The Top 8 Pitfalls of ERP Implementations and How to Avoid Them
Implementing an Enterprise Resource Planning, or ERP system in any company is filled with promise and fraught with danger.
Along with the many benefits that ERP systems bring, the chief among these being rapid access to customer and supplier information, there are also pitfalls. One pitfall that can be so very costly is a poorly executed ERP implementation, and this can cripple a company and cause a loss of jobs.
In order to avoid costly mistakes, an ERP implementation needs to be thoroughly planned with a great deal of care. Then, once all is in place and the critical path is identified, rapid implementation is the key to success. Through our experience we've identified the "Top 8 Pitfalls of ERP Implementations and How to Avoid Them".
If even one of these pitfalls exists there's a good chance that the ERP implementation will fail. The Top 8 Pitfalls of ERP Implementations are:
1. When there is no executive sponsor. ERP crosses functions within a company. Therefore, the program needs someone with the authority to bring various functional managers together. People must devote time and resources to the project, and if they don't think that doing so is in their best interest or important enough to the organization, they will undoubtedly find something else to do.
2. When the project is viewed as being of interest to only one department. If the project is seen as being important to just the finance department, or the IS department, or just the manufacturing department, it will fail. It applies to all departments not just one and people need to understand that.
3. When there is no full-time project manager. ERP implementations are important enough to warrant at a minimum, one full time person to manage the project.
4. When, because of the hardware/software/communications intensity, the IS people make the decisions. The problem here is that the IS people may not have a good understanding of functional requirements of the other departments and how others will use the ERP system. Input from all departments is needed for the system to be most effective and to create a sense of buy-in.
5. When there is a lack of internal resources applied to the project. Implementing an ERP systems take a good amount of time and effort from the people within the company. This project is work on top of the tasks that people currently are responsible for performing. If the implementation constantly put aside to do “important” day to day work the schedule will slip and the project risks failure. The question on priorities should not be an “either/or” question. Work and task planning must take into account the increased time demands of the project for all participants.
6. When there is no documentation of the implementation procedure. Most ERP implementation will constitute different degrees of business re-engineering. It is imperative for companies to document their current processes "as is" and reflect the re-engineering effort in a documented "to be" process. This approach will maximize the input from company resources and bring the need to revamp legacy practices to the forefront.
7. Lack of training. Companies often overlook the importance of training in enabling the success of enterprise implementation. Training should be delivered in stages. At first, company team leaders should be trained during different stages of the implementation. The training should be delivered by a product and process expert. It should follow a methodical approach which maps the company's way of doing business, performed on company data. The second tier of training should be rolled out and populated to the rest of the company staff prior to the enterprise application "going live."
8. If there is a massive change of everything. From experience, companies embarking on massive re-engineering in their core processes, subject the company enterprise implementation to higher risk with greater probability of failure. It is our recommendation that companies should implement less re-engineering effort and more process enhancement. This will expedite the implementation and will have less disruption on a company's culture.
We recommend an approach where there is an upfront analysis of such business issues as company competitiveness, the long-term business objectives, a detailing of the functional business processes, a listing of the business issues at an operational level, and a listing of the company initiatives. Fundamentally, what is created is an architecture of the business. Senior management, of course, is the group that defines what the business objectives are. Then it is a matter of having the functional managers become involved so that there can be a determination of how the objectives can be met and to look within the architecture to make a determination of what needs to be addressed.
ERP systems can return great rewards, but because they are so high profile and cut across the entire organization, they need to be approached carefully to avoid the pitfalls.