Four lessons to avoid ERP implementation disappointments

30 June 2024 Consultancy.com.au

While there are many benefits to upgrading an ERP system, doing so without proper consideration can leave an organisation open to (costly) risks. Tracey Shearer, managing director of August Consulting, shares four ways how leaders can ensure a successful ERP system implementation.  

Many businesses purchase enterprise resource planning (ERP) systems to manage their core business processes within the organisation – including accounting, human resources and purchasing – in one integrated system.

If correctly implemented, ERP systems have various analytical features, such as performance evaluation, reporting and decision making, which can allow for business flexibility and efficiency gains. If implemented poorly, however, companies can soon find themselves with inefficient processes and dipping user satisfaction.

Tracey Shearer, Managing Director, August Consulting

Tracey Shearer, Managing Director, August Consulting

According to a recent study, almost half of CPOs are investing in technology and digital transformation initiatives. But these investments come with their risks: around 70% of ERP system implementations fail – meaning that digital transformations which should be key enablers of efficiency and business improvement end up costing firms huge sums of money. So, what’s going wrong?

According to Tracey Shearer, a managing director at August Consulting, ERP benefits can only be realised when the systems are aligned with the business strategy. “Many organisations are committing to digital transformation campaigns simply out of an instinctive need to keep up with the competition, or due to legacy systems that are no longer supported, in both cases they need to make sure that the things they are doing actually make sense for their own operational needs.”

When it comes to ensuring success with ERP system implementation, Shearer notes there are four key battles to focus on.

Plan ahead of time

Before doing anything else, Shearer recommends that companies map out their current operational state, as well as outlining which strategic goals they would like to meet with a transformation. This ought to also highlight key pain points, and differences across regions, sites, and categories. With this clearly marked foundation to define the business case for an ERP project, the following implementation can be centred on meeting the broader needs of a business – while being aware of how difficulties that could arise.

“It’s also essential to unpack the potential impacts of implementing an ERP system,” Shearer adds. “Will the changes make processes easier and more efficient, or will they increase complexity, time, and resource requirements? The value vs complexity equation needs to make sense to ensure an ERP system elevates your procurement function and drives supply chain optimisation.”

Strong vendor selection

While vendors might suggest they can do everything, businesses need to ensure they get what they are paying for in this regard. According to Shearer, due diligence is one of the most important parts of a successful ERP implementation, because researching clients can offer insights into their experience with a system – and where they have come up short before; both for out-of-the-box configuration and customisation.

Shearer goes on, “When choosing an ERP vendor, consideration should also be given to reviewing commercial contracts, reference sites, stakeholder obligations, and supplier management capability. Failing to approach vendor selection and management strategically will result in an inferior product that fails to deliver value.”

Clear communication

Highlighting a third key factor, Shearer explains, “Another big challenge you can face in an ERP implementation is what happens when key stakeholders’ expectations are misaligned from what is set to be delivered. A breakdown in communication channels can lead to misunderstandings, which lead to resistance to change throughout the organisation. This is one of the leading reasons why ERP implementations fail.”

Businesses therefore need to prioritise the implementation of collaboration tools, such as project management software and communication platforms. This can help facilitate responsive interaction between stakeholders – staff, the C-suite, the board – with the teams working on ERP change, and help them feel involved with the process. At the same time, regular feedback sessions and workshops with stakeholders can keep expectations in line with the project’s goals and progress.

Seek professional help

“Three-quarters of ERP transformations fail to stay on schedule or on budget, and two-thirds have a negative return on investment,” Shearer warns. “Add to that, outdated and poorly implemented systems become tedious legacy systems that prevent businesses from remaining agile in their industry.”

In this case, it is important that firms seek help from procurement experts, who can help them shape and implement a best-fit contemporary solution that primes your business to meet current and future business objectives. August Consulting itself is well positioned in this regard, with best-practice procurement services, which Shearer says can help “empower procurement and supply chain teams to work smarter to generate time and cost savings.”

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