How to avoid the most common errors when implementing an ERP
Avoiding the most common errors when implementing an ERP will allow you, among other things, to avoid unnecessary costs. This happens because implementation costs are multiplied exponentially when these mistakes are made. So keep in mind these recommendations to avoid these mistakes in your business.
Many companies do not see in time that they have chosen the wrong ERP and that it does not serve them. Unfortunately, when they realize this, they must re-implement a new ERP with very high costs. These costs are not only money but also time and organizational disruption.
To avoid the most common errors when implementing an ERP it is good to ask for specialized advice or consultancy in ERP implementations.
This is something that can save you a lot of headaches. There is a total affectation to the company by the ERP systems. It is a total cross-cutting impact of all business processes and human resources.
This means that if there is a serious error, the organization can be paralyzed. The effects of something like this bring important damages. For example, inability to work or perform tasks using manual or old methodologies.
An example of this was what happened to the company HP in 2004. The company had a 5% drop in revenue due to delays. This was also caused by cost overruns and loss of money in the implementation of the ERP.
Vodafone also had a problem with not migrating customers to the new platform. There were errors in collections as well as suspensions in customer services. As Vodafone did not reveal the reality of the situation, the company had to face fines when the problem was discovered. The fine was £4.6 million.
These are examples of errors and their effects but let’s look at errors in particular ERP implementations.
Not being clear about what functionality is required in the organization. Poor planning and a lack of involvement by the company contracting the service.
It happens that several companies implement an ERP in the business without having a clear strategy. It is essential to have a previous strategy and not only implement an ERP because of pressure or because everyone does it. This planning is necessary to achieve a knowledge of internal business processes and thus achieve a full potential of the ERP.
There must be a team that is focused on the process with representatives from all sectors of the organization. Developing an internal audit of the implementation process is relevant.
Another aspect to take into account is the implementation methodology used. It is important to use the most appropriate one for the organization since not all of them are the same.
Not knowing the potential of the tool that is being implemented is another mistake to avoid.
By not knowing in depth everything that is possible to do with the ERP, problems begin to arise with users. For this reason, it is necessary to carry out training in order to ensure a good result in the implementation of the ERP.
Another important thing is to make a periodic control of the functions of the ERP in order to verify that the maximum performance of it is being obtained. Frequent testing to evaluate the adaptation of the software to the business processes is also important.
Now let’s look at the example of the multinational company Nike when it had multi-million dollar losses. Over $100 million in losses when they implemented an ERP incorrectly. It was a supply chain software solution and the failure to pre-test it precipitated the failure.
A serious error is not having an ERP vendor actually involved in the implementation process. This can lead to several problems for your organization.
Although cases like these can be brought to court, no one wants to have to waste time and money without having any guarantee of success. This happened in 2005 in California when Marin County hired Deloitte to implement an SAP system. After two years with errors and 30 million dollars of disbursements plus 11 million dollars in consulting, the project failed. The very unsatisfied client received a $500,000 demand.
Another of the most common errors when implementing an ERP is not giving the project the proper priority. ERP is often seen as an IT project without seeing it as a comprehensive and strategic project for the organization to grow.
It is necessary to take into account that a project of this type has not only to do with infrastructure and technology. The most valuable asset has to do with the human capital that will affect different sectors of the organization.
Poor data migration. This is another error that often occurs. This migration process is not as easy as it requires migrating data between systems that are heterogeneously distributed. Erroneous planning and execution of this migration cause serious problems to the implementation.
Errors that produce high costs for companies.
The costs associated with the time of disconnection are very costly if not properly scheduled. In the United States, these disconnection periods usually cost 3.6% of the year’s revenue. $18,000 per hour costs this for small and medium-sized businesses in the United States as well. For higher-level e-commerce companies, this cost amounts to no less than $7 million per hour.
On the other hand, we have another associated cost that is caused by delays. When a company decides to postpone a project because of the complexities of migration, it loses much more than it gains by postponing the migration.
We also have staff time that implies more associated costs. This happens when the migration is scheduled outside normal hours. Overtime must be paid and costs increase.
Costs due to validation errors: when migration is not validated, there is a delay in identifying problems and the disconnection periods make everything more expensive.
Data loss also causes extra costs. Data is often lost in the migration process by a third of the companies that do it. This means significant losses for companies. It is estimated that half of this data loss becomes a financial loss.
When you want to start the project earlier than necessary. This is when there is no respect for the deadlines required for implementation. An attempt is made to start the project before it is fully operational. This can lead to major problems.
This happened to a pharmaceutical company in France. The National Agency for the Safety of Medicines had a production stoppage when there was an error in starting the project earlier. It had a 50% drop in business in one semester and took several months to recover.
It is worth noting that more than 70% of ERP implementations fail due to poor project planning. Or by a bad evaluation of the company’s requirements. When the ERP provider spends the time necessary to really know how your business works as well as understand the needs, there is more certainty of success.
In resume, you will be able to maximize the potential of your business for several years to come. For this reason, you should select your supplier carefully and avoid the most common mistakes when implementing an ERP. Contact us for more information and ZOHO’s application implementation services from SAGITAZ.