How to make Successful ERP Implementation
By: Vijay Kr. Chaurasiya, Faculty,
Indian Institute of Information Technology
When ERP implementations fail to deliver, it's usually because management hasn't taken the time to structure the organization to take advantage of these systems.
I t's not pretty out there. Companies have spent fortunes on ERP software and implementation only to find that business performance has not improved at all. These large investments and negative ROIs have created a whirlpool of controversy, rampant company politics and even a number of lawsuits. The trade press has reported many negative ERP stories, and even annual reports have pointed the finger at ERP for lower-than-expected earnings. For some, this has created a higher level of fear about making a big ERP mistake. Much of the time, ERP software vendors are the targets for blame when anticipated results do not materialize. Are the ERP vendors that sold the software the real culprits for the lack of business erformance improvement? The answer is, not very often. Certainly, it can often be argued that ERP system logic is sometimes illogical, functionality is missing, functions perform poorly and so on. But accountability for ERP software selection and implementation usually lies to varying degrees with internal personnel and often with external consultants. Selecting and implementing a new ERP system, and the process changes that go with it, is unquestionably a complex undertaking. Regardless of your size and perceived resources, an ERP implementation is not something that should be approached without a great deal of careful planning. Among companies that have been through a less-than-fully successful ERP implementation, five reasons for poor results show up consistently:
- Operating strategy did not drive business process design and deployment.
- The implementation took much longer than expected.
- Pre-implementation preparation activities were done poorly, if at all. • People were not well-prepared to accept and operate with the new system.
- The cost to implement was much greater than anticipated.
- How can we avoid some of these costly mistakes? Here are some guidelines to help you with ERP success.
It's the process
Management is getting its hoped-for results from ERP less often than not, and this begs an explanation for ERP's often-poor performance. What many manufacturers fail to realize is that extensive supply chain improvement requires that management begin to redefine its business in terms of strategic opportunities. The purpose of ERP technology is to support the business processes that support the company's strategic opportunities. There are some basic tenets of ERP that should guide management's actions and decisions.
1. There is no magic in ERP software. ERP's benefits are a direct result of effective preparation and implementation, and appropriate use. This seems obvious, but nine out of 10 companies don't get it right the first time around. Expecting a quick fix, silver-bullet solution is a dangerous mindset.
2. No amount of advanced information technology can offset the problem of a flawed business strategy and poorly performing business processes. This area, in particular, is something that ERP software implementers may not fully address because it can slow system deployment.
3. Define a business strategy that will give you a competitive advantage or, at the very least, make you competitively equal. Then, analyze your current business processes and develop your objectives. Once this step is done, the following steps for preparation, ERP software selection and implementation can support your strategic and process objectives better.
4. Acquire flexible ERP information technology that can accommodate rapidly changing business conditions. The high-velocity flow of information needed to support action up and down the supply chain is a major step forward for most manufacturers. It will be mandatory in the future just to compete, much less stay ahead of, the competition.
5. Have the implementation led by a senior executive who has the authority to make changes happen and happen quickly. Make sure there is a sense of urgency and true accountability for completing preparation and implementation activities on time.
Moving away from functional silos and creating effective cross-functional processes that are truly integrated via an ERP system is not an easy task. When ERP is not fully integrated into day-to-day business operations, however, it is not likely to be very beneficial.
If enterprise integration or more advanced supply chain management strategies are to have any chance of complete success it will be due, to a large extent, to the removal of traditional cross-functional barriers. These silos comprise the organizational boundaries where information flow, and often cooperation, stop. You must ask, “How will we use the ERP system?” Some not-so-obvious issues will surface as you try to answer that question. For example, will you combine demand-based flow and lean manufacturing techniques, which will negate the need for some traditional ERP functionality? Focus on your business strategy and not just software selection and implementation. Many problems are reinforced by contradictory objectives and performance measures that actually create inconsistent value and belief systems, to the company's detriment. No amount of information technology will correct these problems. Management must aggressively remove them once and for all through business process redesign.
Plan to succeed
Successfully implementing ERP the first time requires a structured methodology that is strategy-, people and process-focused. This is the only way to manage the risk effectively. A good methodology covers all the bases, but when the unexpected pops up, as it usually does, you will be prepared to handle these exceptions without severe negative consequences. One very common mistake is not having your employees prepared to use the new processes and support system. The consequence here can range all the way to total failure, but they are avoidable. Evaluate your business strategy and ERP plan before you commit to software acquisition and installation.
Doing it right the first time is the only cost-effective way to go. Many people out there wish they had paused to evaluate their direction. The following questions do not cover every possible contingency, but should be helpful to stimulate thought and discussion.
How do we want to run our business?
- What business problems need to be solved?
- Do we know and understand our priorities?
- Do we fully understand our as-is condition versus our could-be/should be processes?
- Have we carefully defined an action plan for pre-implementation preparation activities?
- What tasks will be accomplished and when?
- What are the missing links in our current system and our software of choice?
- What are the real costs, benefits and timetable going to be?
- Do we have an executive-level ERP champion to provide the necessary link to top management?
- Who will implement ERP and make it work?
ERP and supply chain management systems implementations are, in fact, projects without an end. After all, the supply chain is, to a large extent, the very life blood of a manufacturing company. For the well-prepared, new supply chain management systems based on ERP have become significant competitive differentiators. Implementing ERP can become a mind-altering experience for those involved. Following a sound methodology will greatly increase your likelihood of success the first time. Yet, it will not guarantee your success. Only you can do that.