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.
What is ERP implementation?
ERP implementation is the process of examining current business practices, strategic planning, streamlining operating procedures, installing and testing software, cleansing and migrating data, managing change, training users, going live and maintaining support. It’s not a one-time event, but rather a continuous process or life cycle.
7 Steps to Successful ERP Implementation
The seven key steps for a successful ERP implementation are:
Some steps may overlap or need to be done simultaneously.
The first step is to define the need, vision and scope of an ERP solution. You’ll need to form an implementation team that can communicate effectively and has the knowledge and commitment to guide the project from beginning to end. The team should include the following roles:
Pro Tip: For the users, select employees who are most impacted by the ERP software. Include them in brainstorming and decision-making sessions. They’ll have the greatest incentive to work toward a successful implementation.
The team should document and examine current business processes and map out how they flow from one department to another. It’s important to identify common problems or errors, duplicated or unnecessary efforts and missed opportunities with customers.
According to Andrew Bolivar, Director of Ultra Consultants Center of Excellence, “We have found it instructive [to do] a thorough evaluation of the current state of business operations and then a detailed definition of what the desired future state would consist of. If the company has no perspective on what success looks like, they are unlikely to take full advantage of what a robust ERP solution can deliver.”
Understanding your current business processes will help you set goals and objectives for an ERP implementation. Remember to be specific. Decide on key performance indicators and quantify your desired results. Define the exact requirements you want in your ERP solution. Put together a reasonable timeline and budget.Pro Tip: Set your goals and objectives before you purchase an ERP solution.
ERP software installation is also an opportunity to evaluate your current operations and re-engineer business processes into standard operating procedures. Figure out which processes to automate or keep manual and then design a blueprint of how new business practices will flow.
The application developer will be responsible for installing the software and building the infrastructure, such as networking facilities and data collection or display devices.Pro Tip: Don’t lose track of the project’s progress. Keep an aggressive but flexible timeline. Remember that you’re ultimately responsible for your ERP implementation, not the vendor or consultant.
The next step of ERP implementation is data migration, or transferring all records and info to the new system.
Many organizations store their customer, supplier and physical asset records in multiple formats and databases that contain errors and unnecessary information.
This data should be reviewed and edited for accuracy and uniformity before migration begins. Any out-of-date information should also be removed.
When the data has been updated and verified, the application analyst migrates the data to the new system. This step involves setting up new databases, mapping database fields between the old and new systems, and transferring the data.
The quality assurance test engineer is in charge of the next step: testing the system. All interfaces, functionality and reports should work with real-life scenarios and transaction data.
Users should also validate that business processes are flowing correctly between departments.
It’s vital the system is thoroughly tested before the go-live date. User training, discussed below, is another opportunity to see if there are any errors in the system.
Training users requires significant time and effort, especially considering employees are also expected to carry out their normal responsibilities throughout the process. How long it takes will depend not only on the size and complexity of the ERP solution, but also on the mentality that employees have about changing the way they work.
Users may “find it difficult to change roles, processes and behaviors that they may have learned over many years of work,” according to Jennifer Gostisha, Senior Manager at Epicor. “Managing change is a constant, ongoing process that needs to start from day one and continue throughout the implementation to the end-user training at the close of the project.”
In the beginning, you should prioritize thoroughly training the trainers. Provide opportunities for users to offer feedback and for the implementation team to act on it. Consistent, meaningful communication between users, trainers, the implementation team and the vendor will decrease the likelihood of lost productivity after deployment.56% of ERP implementations result in some type of operational disruption after going live, which is frequently attributed to inadequate training.
Some vendors also provide user training and onboarding support, such as live classes, e-learning modules or written manuals. Training may be included with the software purchase or require an additional fee. Be sure to ask your vendor what type of support it offers to new users.
Depending on how large an ERP project is and the resources available, companies can choose between three methods when going live and deploying the software:
- Big bang – All users transition from the legacy system to the new system in a single day. This method is the fastest and cheapest option, but technical difficulties can cause major operational problems.
- Phased approach – Users transition by business unit or function. The implementation team can improve transitions with each group, but the process will take longer, and integrating ERP modules individually can be difficult.
- Parallel operation – Users run both systems simultaneously. Because there’s a system to fall back on, this method is the least risky. However, users need to spend more time duplicating their work, and running two systems is expensive.
Your company should be flexible and available for unexpected challenges on the go-live date. Have additional, temporary IT staff on hand, as well as employees who can work overtime. Develop a communication strategy in case of system downtime.
When the ERP software has been deployed, you’ll need to test and audit the system again for accuracy, reliability and speed. Prioritize the balance sheet, as well as the inventory and accounts receivable ledgers. IT should support users as they verify, document and modify businesses processes in the live ERP system.
Many companies believe that ERP implementation ends on the go-live date. However, it requires ongoing maintenance of the software and support for its users. Budgeting time and resources to identify issues and fix errors will be important throughout the entire life cycle of the ERP solution.
In addition, after going live, start evaluating the success of the ERP project. Consider key performance metrics that are tied back to the goals and objectives of the project:
- Costs compared to the budget
- Return on investment
- Decrease in human error
- Increase in manufacturing or supply chain productivity, customer engagement, etc.