Enterprise resource planning (ERP) solutions have the ability to revolutionize companies by streamlining manufacturing and boosting customer engagement. Yet many businesses are struggling to understand how ERP systems work and how to successfully implement them.
In fact, 75% of ERP projects ultimately fail.
Because of the time and cost involved in ERP implementation, it’s important for your company to thoroughly research and understand the process before getting started. So we’ve put together this in-depth guide on how to avoid failure, as well as best practices for success. We’ll also discuss methodology, risks and challenges, expert tips and costs.
1. Understand Why
It’s important for companies to understand why they are going through ERP selection. One good reason to do an ERP project is to leverage technology as a competitive advantage within your industry. This is a better reason than, “Our support is ending on our current product, and we need to switch.”
Once you understand your reasons for implementing ERP, you need executive sponsorship around these reasons, and you need buy-in all the way down to end users.
2. Document Requirements
It’s important to do requirements gathering upfront as opposed to doing it after you’ve selected an ERP vendor. At that point, you’re on the vendor’s dime, and you’re rushing to define your business requirements.
From our project recovery experience, we have found a common theme is companies waiting too long to begin requirements gathering. It’s painful work, but it ensures you implement successfully. In fact, one of our clients’ CFOs told us that spending money upfront decreases expenses during implementation.
3. Prioritize Functional Areas
Your choice of ERP software will depend on what functional areas you prioritize. Maybe you want to focus on financial management and operational management since you’re aiming to optimize your supply chain and manufacturing processes. Or you might focus on financial management and omni-channel since you’re trying to improve the customer experience within with an e-commerce platform.
Depending on your focus and the size of your company, ERP vendors have a different mix of solutions – some stand alone, some fully-integrated. Do you just want a workforce management solution, or do you want human capital management, as well? Do you want your system to include payroll, or do you want to continue to outsource it?
If your organization is prioritizing the customer experience, you’ll need a system that handles marketing and customer relationship management. Some of these systems also handle configure-price-quote.
When you’re talking about meeting customer expectations, you probably need an e-commerce platform that integrates with a core ERP system. This allows you to integrate customer data, dynamic pricing information and other real-time data with your supply chain. The retiring of Baby Boomers and the increase of the Millennial workforce is a major reason why a lot of companies are integrating e-commerce.
Some of our clients want a permanent solution, while other clients know their business is going to change and want a solution that lasts five to ten years. This decision also can influence what functional areas you prioritize.
4. Understand the Software Tiers
We define Tier I as systems suited for companies with $750 million or more in annual revenue. Tier I vendors target enterprise-level companies with multiple entities and complex operations.
Upper Tier II vendors still serve companies with multiple industries and business units, but these companies are slightly smaller.
Lower Tier II vendors play well with small- to mid-sized businesses that typically serve one industry with a single entity.
Tier III vendors include point solutions suited for startup companies.
5. Align Your People, Processes and Technology
Another important aspect of selection and implementation is strategic alignment. A clearly defined digital strategy is essential. It’s important to have a strategic roadmap with KPIs to ensure executives and middle management are aligned around the same expectations. People and processes also must align with the defined strategy to ensure a successful project. Successful ERP projects are those that focus on improving operating processes and helping employees develop digital competencies. All too often, companies think that technology leads the project, and that’s not necessarily the case.
We will continue our series next month.