What Should Be Your Key Focus for an ERP Implementation?
Enterprise Resource Planning (ERP) has truly become a mature business application that spans over three decades and become more pervasive across all industries that form the necessary infrastructure for business operations needs of all types and sizes.
Many companies rely on an ERP solution to overcome the pressures faced by today’s landscape to streamline processes, increase efficiencies, gain profitability and other tangible business benefits. It’s true that for a well-executed successful ERP implementation – Companies can gain valuable returns including reduction of costs (i.e. operating, administrative, inventory costs etc.), improvement in complete, on-time shipments and in-schedule compliance, growth in operating profits, as well as prompt decision making to gain competitive advantage. Instead, ERP implementation failures also inflict a great deal of pain and bring companies to their knees through implementation cost overruns, under-deliver business value, project delays etc. It can be amazing to see how companies go from high expectations during their software selection process to merely hoping that their ERP “go-live” doesn’t fail as the implementation proceeds.
So, what should we focus in an ERP implementation?
We have narrowed down the “most-common” root causes of a poor ERP implementation boil down to the following three key elements:
1. Understanding of End-to-End Business Processes
ERP systems are flexible and have the capability to design for unique industry’s needs such as retail, manufacturing, distribution, heavy equipment etc. Even the ERP system can be extended to the sub-verticals of each industry like food and beverages, chemicals and plastics, pharmaceuticals, fashions, restaurants; to name a few.
For example, an ERP system allows process manufactures to operate and manage business activities such as order entry, packaging, shipping, and accounting. It also provides the capability for quoting, work order generation, job tracking, costing, inventory control, attendance, and data collection. However, the process manufacturers require the ability to understand their product capabilities and to incorporate industry-specific functionality that best suit the nature of their operation processes, in order to integrate with their supply chain planning, production scheduling, product lifecycle and asset management, etc.
Thus, it’s important for companies to visualize, plan, define and communicate precisely to employees how business processes are going to look like in the new “go-live” environment. Otherwise, the most perfect ERP implementation can result in failure due to poor understanding of the business processes.
2. Effective Organizational Change Management
Employees’ resistance to new processes, even among C-level executives as they don’t understand the distinguished benefits and value in return of IT investment to the company.
The management team needs to realize that implementations often span several years and involve endless amounts of organization-wide effort and change. An ERP system doesn’t end at the software purchase or/and “go-live”. It requires changes in business practices across the entire organization that is always overlooked by companies, which has resulted in unanticipated additional costs (e.g., employee training, software customization, and/or external consulting assistance for implementation strategies) which blow budgets and lengthen project implementation durations. In order for companies to move forward their business functions effectively, they need to fully understand these business processes changes, and to set accountability for critical path and business-focused implementation activities.
Service and technology providers that have deep industry verticals knowledge, have competent to provide a realistic project plan for decision making process and facilitating a robust organizational change management program are able to help employees better understanding of the specific differences and needs, such as how the ERP implementation affects their specific jobs, and how the end-to-end business processes will appear in the new system environment etc.; in addition to the well-versed end-user training.
3. Right Business and Implementation Expectations
From our past ERP implementation experience, a project that had not been well-defined/planned; had an unrealistic budget and/or insufficient allocation of resources always proves harmful to an ERP implementation and may cause additional problems in the short and long-term. The companies may face challenges like the customization didn’t fit with what they want it to be; project delayed with additional requirements added during the implementation phases; under-estimated the budget and resource requirements to meet the project scope and implementation timeline etc.
Let us take “software customization” as one of the common challenges for an ERP implementation - The more customization, the longer implementation time; the more it’s going to cost and the higher risk you bring into the project. On the other hand, it’s not realistic to completely withdraw from software customization. Hence, companies need to decide on the right level of customization that allows them to maximize its cutting-edge advantages or differentiators. At the same time, they should re-evaluate the customization requirements to align back with their business needs in short-and long-term, and the implementation rollout approach strategically - big bag, phased or a hybrid of the two. Otherwise, it may end up in high implementation cost, project delays etc. without the realization of expected benefits.
Of course, when spending up to hundreds or millions dollars on an ERP system, there are certain things that companies expect - high quality, on-time delivery, and made-to-order customization to non-standard specifications, etc. Nonetheless, it’s vital for companies to realize that an ERP project can easily go awry without a well-defined plan or/and insufficient supporting resources. They need to set a realistic expectation on their business and operation needs, form a tight project governance structure i.e. project scope, implementation timeline, with the right resources and allocated budget in place. If the company initiates their ERP project with well-defined phases such as ERP evaluation, selection and implementation planning phases that will definitely help the company to have a distinct decision making and buy-in into the way the system will be set up for a successful ERP implementation.
To Put It All in a Nutshell
From a technical perspective, ERP software can often be done in as little as a few weeks, but the challenge always falls into aligning the software with the company’s business processes and their specific needs. Bear in mind that ERP project “Go-Live” will not necessarily gain benefits and business value to the organization. Benefits are attained as a result of strategic actions and capabilities in order to combat the challenges and achieve the company’s goals. Thus, companies need to understand the key challenges faced and set priorities accordingly; and at the same time, build a strong collaboration with the service and technology provider to form a realistic plan; adopt appropriate methodologies and actions that definitely help the project go a long way toward ensuring successful ERP implementation.
(Nguồn: www.vn.tectura.com)