Avoiding Potential Pitfalls of ERP Implementation
The goal of implementing a new enterprise resource planning (ERP) system is to accurately report information, save time and money, improve efficiency and increase the bottom line. While ERP systems can return great rewards, they are high-profile and cut across the entire organization, meaning they need to be approached carefully to avoid pitfalls.
Issues happen during all three phases of an implementation: before, during and after. Here are a few of the pitfalls to avoid in each phase.
Not selecting the right ERP solution or ERP vendor – ERP systems tend to be industry-specific, so it’s important to select an ERP solution that’s a good fit for your business. If you’re a manufacturer, you don’t want to try and implement a medical or hospitality ERP solution.
Implementing an ERP system is a big endeavor, so be sure to fully investigate your vendor. Ask for references from at least three companies similar to yours. Call and discuss features, functionality, timeline and implementation challenges with them.
Lack of executive sponsor – ERP implementation is an organization-level strategic initiative that crosses all functions within a company, so it requires someone with the authority to bring everyone together. An ERP implementation is not an IT or accounting project. It’s a project for the entire organization, and it needs the sponsorship of the CEO, president or chief operating officer.
Poor overall planning or unrealistic expectations – You cannot plan as you go. It’s important to have strong project management in place. Make sure your project team includes members familiar with the business operation—preferably some who previously have gone through a technology conversion or an ERP implementation. The team should focus on clearly articulated goals that are SMART—specific, measurable, attainable, realistic and timely. Consider an outside consultant if your team is deficient in a critical area. Then, set project priorities. Ensure this team has been empowered by the organization.
Data is invaluable; it’s what powers the ERP software. So put procedures and safeguards in place to prevent data inaccessibility, corruption and loss. Decide how much historical data to keep. Plan to clean up obsolete or redundant data and reformat it, if necessary. Static data might be migrated early, while dynamic data can be moved last.
No defined timeline or budget – Defining a realistic timeline and budget for ERP implementation is crucial. Rushing the process can cause several problems, including missed details and incomplete training. A lax attitude toward setting timeline and budget could result in a drawn-out mess with a ballooning price tag.
Lack of understanding of how your business processes work – If a company isn’t fully aware of its strengths, competencies and deficiencies, how can it correctly identify needs and define goals for an ERP system? The company should conduct a detailed assessment of its operation, with input from all stakeholders. There’s no room for a “do-over,” so it’s imperative the assessment is thorough, documented and prioritized by critical requirements.
For the implementation to go smoothly, you should know your current business processes and how you want the processes to work moving forward. This needs to be communicated to your ERP solution partner.
Failing to adequately train – A lack of proper training is one of the most common reasons ERP projects fail, and it can result in employees resenting the new system because they don't understand it. Create a collection of recorded training videos detailing the most critical business processes and make them available for on-demand retrieval, supplemented by complete documentation. This can help employees understand the system and feel confident using it.
Lack of buy-in – The captain’s chair should be occupied during this foray into the relative unknown. An engaged CEO will inspire top managers and decision-makers to take up command positions “on the bridge.” Create a companywide awareness of this major undertaking, with a call for all hands on deck. Each employee should know the destination—full ERP implementation—and understand the timeline for arrival. If the project is seen as being important to one department, it will fail. It applies to all departments, and people need to understand that.
Not devoting enough time/resources – Failing to appreciate the project’s scope is one of the biggest mistakes companies make when embarking on an ERP implementation. Failing to dedicate the time and resources the project deserves can lead to huge problems. As an ERP system will underpin a business’ entire operations, it’s not a project that should be taken lightly; it needs to be a main priority until it’s finished.
Not having clean data – One of the biggest issues companies encounter when migrating data to their new system is poor-quality information. For migration to work, your data must be high-quality, which means the right information must be in the correct fields.
Improper customization – An ERP solution may not cover all the existing processes in an organization. There may be some gaps in the processes and controls, so the implementation team must foresee such gaps well in advance and plan to mitigate them. No ERP system is a “complete” solution. It needs to be customized and fine-tuned. Companies are often ignorant about how much customization they require. It’s a delicate balance—too much customization can result in associated cost and time over-runs, while underspending on customization can cause problems by letting your organization miss out on key requirements.
Employee turnover – For many companies, employee turnover is a major problem, and it can be difficult to get new people quickly at reasonable salaries. If the time required to find new resources runs into weeks, the backlog of work grows and can lead to an ERP system failure. If employees trained on the ERP system leave and new employees work on the system without formal training, the ERP data begins to degrade and the problem is aggravated, making damage control more difficult.
Entrusting responsibility to inappropriate resources – An ERP system is a tool for the entire business and may fail if inappropriate people are responsible for it. A core team must include people who are knowledgeable, enthusiastic and empowered.
Apart from inappropriate human resource allocation, inadequate infrastructure also can be a problem. While companies invest in a good ERP product, they make compromises when purchasing the supporting infrastructure. It’s equally important to invest in the right hardware.
Keeping legacy applications – Keeping and using old technology (legacy applications), other than for reference, is inefficient for production, confusing for employees and expensive. Say goodbye to legacy applications during the ERP implementation. Burn the bridges. When there are no alternatives, people are forced to work with the new system.
Not understanding or using key features – Without knowing or understanding the ERP system features, companies miss opportunities to automate business processes, complete functions faster, save time, save money and meet business objectives.
User resistance – Change can be hard, and people tend to use familiar tools. User resistance to changes to a system they’ve used for years can turn into a roadblock. The return on ERP system investment and the success of the implementation is influenced by how well it’s accepted and used by employees.
As you can see, there are many pitfalls on the road to a successful ERP implementation. Do your homework, plan appropriately and work with an implementation team and ERP vendor that’s a good fit and wants to help you succeed. The risks and challenges to implementing an ERP system are many, but so are the benefits and rewards.
To learn more about implementing an ERP system, contact a BKD Technologies advisor.