How to overcome the challenges of ERP
ERP is a complex system of interconnected databases covering accounting, sales, production, quality, engineering, that is used throughout an enterprise. ERP is a very expensive tool with costs that can range from tens of thousands to tens of millions of dollars. ERP, once chosen, is a system that will be used for a decade or longer which makes selecting and implementing the right system extremely significant. Challenges related to ERP are almost never-ending and are worth much consideration, let’s discuss some problems you may face during your ERP selection and implementation.
Challenges during selection
The first steps of ERP selection
The first and possibly the single most important challenge is to define your requirements for ERP. For most of us, this will involve a series of meetings and conversations over time. ERP is an enterprise-wide tool so every department or function must be included and set out the requirements they perceive. Once all the individual requirements are listed these need to be analyzed. Some will be the same requirement stated with different words. Some might be mutually exclusive. Come to a consensus on the requirements to be used to select your ERP. Keeping Eli Goldratt’s maxim in mind will help: the optimal organizational goal is greater than the sum of individual goals.
Take your time working through your challenges. The ERP you choose will be yours for years to come. Now that your requirements are ready, look at them as SMART goals and objectives. In case you forgot, these are specific, measurable, attainable, relative to your business, and time-based. Your requirements need meaning and substance. Restating the requirements in this way allows the benefits you hope to gain to be quantified and will lead toward a return on investment statement.
Now it is time to rank your requirements. Those at the top of the list you can define as “must have”. There will be a line where the following requirements listed will be only “nice to have”, you want them but can live without them.
Uncertainty is another challenge. You and your team are looking forward ten or more years. Be confident in your work so far. Remember, too, that your requirement list is not chiseled in stone and it can be updated later when you move toward your future.
ERP vendor challenges
Only now is it time to begin conversations with ERP vendors. There are a lot of them, which is another challenge. You can weed out a few as their products are clearly aimed at an organization different from yours. You will find some whose offering seems specifically aimed at your business and others where their offering is aimed at a broader market. Ask your friends and LinkedIn connections for suggestions. Read your trade magazines. Search the internet for ideas. Narrow your choices to a reasonable field and contact those vendors. You now are looking for two objectives: how does your requirement list fit their ERP, and is this a vendor you can work with?
Some vendors work with only one ERP product and others might work with several products. Some specialize by industry or by the size of their client businesses. Talk to enough candidates. Look at all they offer. Dive deeply into the features or the ERP systems they represent. Understand these features and determine how to compare the apples from one to the oranges another sells.
Selecting the right ERP features
All those features are nice. Only those that relate to your requirements are important for now. Those features that achieve your requirements are benefits and the others are only sizzle in the skillet. Your challenge next is to verify as best as you can whether a particular ERP feature truly meets your requirement. Focus product demonstrations on this objective. Visit other users of that ERP and gain from their experience. Listen to what the salesperson says between the lines.
At this point, you are choosing both an ERP and a vendor. You could find two vendors representing the same ERP. You might get the ERP directly from a developer and your choice of vendor is more for support and implementation. You might think two ERP systems can meet your requirements with similar results. Set product demonstrations up with your leading candidates. Develop a system internally to measure those demonstrations. This might be a questionnaire that members of your selection team complete that you can use to score the demonstrations. Consider scheduling several demonstrations aimed at different functional groups within your business.
After the demonstrations, your vendor list will be very short. Ask each one for a proposal. The proposal should include the cost of the ERP as well as implementation and maintenance costs. There could be holes in some proposals. If one vendor does not cover data conversion, you will need another resource, internal or external, to provide the work necessary.
The final ERP selection hurdle
The last selection challenge is to negotiate the best deal from your chosen vendor with the best ERP for your organization.
Challenges during implementation
Selecting your ERP project manager
OK. The agreement is signed. Your ERP software is downloaded. Ready to start? Not so fast... The first challenge now is to assign a project manager and define that person’s role. Many promote a PM from within the organization. That person is proven to have good skills and is well known. Likely they are ready for a new challenge and potential promotion. Other businesses look outside and hire a consultant who has experience in leading ERP implementations and similar long-term vital work. There is no one right way to proceed.
Your project manager must communicate regularly with executive management assuring them the work will be completed on time, within budget, and that it will deliver on the promises made. Their other role is to lead a diverse group of people from both inside and outside your organization and accomplish your ERP project’s objectives. Some of those people will be full-time and others part-time. All of them will need to quickly become a team dedicated to the mission, leaving their previous jobs behind.
The PM will start by breaking the mission into discrete tasks assigning people to work on those tasks with deadlines set. Like any project, some of those tasks will be dependent on previous tasks and others will stand-alone. Using project management software and keeping public Gantt charts visible are useful tools. Every task must have realistic deadlines. If one cannot be completed on schedule with available resources, the next task will fall behind schedule even before it starts. Management might ask for a 15-month completion but if the schedule shows 24 months, management might need to revise their hopes.
Legacy ERP data
Data quality from the legacy systems will be an immediate challenge. There are likely several systems with data in a variety of formats. Fields in the legacy database will not align with fields in the new ERP. The new ERP will need data input in certain sequences in order for internal data validation to work. Some legacy data often is known to have deficiencies that could be one of your reasons for a new ERP. This domain will surely show new challenges as you learn over time what you did not know you needed to know. Your team must become good at data quality in the new ERP, as they will need to load new versions of the same data in several iterations during the testing phase.
Testing is the next challenge. Begin with single transaction tests and move to process tests across several functions. Finish with testing across all functions from the point of receiving an order until that order is delivered and paid for by your test customer. Some tests will get a green light right away. Others will have problems to resolve. Was there some ERP configuration to fix? Was there an unexpected problem with the data? Was it simply a training issue to work out? Testing should yield a string of surprises and finally good experience of how your business will operate tomorrow.
Testing needs to be repeated too. Some tests next week will require an adjustment that turns last week’s green light to a red light. You will reload data into your ERP several times during testing. Track how long the reload processes take. When you reach your go-live date, you will need to schedule many tasks in as short a time as possible allowing your users and your business to return to work quickly. Consider using test software to automatically run and rerun tests with no persons required.
Your PM must ensure management remains committed. One good test is when one of your team is asked to return to their previous job for some emergency. Management committed to the project will likely say “no”.
Change management is a major challenge. Some workers will resist the change to your new ERP. Was there some shortcoming they saw that needs to be resolved? Is that person simply stubborn? Other workers will eagerly accept the ERP. The PM must pay attention to all workers to ensure the project really is complete and used as planned.
Some employees will leave. Whether they were dissatisfied with the ERP or just found new jobs, their replacements must be trained to start with the new ERP and perhaps become a tester. Try to retain good employees as each turnover makes a new challenge.
There must be a mind shift in your workers with the new ERP. They did their work a certain way yesterday and it was well done. Tomorrow they will need to use new tools and new processes to accomplish the same work.
You will see culture changes too. Yesterday your business ran using Excel spreadsheets that were quick to develop. Tomorrow your processes using ERP will become more rigid.
ERP risk management
Every challenge presents new risks. However, as we have seen, every challenge can be met and overcome. Yes, some risks will always be present. Maybe the greatest challenge is to anticipate the risks in the future and have a plan to work past or around that yet unknown risk. You can overcome all the ERP challenges you will meet. Many others have already completed successful ERP selection and implementation projects and you can as well.
Featured white papers
ERP Software Pricing Guide
Get your comprehensive guide to the cost of ERP softwareDownload
60-Step ERP Selection Checklist
Get the comprehensive checklist for your ERP selection projectDownload
ERP Implementation: 9 steps to success
The 9 proven steps you should follow when implementing ERPDownload
Open source ERP risks: can your company overcome them?
Considering an open source ERP solution? Here are some of the risks...
Risk management and ERP implementation: three tips
Actionable advice for managing risk during an ERP implementation project.
Risky business? Why looking at ERP and risk management pays off
Advice on business and project risk, and how to plan for it during implementation