An ERP Diary

Over the next few weeks, I’m going to be doing a series of posts that talk about some of the lessons that I learned while implementing an ERP.

Abstract

The fierce competition in the market place is driving many changes in the corporate world to cut costs, be more productive and be cost-effective. Many corporate are looking at ERP as a means to achieve these three objectives. However, the corporate history of ERP implementation is a mixed bag with many horror stories and some successful ones.

This series of posts addresses some key lessons during the course of ERP implementation which can make the ERP implementation smoother, more efficient and meet the stakeholder’s objectives. It also analyses the essentials of a successful ERP implementation like A Systematic Approach, Top Management Involvement, Managing Requirements, Intensive Communication, Effective Change Management, and Methodical Data Migration. Each topic is diagnosed in detail to arrive at the critical factors in each area. The paper concludes with a summary of the key take away for a successful ERP implementation.

Introduction

ERP (Enterprise Resource Planning) implementations are specialized projects and companies have been using them since the mid-90s. Over the years this technology has matured and continues to do so with the increasing demand. These systems are very expensive, are bound with aggressive schedules and involve diverse teams be it business users, developers, consultants. AMR Research has calculated that, in 2005, companies spent $14.5 billion on licenses and maintenance.

If things do not go well, implementation can lead to many roadblocks, dead ends, schedule and cost overruns, possibilities of wrenching business-process change, rendering it counter-productive and gnawing uncertainty in the minds of employees.

Here are some horror stories:

  • “ERP is the Ferrari you crave, but it comes without throttle and brakes,” Paquet said.
  • A mere 5% of projects were a major success. (McKinsey)
  • Users rebelled. Morale sank, turnover soared and help desk calls reached 300 per day. In June 2000, Nestlé halted the project in the mid rollout. (Nestlé’s ERP Odyssey)
  • The Hershey foods ERP system implementation failure leads to massive distribution problems and loss of 27% market [1]
  • The FoxMeyer drug ERP system implementation failure leads to the collapse of the entire company [1]
  • State of Florida welfare system was plagued with numerous computational errors and $260 million in overpayments [1]
  • Every year, hundreds (if not thousands) of companies try implementing Enterprise Resource Planning (E.R.P.) systems like SAP, JD Edwards, PeopleSoft or Oracle.  More often than not, once completed, these initiatives do not meet business expectations or deliver expected results.  Some of these are outright failures – systems scrapped, CIOs fired. [2]
  • And the list goes on…

To achieve this and implement a flawless ERP, it requires a complete understanding of the business, the utmost committed best and brightest workforce. It also means planning of every single aspect, close tracking of every minute activity and most importantly continuous engagement and support from top management. Care and precision are the watchwords here that would guide the team to lead them on successful implementation.

It also involves professionals with the ability to foresee possible bottlenecks and provide a solution. while the implementation itself is nothing less than attempting to walk on a rope that is tied on top connecting two-fifty story buildings!

Crucial bolts in the machine

There are many factors that impact an ERP implementation but there are certain key areas that have to be addressed. This is not a complete list but the most important one to be addressed.

  • Align your wheels or you will be off the road
  • Let the boss work
  • Spend enough time for your grocery list
  • “Chinese Whispers” strictly prohibited
  • Do you think Change is very easy
  • It’s not easy to clean the old mess and move on to a new one

References

[1]  A Recipe and Ingredients for ERP Failure  by Ernest Madara
[2] http://www.squidoo.com/erplessons  by David Winter

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