Transitioning to a new ERP system can cost your company millions of dollars in investment. Still, many companies do not approach implementation like they do other core business activities.
Across most organizations, important steps such as risk assessment, cash flows, performance objectives and benefit analysis are typically ignored during ERP implementation. In their place, companies concentrate on reducing implementation expenditures, hoping that the new system will magically transform the operations and efficiency of the business. In turn, expected benefits are not realized after implementation and management concludes that the wrong system was implemented.
In other situations, the management realizes lack of planning lead to failure of the implementation. In turn, they have to hire an experienced ERP consultant to carry out the implementation again, leading to double expenditure.
In our experience, ERP implementation does not fail because of the system. Rather, failure stems from a number of factors that should have been taken care of beforehand. Below are some factors that usually lead to ERP implementation failure.
1. Lack of Adequate Resources
Most organizations downplay the resources required for ERP implementation. It is critical for organizations to have a solid understanding of the internal and external resources required for the project.
For internal resources, the organization should have a solid timeline on the commitment required from critical employees that will be using the ERP, usually those in the Finance, Accounting or Human Resources. Many times, temporary resources will have to be called in to keep processes moving as users of the new system undergo training.
For external resources, the organization should find out from the consultants and contractors the duration, skills and resources required for the successful implementation of the system.
2. Inexperienced Consultants
Experience makes a lot of difference when implementing ERP. Typically, an organization will use an ERP system for more than 10 years. Therefore, most employees in the organizations would experience one or two ERP implementations in their career.
Given the long-term expected use of the system, it’s important to identify experienced leaders for your project. Both internal and external managers should have experience in implementing the specific ERP you are deploying. Outside consultants should have successfully implemented the same ERP in other similar-sized organizations in the past.
3. Secondary Customization
Data conversion, interfaces and customization are the three main areas of technical risk in ERP implementation. Customization usually increases the time-to-deploy and costs of the implementation.
While the risks of customization are evident, some organizations find the slightest reasons to implement small changes. The small customization requirements usually grow to become technical problems that can derail the implementation of the ERP.
While ERPs should not be implemented as the out-of-the-box solution they come as, customizations should be managed tightly. Any customization should be justifiable and result in the benefits the company wants to derive from the ERP.
4. Project Management
The success of ERP implementation can be affected by the project manager in charge. The scope and size of ERP implementation requires a professional, dedicated and experienced manager to oversee the various activities.
Project management is a discipline, not an art. The project manager should have the ability to get into the details of the implementation while keeping perspective of the overall business goals. Most successful ERP implementations are led by project managers that actively participate in both selection and implementation.
When choosing a project lead for the implementation, choose one who will understand the pain of the users. The manager should have the most to gain or lose with the successful or unsuccessful implementation, respectively.
5. Poor Implementation Strategy
implementation should be done in a systematic manner to be successful. The implementation strategy should be in line with the end goals of the organization. Many times, lack of a clear strategy on the problems that the ERP is expected to solve and the desired outcome lead to challenges in implementation.
A good strategy should factor important business processes, financial benefits and deadlines, and ensure they are fully addressed. Without a clear definition of the end goals, the implementation strategy becomes jumbled up.
With successful ERP implementation, your organization can improve its competitive advantage, increase productivity and plant utilization, raise customer service level and reduce inventories.