Key insights of ERP Implementation
- Use and identify key performance indicators (KPI’s) to understand and measure the success of the ERP implementation.
- Identify the critical success factors of the project implementation.
- Be clear about the ERP functions and how this can be translated to your business processes.
- Look at industry expertise when searching for a Vendor.
- Make sure you have a clearly documented data migration plan.
- To obtain optimal efficiency from the ERP software it is important that the employees understand how to use the product.
- Get an executive to buy into the implementation and to act as executive sponsor.
- Many ERP projects’ success depends on the willingness of the users to adapt to the new way of doing things.
- Ideally you would want to identify an ERP champion in your organisation who can offer post-implementation support to users.
- It is important to align the implementation project with the business strategy and goals.
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What is Enterprise Resource Planning (ERP)
An ERP simplistically explained, is a way to plan the resources required to run the business. This is done by making use of ERP software applications. It helps companies to integrate all their business processes into one system. This gives the business an effective way of linking all the different departments like finance, manufacturing, distribution, sales, human resources, etc.
Some key considerations for your ERP implementation project
Why do you want to implement an ERP
This should be the first step in your ERP journey. You need to know why you are going to do this. You should be able to identify the benefit(s) that the ERP system will be able to offer your business. Very often this can be translated into the Key Performance Indicators (KPI’s) of the business, either through future opportunities, cost savings, or efficiencies. KPI’s will differ from sector to sector and amongst different departments. These KPIs may be financial or non-financial indicators. It is therefore important to identify those KPIs before you start the implementation process to have a view of the real opportunity that the ERP can offer you.
Know what you are getting into
You have to be clear in what the process of an ERP implementation entails and what the requirements on the business will be. Being unclear about the process and its requirements can lead to a failed ERP project. This means you need to be clear about the ERP functions and how this can be translated to your business processes. The best way is to map the functions and map and align it to your business processes. This will help you to understand the gaps. Also, what will you get additionally from the ERP and how will this impact your operations? Will you have to implement a new way of doing things and what is the learning curve that is involved with this?
Another important factor is the cost. This should be measured in accordance with the return on investment. Bear in mind that the cost of the ERP implementation is underestimated in ⅔ of implementations done. So do your sensitivity analysis to make sure you can run various scenarios during the implementation. The ROI should be constantly monitored against this during your implementation to understand if you are still on track.
Cheapest is not necessarily the best option here. When selecting a Vendor to assist you with your implementation there are a number of factors that you can consider. We would suggest that you firstly look at industry expertise. It is important to understand if the short-list of Vendors know how your industry operates. It makes it easier to communicate your requirements to the Vendor as they should already be familiar with some or most of the expectations.
Choose the right product
So you have mapped out your business processes by now. Now you have to choose the ERP software. The best fit option would be the product that you can best align with your business processes. Some ERP software are very industry-specific. Ideally, you want to compile a basket of products that focus on your industry. Bear in mind that it will be very difficult to find an exact fit. So, you will either have to adapt your processes or look for a product that allows you to do some customization. Customization adds to your cost so make sure to factor that into your ROI analysis. That said, bending the system to an old way of doing things may not have an effective outcome, so consider this carefully in the planning process. Also, have a look at our Scalability section below.
Data migration strategy
Make sure you have a clearly documented data migration plan. Assign an owner to this part of the implementation and make sure that you have developed the necessary controls to migrate the data from the legacy system to the new ERP. Data integrity should be maintained throughout the migration and it can be useful to have approval processes built into the migration phase. Data migration also offers a great opportunity to clean up old data to eliminate the possibility of garbage in, garbage out scenario.
Ensure enough time is budgeted for testing and training
Your new ERP system should be thoroughly tested to make sure it meets business and user requirements. This can avoid additional costs down the road. So budget for this from the start to avoid lengthy overhaul procedures after implementation.
Training forms an essential part of the implementation project. To obtain optimal efficiency from the ERP software it is important that the employees understand how to use the product. Place emphasis on this as it will also make the adoption process easier for employees. Most projects fail because the users fail to adapt to the change in circumstances that the new ERP offers to the business.
Make sure you get buy-in on your project plan
Get an executive to buy into the implementation and act as executive sponsor. This will make adoption across the business functions easier. Develop a clear project plan that has clear buy-in from key decision-makers. The project plan should at least cover aspects of the implementation such as timelines, hardware requirements, project team, data controls, etc. The project plan should be monitored and measured against key milestones during the project to ensure deliverables are met or to readjust your goals.
Many ERP projects’ success depends on the willingness of the users to adapt to the new way of doing things. Proactive change management can play a significant role in getting users ready for the new role. Incorporating a change management strategy into the project plan can make a significant difference. Make sure to understand the different elements of user success in an ERP implementation and mitigate risk factors with a proper change management strategy.
It is important to align the implementation project with the business strategy and goals. You ideally want to avoid any problem down the line where the ERP cannot accommodate your business strategy. Based on your future goals will the ERP be scalable enough to grow and change with your business?
ERP security plays an important role in protecting your business data. So from the start, this should be a major discussion point in terms of what your business requirements are. Ensure that your ERP can accommodate these requirements. Other considerations will be how you are planning to store your information on-premises, hybrid, or cloud and how this fits into your business security strategy.
Ideally, you would want to identify an ERP champion in your organization who can offer post-implementation support to users. The ERP champion can work with the ERP vendor to ensure things run smoothly and ensure any issues are addressed and resolved. Don’t neglect post-implementation support as is very often the case many unknowns can arise during this stage. Having someone who can address these unknowns ensures business continuity.
Benefits of ERP
Business flow consolidation
ERP allows all business processes to be centralized under one system. This allows greater control in the business and allows for better planning of resources. Having one consolidated and integrated workflow allows the business to save cost, address wastage and have ownership of functions within the business.
With an integrated way of doing things employees have to communicate with each other across departments allows for more interdependence. If a workflow is disrupted on one end this will have a bearing on the other departments’ ability to complete their task.
Greater control and visibility over costs
ERP presents a birds-eye view of the commitments within the business. You gain a view right from the input process right up to the output process within one centralized workspace. This allows businesses to understand where they are spending their time and money and what the results of all of those efforts are in a measurable and visible manner. Businesses can plan or reduce costs in unwanted areas or build in more efficiencies for unproductive resources such as materials, capacity, lag times, etc.
Improved execution of tasks and increased productivity
User activity and productivity can be traced through the ERP systems. This allows organizations to assess and evaluate the success rate of task completion and focus and align people and other resources to be more productive.
Why ERP projects fail
Failure of employees to adapt or change
We have mentioned that a critical success factor in the implementation of an ERP system is the ability of users to adapt and change to the new roles and responsibilities they will have to adopt. Change management is crucial to this and is already mentioned in this text.
Lack of commitment of key stakeholders
Key stakeholders in the organization play an important role in the motivation of other stakeholders in the implementation process. That is why we suggest that an executive sponsor joins the project team. This should be a key decision-maker in the organization as this will ensure that everyone gets on board with the new ERP system.
Completion and implementation goals are unrealistic
Be realistic about your organization’s expectations. Are the goals feasible, especially if it is the first time that you have entered into such a project? Continuously monitor and evaluate the goals and clearly communicate the current status of the project to the key stakeholders. Make sure that their expectations are managed realistically as a complex project has many unknowns up to the go-live date.
Many ERP projects underestimate the budget that is required to fully complete the project. This is due to a lack of proper planning and understanding of system requirements. Make sure that you do a sensitivity analysis based on different scenarios. Make sure you fully understand the entire life-cycle of the project and attach a cost to each component of the project life cycle. This will give you a clear view of which areas you have to build some unknowns into.
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