ERP Implementation in a Co-Operative

ERP - Publications By: Dr. Harald Dreher - Mar 30, 2021

Benefit from 3 decades of experience in IT strategy, digitalisation, ERP consulting and process optimisation...

ERP Introduction in a Co-Operative - What Are the Special Features?

erp implementation in a co-operative

ERP Introduction in a Co-Operative - What Are the Special Features?

ERP implementation - this term is often associated with the implementation of ERP software in large industrial companies. This may be due to the fact that these companies take on pioneering roles in the context of digitalisation and transformation from analogue to digital processes. This pioneering role is due to various circumstances, including strong national and international competition, pressure to innovate and many more. In contrast, cooperatives tend to be nationally oriented and operate in less industrialised sectors, where the pace of innovation is slower.


Which Co-Operative Business Models Are the Business Drivers of Tomorrow?

Today, there is a discernible trend of cooperatives, often operating in the retail sector, to abandon their outdated merchandise management systems and optimise their supply chain within the framework of an ERP implementation. However, this legal form brings with it a whole range of special requirements that often prevent the introduction of standardised retail software.


What Can be Special Requirements of a Trade Co-Operative for an ERP System?

What are the clear differences to classic industrial companies??

Member administration and its master data play a central role in the everyday life of a cooperative and are linked to many different operations and processes in the exchange of data.

In this context, dividend payments or goods reimbursement payments, but also ordinary supplier invoices are linked to this data. Here, the special features of the process landscape of the cooperatives with their own business models must be presented in an ERP requirement concept and then in an ERP requirement specification. In our experience, it is not enough to briefly describe the business process as a function, but it is necessary to document the process flow in a notation (for example in BPMN2 standard) and in a text description. This makes it easier for all participants to work together and gives every user the chance to understand the overall process.

Finally, an example from cooperative trade with a focus on agriculture: in the food sector (vegetables, fruit, etc.), a retrograde payment to the supplier, i.e. to the cooperative member, that depends on daily prices is often calculated and is the basis for their remuneration and payment.


Co-Operative Trading from a Tax Perspective:

If a co-operative in the trade sector includes business areas that are not exclusively served by cooperative members as suppliers, the company must have two external company names from a tax law perspective.

However, it is not only from a tax law perspective that two (legally) separate companies must appear externally. An example of this would be a cooperative that distributes food from agricultural production. In order to benefit from state subsidies, a clear distinction must also be made here between purely cooperative marketing and marketing by various other suppliers. The requirement to map several clients can be solved, for example, through an inter-company solution.

The requirements for activity allocations, goods allocations, stock movements without physical stock movements (transfer postings, etc.) must be defined for all use cases and permanently checked as part of the ERP introduction and ERP quality assurance.



Limitations of Experience of Software Providers for Special Cases

Many ERP providers have little experience in these areas themselves. Sales events with embellished presentations of the systems often distort the view of essential requirements of cooperatives. This already makes it difficult for cooperatives to select suitable ERP providers. As a result, decisions are often made in favour of ERP systems that contain some additional programming far removed from any standard. This often turns into disastrously cost-intensive investment projects. Budgets cannot be met, the TCO (Total Cost of Ownership) of the ERP system is clearly too high and thus the necessary ROI (Return on Investment) is also too low. However, a wrong decision with deviations from the standard does not only affect the investment costs. The update-ability of the system is also a point that should not be neglected. In order to keep the company competitive in the future, software that can be updated is essential, but it causes more and more headaches for all those involved if the implemented processes are so unique that they cannot or should not be mapped in standard solutions because they are really individual cases in the process landscape and in the company.


Change Management is Necessary When Introducing ERP in a Co-Operative.

This then requires an intensive examination of the business processes and possibly also the departure from old procedures and processes. This change is not always easy to manage for many employees. The reasons for this are often varied and understandable. Therefore, it is crucial to realise the implementation planning together in an experienced team. Change management and the use of tools to anchor this change permanently in the company are the big points of an ERP introduction in a cooperative - especially a trading cooperative in the agricultural environment.


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We hope you find this publication useful. If you have any further questions on this topic, we look forward to hearing from you." - Dr Harald Dreher