity is a business issue, not an IT issue: Business continuity during ERP breakdown calls for decision making on additional investment, choosing options and prioritizing operations. It also includes training users on how to handle business operations during ERP disruption. 

2. ERP Disruption is a fact of life: Your company is going to be hit with ERP disruption whether you like it or not. Senior management must be sensitized about this possibility. A new patch would have introduced a product bug that shuts down the system, you would have loaded a new patch without thorough testing and that would have screwed up the data, a custom code may enter into a continuous loop.. Even things could happen that are beyond your control. There could be a breakdown in your data center, the network cables must have got burnt in yesterday's lightning... Anything can happen that can cause disruption to your ERP system. Be aware. Be prepared.

3. Plan to handle disruption: The infrastructure and processes required to handle disruption can be expensive. Hence one aspect of planning is to determine, the areas where the business cannot live with disruption and areas where they can. In one of the companies that I worked for, it was decided that Raw Material Procurement and Sales Shipments were the critical processes that should not stop during disruption. However since this requirement was not planned for during the implementation, we had to undertake a costly process to design business continuity for these processes. 

Another area of planning could be pre-printed stationery used in case of certain documentation. For example, the company may have a specific format of invoice, which customers are accustomed to. Any approach at handling disruption should ensure that invoices come out in the same format.

Another aspect of planning could be to build a custom application with a document interface to capture the Sales Orders (for example) during the disruption and to sync it back to ERP system once it is available.

4. Involve all stakeholders: Even when you decide that shipment is a priority, there will be other challenges. For example, in India auditors are very particular about the continuity of Invoice Sequence Numbers. Any break in the sequence number is looked on with suspicion Moving from system to manual operations could create a difference between the system numbering and manual numbering. It is very important to bring various stakeholders including auditors and statutory authorities together and ensure a documented process to handle this difference. 

5. Planning for synchronizing the data once ERP System is back: Depending on the data volume and the duration of breakdown, there will be large quantities of data requiring to be entered in ERP once it is back. It is important to plan on how you are going to handle each element of data. Ideally data templates and custom processes should be available to quickly load the data into ERP. Another approach could be to enter the high volume data into another database and sync it back to ERP.  

The key is to think about business continuity DURING the implementation and not when it hits you. Best case scenario is the flexibility to seamlessly handle disruption. With some planning we can easily ensure that ERP or no ERP, your business do not suffer.