The complexity and challenges of an ERP implementation are not to be underestimated, because the process requires the careful coordination of your systems, processes, and people. But with good planning and solid process organization, the obstacles can be removed and complexities can be clarified. Support from an accomplished ERP manager on the part of the software partner contributes significantly to a smooth ERP implementation, as well as a proven implementation methodology. For medium-sized companies without in-house expertise, the experience and competence of the ERP provider should be a key factor in the selection process. You want an experienced partner who’s seen it all before, and helped companies successfully navigate every challenge along the way.
Do not overly trust ERP vendors. They may supply you will relevant information on best practices, but they can only take you so far. Organizations should not let the software to define their business processes. It is important that they understand their business requirements well and align the software with that, not the other way round.
Many companies see the introduction of ERP software as the magic bullet solution to all their problems, but don’t take sufficient time to define the specifics of what they’re trying to accomplish or how they’ll measure what success should look like.
Often, every department expects a different improvement, so how can organizations know which requirements have priority? It’s important to have a clear documentation of what exactly you want to achieve with the ERP system and where the priorities lie. When you don’t have a detailed map of where you want to go, guiding you each step of the way, you’re likely to get lost amidst the dangerous distractions of politics, short-term thinking, and minor setbacks that turn into project derailments.
Examples: Lower error rate, Reduce throughput times, Speed up time to market, Improve service, quality, Improve collaboration between departments, Automate and standardize workflows, Provide accurate and up-to-date business analysis, Support internationalization.
Most companies know that an ERP project requires a considerable amount of commitment and sometimes overtime work from employees, in addition to maintaining the day-to-day operations. But what about the management team? Leadership that’s disengaged or too busy can kill a project in its tracks. An ERP implementation isn’t about pushing a button and everything happens automatically: it takes time and careful attention to get right.
In order to succeed in the ERP implementation, the project team needs strong (and vocal) support from management. Communicating clearly and frequently with the company about the expectations for the project, helping free up the resources needed, maintaining a positive attitude and energy, showing appreciation, and making themselves available for planning sessions are key ways the management team can help overcome this pitfall.
Don’t let your ERP projects fail – Get the right team for ERP implementation.
Tapping the right people for your ERP implementation team is key to the project’s success.
Most ERP solutions fail because organizations have no idea whether the system is working or not. In big projects like this there are things that go on as planned or as envisioned, but still there are those things that don’t happen as planned. For this reason, most ERP solutions need to be modified at some point in time to align them with the current status of the business. However, before you make any necessary changes or upgrades you will need to first identify the areas that need improvement.
Most ERP solutions do not fail entirely but it is the small bits or parts that malfunction, and which end up derailing the entire project. Some of these small failures may include using the wrong kind of software and only realizing about it only a few days after implementation, or even not realizing about it at all.
The organization might have ignored how their business processes are affected by the implementation and introduce customizations that work against expected benefits. In this regard, the organization needs to evaluate what specific hitches might be delaying the success of the project and provides measures to remedy them.
In many cases organizations are unaware that they might have to get some additional software, during and after the implementation process. This means there is no budget set aside to cater for such expenses. As a result, these add-ons are ignored leading to the failure of parts if not the entire ERP system. It is advisable to have a budget for such as part of the ERP implementation scope.
Many organizations tend to overlook some requirements, whereas they are needed for the successful implementation of the ERP solution. In other cases some of the system’s functionalities may fail to work as expected.
There can also be a lack of proper management when it comes to delegation of workflow approval authority and this could cause security risks. In addition, there can be lack of inquiry access to configurations throughout the implementation process and also lack of system based audit trail for critical system challenges. Ignoring these weaknesses instead of resolving them can lead to failure of the ERP implementation.
In order for an ERP system to map the processes in your company, the current processes must be clearly and thoroughly documented. Process modeling is complex, so sufficient time should be allocated for this important preliminary work.
This is the time for optimization! Your software vendor should be able to help you evaluate your processes and find areas for improvement before they are mapped in your ERP. It pays to reevaluate and reorganize your workflows:
Which processes are really necessary and useful?
Which processes can be made more efficient with the help of the new software?
Which workflows have not been updated recently, even though processes have changed?
Be open and flexible too, if the new software can not reproduce a specific process exactly as you are used to, it may make sense to tweak your process rather incurring the cost of custom programming. Analyzing and discussing all this in advance is crucial.
Every ERP implementation should be approached methodically. This starts with assembling the right project team, consisting of a project manager, key users and IT staff. To avoid later knowledge gaps, the key users should cover all relevant business areas, including purchasing, marketing, logistics, sales, production, controlling and service. The team needs to possess the right skills for the job, and needs a leader who deploys their skills well in a coordinated fashion through the ERP implementation.
Characteristics of a good project manager: close to the daily business, deep insights into all, departments, organizational skills, assertiveness, social competence / teamwork.
The project team is usually supported by a project manager from the software provider, who drives the process based on an implementation methodology, defines milestones together with the team and provides valuable input.
Also important are firm responsibilities and competencies, for example through role descriptions and ground rules for resolving disagreements. Building a great team takes a clear framework of goals and expectations, as well as strong, proactive leadership.
Many ERP implementations suffer from inadequate communication between management, the project team, employees, and the software vendor. If employee questions and concerns go unanswered, rumors and negativity can take hold, creating yet another obstacle for the implementation team.
Instead, communicate openly from the beginning. In the weeks leading up to the implementation kickoff, put the tools in place to ensure a continuous flow of information and maximum project transparency. For example, set up a regular meeting time each week between the ERP project manager and management team.
Schedule regular information sessions for the employees. Use company newsletters or company-wide emails for project updates. Make sure documentation, to-dos and current project progress will be easily accessible to all involved.
It is far, far better to err on the side of over-communication rather than under-communication. When your people don’t clearly understand the day-to-day progress of the ERP implementation, and where it’s going next, you have a communication problem to fix.
The reasons why ERP Implementation fails include Failure to set up realistic expectations, Failure to embrace change, Lack of commitment by key stakeholders, Lack of competent project managers, Failure to modify or align the system with business processes, Failure to budget for complimentary software, Ignoring common application deficiencies and many more.
ERP packages, even those that are industry specific, are designed for a large audience of companies looking to achieve success by following a template of best business practices. However, software often fails to achieve its promise due to the reluctance to change by people who have a vested interest in existing processes.
This leads to costly program modifications to replicate those processes. This, in turn, can result in unnecessary manual tasks and issues of software maintenance, which neutralize the original benefits of the software.
When making your ERP software selection, examine the processes encoded in the software. If you can agree to model your company’s best practices based on those processes, you’re choosing the right solution. If you can’t, continue looking.
Once the ERP system is chosen, it’s not uncommon for management to turn the project over to a subordinate to manage the implementation. The problem is that the subordinate, who is usually chosen from the end-user base or information technology department, typically isn’t given the authority to implement necessary business process changes.
Project management is a discipline, if not an art, which requires the ability to delve into detail while keeping a perspective on the original business objectives. The project manager needs to have the ability to overcome impasses through a judicious combination of political guile and management direction.
The most successful ERP projects are led by a member of the management team who has actively participated in the both the software selection and implementation efforts. When selecting your project manager, choose the one who has the most to gain (or lose) from the ERP system.
Once the project manager is selected, many companies tie their hands by under-funding their efforts or by limiting the scope through impractical project schedules. It has been my rule of thumb that an implementation budget should be a one-to-three-times multiple of the list price of the software package. Budgets are variable based on the size of the organization and the package selected.
Tier 1 packages, such as SAP or Oracle, should be budgeted on the upper end of the range due to their implementation complexity and the size of company that gravitates to that part of the spectrum. Other packages fall elsewhere on the range. Variations can occur as a result of the amount of outside consulting required and the geographical diversification of the company.
At a minimum, 5 to 10 percent of the implementation budget should be set aside for a project management consultant. Many companies make the mistake of using the software vendor for this role.
But the vendor is driven by installing the package and moving on, not by business process improvement. Furthermore, vendors do not have the resources and background to evaluate and recommend business process improvements and do not see this as their job.
Project schedules are equally important to ERP initiatives as implementation budgets. Some companies try to back-schedule an ERP project by establishing an implementation go-live date and then attempting to schedule interim (and often unrealistic) milestones. This usually results in insufficient attention to details and carelessly completed tasks.
An effective project plan starts with a kick-off meeting and logically progresses to a go-live conclusion. Tasks should be properly resourced and scheduled, in man-day increments, with no task exceeding 15 days. At the end of each task, a meaningful deliverable should be presented for evaluation by the project manager.
The project schedule is the foundation of a successful ERP implementation; it should be developed and monitored carefully. The schedule should be updated weekly to reflect real-time activity and progress, and regularly reviewed by both the project manager and senior management.
The last reason for ERP system failure that we are going to look at in this article is a double-edged sword: lack of training and education. Many companies confuse – and under-fund – both tasks.
Traditional training, initially provided by the software vendor, is essential to successful ERP implementations. For obvious reasons, end users need to have working knowledge of the selected software package to feel confident when performing their jobs.
There are two ways to approach this. One is have the vendor provide all of the training. The alternative is to take a “train the trainer” approach where the vendor trains a few individuals who then train the rest of the staff. The latter approach minimizes the stress on your implementation budget while developing expert users who tend to claim ownership of the process. There are no rules of thumb, however, in time or percentage of implementation budget, to determine how much training is required.
Successful ERP implementations stress staff training. They provide training sessions regularly throughout the project, with special concentration during the weeks just prior to implementation.
Education is different than training and provides staff with the knowledge of the methodology behind their activities. Members of the management team, master production schedulers, shop foremen or even cost accountants won’t be effective unless they understand the concepts required to do their jobs in an ERP environment.
You can’t rely on the software vendor to perform the task of educating your workforce. In fact, the education step should really begin prior to package selection. This allows key staff to correctly evaluate your company’s processes as they relate to the software requirements and each vendor’s offerings. For companies who miss this early opportunity, education should be completed prior to the new software configuration.
Make the commitment to educate yourself and your staff on how you need the business to perform and consider outside help if needed. For example, successful ERP education programs have been developed in conjunction with professional organizations such as The Association for Operations Management (APICS) and independent consultants who specialize in operations management education.
The transfer of old data into the new system is an often overlooked and underestimated aspect of a successful ERP implementation. The data migration is not limited to a simple Excel export and import, but all data must be targeted and meticulously prepared.
In addition, many people wrongfully believe that they will be able to automatically increase the quality of poorly maintained data with an ERP project. The data quality in the new system will only be as good as the quality of the migrated data. As the old saying goes, “garbage in, garbage out.” To avoid this problem, duplicates, spelling errors or card details should be corrected before migration.
After the records have been cleaned up, the mapping takes place. Each field of the old data record is assigned to a counterpart of the new data structure and a check is made as to whether the data types are correct (for example “date,” “text,” or “currency”). Only when the new data structure works in a detailed simulation will it be transferred to the production system.
Companies should be prepared for the fact that not every employee is enthusiastic about the ERP implementation. After all, jobs and processes are changing, information is becoming more transparent, responsibilities may be redistributed – this change is sometimes met with fears and resistance.
It is therefore important to communicate to each department the concrete benefits of the ERP project for daily work and to familiarize employees with the new system through workshops and training. When employees understand why the change is happening and the benefits the change will bring, they have a foundation for moving from fear of the known to increasing comfort with the change process (i.e., the ERP implementation).
Think of change management as a “change triangle” that includes technology/systems, processes, and people. You need to focus on all three parts of that triangle. As discussed in #4 above, communicate openly and frequently with your people through many channels, being sure to address questions and concerns as they come up. It’s far better that objections and resistance to the change get aired, and responded to, early in the process rather than during it, where it can do more harm to the project at unexpected moments.
If you want them to get all stakeholders on board, you will need to offer training, coaching and any other activity that can help you achieve this goal. Educating the executive team on the scale and risk of an ERP install is a good idea. Many executives are so busy with day-to-day work engagements that they are unable to absorb all information on ERP.
It is highly likely that they may view it as just another IT project and not a viable way of automating existing processes. It is equally important to warn stakeholders that regardless of the big rewards that come with ERP implementation, the project is also exposed to high risks. You can add that in order to minimize these risks it will require their attention and participation.
Poor project management is widespread in many organizations. When you get a group of people to engage in certain activities, especially activities that are intense like ERP implementation there are bound to be problems. It takes good leadership to keep things on track and to hold people accountable. In order to avoid this problem, hire someone to take charge of the implementation and management, if you cannot find someone who is qualified, hire externally. You can use the services of a third party who can act in their stead.
Depending on consultants too much could be a business undoing since it runs the risk of making your team redundant. The company needs to maintain control of its key business processes and hold the consultants accountable. It should also provide for smooth transition of executive positions and other managerial positions, and also ensure that knowledge is transferred to every new member of staff.
While ERP implementation process requires a lot of involvement from the IT department, they do not own the manufacturing and financial process and, therefore, cannot direct change in this areas. They might also be unaware of the components that make up the software and this is something could highly cost the organization. Incorporating only employees who are experts on the key business process of the company and who can offer direct support for ERP implementation in specific departments.
Taking Responsibility Leads to Success
Failure to adequately train end users
What should you do ?
Your ERP project needs to be driven by the business strategy. If the project isn’t going to add value to your business, then you shouldn’t be doing it.
Given that the project has such strategic value, it needs to be sponsored from the top, otherwise people within the business won’t believe in the vision. This could lead to far too much reliance on your ERP vendor, or a solution that doesn’t adequately meet your business objectives.
The vendor will have a team of skilled and experienced project managers, business consultants and technical consultants to assist you through your implementation with minimal fuss, but no-one knows your business like you.
Simplified processes, visibility, improved traceability and accountability, increased efficiency, reduced costs! The benefits of a new ERP system are plentiful, so why wouldn’t you want them now? However rushing your way through an implementation will actually provide more detriment than benefit.
ERP is the brain of a manufacturing business, and brain surgery should not be rushed! It’s much better to take a step back, plan meticulously, and make sure every member of your implementation team is clear in their role. Don’t cut corners for the sake of going live two months early. Set a realistic time, that can be met without risking the day to day operations of your business.
In order to create that realistic stake, you need a scope and you need to stick to it. Scope is all about understanding the scale of the project you are about to undertake. Understanding what is achievable, in which timeframes, and managing expectation accordingly.
The larger the implementation, the longer the implementation – so it’s easy to lose track. A clear scope of delivery keeps the project on the straight and narrow. You know what should be achieved, by when, and by whom – so will never fall behind. Splitting the scope into manageable phases, each one delivering value, is often the key to balancing momentum and complexity.
ERP is only as good as the data you put into it, and collecting the data needed from the previous system(s) is arguably the most time consuming part of an implementation. To help with this, your vendor will be able to provide you with a database schema, which is the structure needed for the ERP to function. This acts as a guide so you know which data is needed, but unfortunately not where that data is stored. Upgrading or moving from one ERP to another means the relevant data should be easily found within the current system.
If however, the data is being extracted from several disparate sources such as excel, accounting software and CRM software, the data needs to found before it can be extracted and inputted into the new system. These disparate systems will most likely create files in different formats which will need to be converted for the ERP, or entered manually. Either way, this is a mammoth task that requires a lot of time and effort.
Just because ERP involves computers, doesn’t mean the implementation belongs solely to the IT department. Granted, they will play a pivotal role during implementation, but a system used companywide, requires companywide co-operation. Even if your IT department are a super talented bunch – with all the required skills – insight from all departments is vital for a well-rounded ERP solution.
Who will use the ERP? Will it be the IT department? Shop floor staff? The board? The chances are, every department in the business will have some contact with the ERP so it’s in their interest to be part of the implementation. Understanding how the business will react to change, and preparing them for it, is a crucial part of an ERP project. Central to this is having a clear, strategically focused scope and strong ownership of the project, driven from the top.
There’s a lot resting on an ERP system, so it makes sense to test it thoroughly. However testing often not given the attention it deserves. Testing shouldn’t be treated as dummy run or going through the motions, it should be treated like the genuine process that has immediate effect upon business – because it does. Failing to test correctly and thoroughly will leave you with an inaccurate idea of how well the ERP works and which areas need improvement.
This means investing sufficient time into mapping and cleansing your test data, and practicing the processes. Even if there’s a process your business undertakes only very occasionally (annually, every six months, or maybe completely irregularly), these processes also need testing. It could be the occasional process that puts the ERP, and subsequently your business, out of action six months after go-live.