Like the nervous system, ERP software delivers critical data from a variety of sources to a centralized hub where the information is analyzed. No one thinks twice about the nervous system when it’s working properly, but if it begins to break down, it has our full attention. Similarly, when an ERP implementation goes awry, it captures our attention, as it can negatively impact the organization’s supply chain and other critical business functions.
Many large organizations have struggled with implementing ERP software. Think Waste Management’s failed implementation of an SAP ERP system and Nike’s disaster with i2’s “software glitch.” While these high-profile ERP failures should serve as lessons learned, organizations don’t always take advantage of the insights.
To ensure you are aware of the potential pitfalls of implementing your ERP solution, we’ve outlined five mistakes to avoid:
Mistake #1: Buying an unnecessary system
Organizations often find themselves dissatisfied with their current financial, supply chain management or human resources management systems and decide that a completely new ERP solution is the answer to their dissatisfaction. While a new system is warranted in many cases, there are instances where a refinement of the existing system might be what’s really needed.
We’re all familiar with the notion that sometimes our eyes are too big for our stomach. The same can be applied to the decision to implement a new ERP system. Falling in love with live demos, sales pitches and the perceived successes of other organizations can lead you to the conclusion that a new system is the answer to all your problems.
Prior to implementing a new system, we recommend establishing a task force to determine whether a new system is necessary. It may also be worth engaging an independent consulting firm, like Panorama, to give you an unbiased opinion as to whether a new system is the best choice for your organization’s needs.
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Mistake #2: Misunderstanding success
Companies that have decided to move forward with an ERP implementation often get mesmerized by software features. This can occur when the project team doesn’t properly identify the organization’s core needs. In addition, project scope may not be well-defined and financial requirements may be unclear.
When planning for implementation, your organization should have clearly-defined objectives. Also, you should define key performance indicators as well as a project budget and timeline. This will ensure there is consensus around what success looks like.
Mistake #3: Inadequate planning
Just because an ERP project plan has been created doesn’t mean it will be effective. Many an ERP implementation has run aground because of insufficient planning. The person responsible for the planning was ill equipped to handle that responsibility. Bad planning often involves overly-optimistic timelines as well as a lack of business process reengineering and organizational change management.
When preparing for an ERP implementation, your organization should incorporate high-level strategic planning as well as meticulous planning at the detailed level. All phases of planning should consider every impacted department and every employee group. In addition, you should develop a contingency plan in anticipation of potential problems.
Mistake #4: Inadequate resources
Assigning critical staff to your ERP project without careful planning can be a recipe for disaster. Positions can be difficult to adequately backfill, meaning resources may only have part-time involvement in the project. The result is a lack of focus and commitment leading to inadequate data migration and an inability to maintain deadlines.
Proper allocation of resources is vital, and your organization must understand the internal commitment necessary to ensure success. Building a strong project team will reduce your chance of ERP failure.
Mistake #5: Over-customization
The growing reliance on extensive ERP systems and the rising number of third-party modules has led to increased software customization. Customization can create extremely complex systems and extend your project scope. This is not to say all customization should be avoided, but we recommend minimizing it.
Your organization must build strong project governance to ensure customization does not get out of control. Relying on capable project managers will help control scope creep and reduce the chance of cost overruns.
Avoiding ERP Failure
Investing in ERP implementation planning and ensuring organizational alignment will help you avoid ERP failure. Panorama’s ERP consultants can help you develop an implementation plan that accounts for all critical project activities and mitigates common project risks. Request a free consultation below.