An enterprise resources planning (ERP) system canimprove business productivity and efficiency by automating processes and providing acentralized source of data for all teams at your company. But an ERP implementation canbe complex and sometimes challenging, largely because it affects people and businessprocesses across the entire organization.
Here, we’ll outline some of the top ERP implementation challenges and discuss waystoavoid or overcome them.
What Is ERP?
An ERP system is a suite of software that supportsmany business functions, from accounting to human resources to sales and marketing toengineering. It provides a central database for the entire organization, connectingmultiple groups with a single source of information that everyone can access. Along withimproved productivity and process efficiency, key benefits include real-time information that allowsteams to make better decisions, faster.
What Is an ERP Implementation?
An ERP implementation is a multi-phase project thatincludes redesigning businesses processes to take advantage of the new system’scapabilities, configuring the software, migrating the organization’s data andtrainingusers. The process typically takes a few months and can take up to a year at largeorganizations. It’s usually managed by a project team that includesstakeholders from all functional groups in the company.
Why Is an ERP Implementation a Challenging Task?
An ERP implementation can be complex since it affects business processes across theentire organization. And to realize the benefits of the new system, people often have tochange the way they work—often replacing longstanding manual processes with moreefficient, automated processes.
One of the biggest ERP implementation challenges is getting users and functional groupsto change their ways in order to work with the new solution. Driving this changerequires strong project management and backing from senior leadership. To develop thenew system, the organization needs a committed project team that represents all users ofthe ERP platform. This ensures the software will support the needs and businessprocesses of all departments across the company.
7 Key ERP Implementation Challenges
An ERP implementation involves people as well as technology. Accordingly, it may facepeople-related challenges, such as resistance to change, as well as technical obstacles.Common ERP implementation challenges include:
Project management. ERP implementations entail multiple phases:discovery and planning, design, development, data migration, testing,deployment, support and post-launch updates. Each phase brings critical tasks,and all elements need to stay on track, which requires meticulous projectmanagement. Additionally, successful ERPimplementations require participation from all the groups that will beinvolved in developing and using the system. That can be incredibly challenging,because each department is juggling its ERP project responsibilities withmultiple other priorities.
Strong project and people management, which includes setting realisticexpectations, time frames and milestones, along with timely two-waycommunication, is critical to success. As with change management, backing fromexecutives and other top leaders is essential to conquering this challenge, aswell.
Project planning: Organizations often underestimate the time andbudget necessary for a successful implementation.One of the most common causesof budget overruns is scope creep—when a business adds capabilities orfeaturesto the system that weren’t part of the original plan—and another isunderestimating staffing needs, according to Statista.
Developing a clear and realistic plan from the startcan help to avoid those issues. A realistic project plan that acknowledgespossible speed bumps and minor cost overruns and addresses them in advance willsimplify that decision-making process and keep the project on track.
Data integration: One of the key advantages of ERP is that itprovides a single, accurate source of data for the whole organization. A keystep in ERP implementation is data migration, which typically involves movingdata from multiple older systems into the ERP database. But first, you have tofind all of your data. This may be much more challenging than you expect. Theinformation may be spread far and wide across the organization, buried inaccounting systems, department-specific applications, spreadsheets and perhapson paper.
Well-planned data migration can help to keep the entire ERP implementationproject on time and on budget. It’s also an opportunity to winnow outobsoleteand redundant data lurking in the organization’s older systems. Incontrast,underprioritizing data migration can cause issues such as inaccurate orduplicate data and challenges to your go-live date.
Data quality: Once the organization has located all datasources, it can start thinking about migrating it to the ERP system. But thatmay involve a serious data hygiene exercise. Because multiple departmentsinteract with the same customers, products and orders, organizations often haveduplicate versions of the same information in their systems. The information maybe stored in different formats; there may be inconsistencies, like in addressesor name spellings; some information may be inaccurate; and it may includeobsolete information such as customers or suppliers that have since gone out ofbusiness.
Ensuring data quality can become a sizable project on its own, involvingvalidating the data, cleaning out duplicates and adding missing values beforemigrating data to the ERP system. The new data should also be thoroughly testedbefore going live with the ERP system. Make sure your team understands theimportance of cleaning up data, and assign clear responsibilities in doing so.For example, the accounting team will handle all financial data and the customerservice group will clean up customer data.
Change management. An ERP implementation involves more than justswitching to a newsoftware system. It typically means overhauling business processes totake advantage of the efficiency and productivity improvements possible with thenew solution. This requires a shift in mindset and a change in everyday workprocesses for many employees, which presents typical change managementchallenges.
Resistance to change can be a formidable roadblock; getting buy-in fromleadership and stakeholders across departments very early in the implementationprocess is crucial to a successful implementation. Communicate the features andadvantages of the new ERP to all stakeholders throughout the implementationprocess, especially end users on the front lines. And make sure all usersreceive comprehensive training and support to help smooth their paths toadoption of the system.
Cost overruns: ERP projects are infamous for sailing pastbudgets after the implementation kicks off. Many organizations underestimate theamount of work required to move to a new business system, and that results inspending more money than expected.These cost overruns often show up in a fewdifferent areas.
When internal resources run low, businesses frequently use a softwarevendor’sservices team or third-party consultants more than planned. This is especiallytrue if the solution requires significant customization to meet yourcompany’sneeds. Experienced ERP consultants, whether provided by the vendor or part of athird-party consultancy, usually run about $150-175 per hour, plus travel expenses.Another budget breaker is data migration, which can represent as much as 10-15%of the total project cost, according to ERP Focus. Training costs areone other expense to consider—ERP vendors often offer free basic trainingtocustomers, but you may need to pay for additional training hours or classesduring or after the implementation.
To avoid blowing up the budget, companies should consider these and otheroverlooked expenses, and budget more than they think for them. Coming in underbudget is always preferable to the alternative.
Continuous improvement: An ERP implementation is not a one-offeffort that ends when the new system goes live. The solution must continue toevolve to support new business demands and technology. The project team needs tocontinue to manage the project after deployment, fixing issues and supportingnew requirements as they come up.
Once implemented, business often use ERP systems formore than a decade, so it’s imperative to perform a periodic review toassesswhether the system is still meeting the organization’s needs. Older on-premises systemscan be harder to upgrade than leading cloud-based systems, which automaticallymake new features and innovations available to users. An outdated ERP system canbegin to hinder the business, so it’s worth periodically assessing whetherit’sbetter to stay with the current system or begin the extensive project of findinga replacement.
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