Damaging your Business with a Failed ERP System
Monday, April 28, 2014
For many organisations the decision to embark on an ERP venture is driven by wishing to improve the business and benefit from the potential the technology has to offer. Too often the level of understanding on what is involved is not adequately understood from the people who make the decision to proceed!
It is a simple matter to see an ERP project as a technology project and apart from making decisions on approving expenditure and a basic oversight of the project, management rarely get involved in driving ERP projects and prefer to delegate the project to middle level management who they believe have the technical skills in computers.
It is easy to see how the implementing company can get swayed by statements from vendors such as proven paths, world class experience over hundreds of implementations, and a host of other comforting terms that are more of a sales pitch to sell the product rather than real expertise.
The reality is 75% of ERP implementations can be put into the category of failure. The definition of failure depends on what the expectations were in the first place. Whilst there are organisations that abandon ERP altogether the majority of organisations implement parts of the system, namely, finance, inventory, order entry, purchasing and some works
order type activity. Whilst these functions offer some degree of process capability it does not utilise the full integration of the technology in terms of planning and control and does not reap the benefits that ERP offers.
The failure of an ERP system is not just confined to areas that are not utilised or that don’t work well. Expecting to fully integrate the functions of the business utilising ERP and turning the system to live running and then finding out post-live running that the system isn’t working because issues such as resources, process reengineering, internal conflicts,
management involvement were not resolved or data wasn’t sufficiently structured or cleaned-up during the implementation stage of the project can lead to operational disaster and in worse case scenarios bankruptcy.
The damage to a business through the lack of accurate information or systems problems not resolved during implementation can manifest in failure to ship and invoice product, failure in order entry, build-up of unnecessary inventory, factory shortages, late deliveries, lack of accurate financial information and significant brand damage.
Whilst these failures are the norm and not exceptions, they are unnecessary. The key to successful ERP adoption is all in the approach taken by senior executives at the beginning of the ERP planning and acquisition strategy.
We have analysed hundreds of MRPII and ERP projects for the past 35 years and have identified 26 key areas that contribute to implementation failure. It is worthwhile just looking at these steps and comparing your implementation strategy against the steps. Contact us for your free copy of a self-assessment.
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