The Proven ERP Implementation Path Myth
I find in my email inbox endless articles on how to ensure successful ERP projects!
The focus of these articles is always around selecting an ERP package with vague comments about asking different areas of the business on what their requirements are and about having these requirements demonstrated in some way by potential software suppliers.
This advice by consultants and software suppliers is couched under headings such as “Proven Path” or some other term that indicates that the advice is a sure way of being successful with the ERP project. The success rates across all ERP implementations is somewhat less than flattering as around 70% of all ERP implementations fail to meet the expected returns.
The reality is the selection of software is way down the list of things that have to be done prior to even looking at software. Our experience over the past 37 years in the integrated systems field from original MRP to MRPII and then ERP has shown time and time again successful ERP is far more complex than just software.
ERP projects can be broken down into three main areas of activity:
1/ Preparation; Putting together a project team and providing education in what the technology is and what it can do for the organisation. Other activities include reviewing all of the data that would be used in any ERP system to ensure it is clean and any bad data removed, establishing KPIs and measuring performance as a starting point, structuring data. I.e. bills of material and routings for a manufacturing company, inventory control processes and accuracy, the design of an ERP model specific to your organisation that can be tested against in any downstream software demonstration, a risk analysis of the stage 1 of the project on the overall ERP project.
2/ Preparing a software specification based upon your model and any specific area requirements that is identified in the construction of the model. Stage 2 is the time a cost justification is prepared with realistic cost and savings estimates, a risk analysis of stage 2 and the potential impact on the overall ERP project.
3/ Software investigations and demonstrations against your model, negotiations with software suppliers, a detailed project implementation plan with realistic milestones, a contract linked to milestones and payments, a risk analysis of the implementation of the software.
4/ Implementation of the software into the business including training, data migration and testing of the software and project reporting including ongoing reviews and risk analysis. Live running and ongoing KPI measurement against original cost justification.
The activity carried out long before the purchase of software costs less, prepares the company at a cost much less than trying to carry out these activities during the implementation stage of the software.
The cost in preparing and implementing an ERP system will always be there whether you are successful or not.