Although information systems for ERP management have many years of history, the successful implementation of an ERP is not an easy task. In this article we will point out some of the situations that we have encountered in our professional experience and that we hope will help you avoid making these mistakes.
In this first article we will briefly define what an ERP is and what it is for and a global vision of the implementation process. In the following article, we will develop a methodology for the implementation of the ERP as well as twenty tips that will help you to achieve a successful implementation.
An information system for ERP management can be defined as a business management application that integrates the flow of information, thus improving processes in different areas (financial, operations, marketing, logistics, commercial, human resources…). Thus, the main objectives of ERP systems are:
1. Optimization of business processes.
2. Access to reliable, accurate and timely information.
3. The possibility of sharing information among all the components of the organization.
4. Deletion of data and unnecessary operations.
5. Reduction of time and process costs.
After seeing the wide possibilities of an ERP, it is important to note that the correct implementation of an ERP entails radical increases in productivity as well as the possibility of having better information in decision-making. The implementation of an ERP, in most cases, is not proposed to achieve small improvements but radical improvements.
Given the characteristics and possibilities of ERP, it seems clear that the organizational change necessary for the implementation of an ERP is very important since processes have to be remodeled and people from different areas have to be involved, creating multidisciplinary teams.
To assess the complexity of an ERP implementation, we must take into account that the following six elements interact in an implementation:
1.- The ERP (management information system).
A priori, it may seem like the most important piece of the implantation process, although, as we will see later, it is not. The correct management of change is more important than the ERP itself.
In the market we can find hundreds of ERPs with different characteristics and prices. On the one hand, we can find horizontal ERPs (which serve any type of organization in any sector) and vertical ERPs (developed or parameterized to meet the specific needs of a sector).
The basic thing is to understand that each organization has different needs and that the ERP and its parameterization will depend on these needs. Therefore, as an ERP is not a "standard" solution and the valid solutions for other organizations may not be valid for ours.
It is common to find how a company begins the implementation of an ERP because a company that knows about another sector and other characteristics is happy with the one they have. Clearly, this second company can work very well with the implementation of its ERP, but if both organizations are not alike at all, does it make sense that their "ideal" ERP is the same?
2.- The people and the culture of the organization.
People are key in organizations and the impact of an ERP implementation on them is very important. Obviously, change management is a key element.
Therefore, the correct analysis of user requirements and integrating them from the first moment of implementation is key to achieve good results with the project.
In addition, the improvements that each person in the organization will obtain with the implementation must be defined exactly and a communication plan defined to “sell” the project to all the people in the organization.
In addition, it is unusual for organizations to have staff with a vision of both business and technology who can lead the project, so the work of external consultants, and specifically the project manager, is very important.
3.- The strategy.
The “ideal” process would be that the technology plan - including the ERP and its associated hardware - supports the corporate strategy and not vice versa, as some ERP manufacturers maintain.
Basically, the idea is that having the organization's strategy perfectly defined, the necessary technological resources are associated with it so that it can be executed.
4.- The hardware.
Although in principle the hardware is not the most complex part of the implementation, in some cases we find that the poor choice of hardware or system design reduces the overall performance of the implementation.
In this sense, it is essential to define exactly the system requirements and thus design the solution in such a way that neither more nor less is invested than is necessary.
5.- The processes.
It must be considered that in addition to people, processes are those that define the efficiency and effectiveness of the organization.
Therefore, in the ERP implementation project, the processes must be redefined to improve their efficiency and effectiveness.
The correct approach is to redefine the processes - with the possibilities that ERP offers - as a step prior to implementation and that the new processes are supported by ERP.
However, it is common to find ERP implementations in which, after implementation, the processes are executed exactly the same as before ERP. This is a big problem since no improvement is achieved in the costs or times of the processes.
Even if we have the best ERP in the world, if the processes are not remodeled, they will continue to be as efficient or inefficient as they were until the moment of implementation, and then, the implementation of ERP will have little or no impact on effectiveness and efficiency.
6.- The rest of the existing management applications in the organization
It is increasingly common for organizations to have different applications for management. Among the most common applications are own or sectoral tools (for example, budget calculation), Customer Relationship Management (CRM), Business Intelligence, Supply chain management (SCM), etc.
In most cases, all applications have to be connected to the ERP to achieve efficient information management. For this reason, the integration between the different applications (EAI) is an increasingly complex task that affects the final results of the implementation.
In this sense, it is also important to assess the advantages and disadvantages of all management applications being from the same manufacturer. As for the advantages, obviously the integration is better and easier. However, choosing all solutions from the same manufacturer takes away freedom in the decision process.
It is important to note that the entire approach developed here and the one that we will develop in the following article is applicable both for organizations that are considering their ERP implementation for the first time and organizations that already have an ERP and want to replace it or improve results.
We will discuss the proposed methodology as well as the twenty tips that will help you make the implementation (or re-implementation of your ERP) a success.
In any ERP implementation there are two totally different phases:
1. The “pre-implementation”, that is, the prior analysis to define the project objectives, functional scope, total cost, necessary resources, specific needs of the organization, schedules, etc. in order to evaluate the profitability of the ERP implementation.
2. The own implementation project including developments, parameterisations, training, etc.
We want to develop the pre-implementation methodology and that will be very important to achieve profitability of the project. This phase is usually underestimated and on many occasions this analysis is not carried out, leading to implementations with poorly defined objectives and a multitude of problems.
The concept that has to be clearer is that the success - or failure - of the implementation is determined by a set of three elements:
- The organization where it will be implemented: the strategy, its people, the culture, the processes, The different consultancies that offer the pre-implementation and implementation services The chosen ERP, that is, both the product itself and the manufacturer.
It is common to find organizations that have not developed the pre-implementation analysis correctly and therefore have not chosen the solution well. Therefore, the prior analysis must contain at least the following sections:
1. Initial analysis of strategy, technology, processes, people and organization. In this phase, a deep analysis of the strategy, people, processes and technology must be carried out in order to propose the best solution from both the technological point of view and the management of the associated change. At this stage, work teams will be created to carry out this analysis and for subsequent work.
2. Definition of the functional scope of the ERP implementation, that is, what areas and functions the implementation will comprise, as well as a first planning approach.
3. Definition of objectives of the ERP implementation.
Clearly, there will be tangible objectives (reduction of costs, improvement of effectiveness and efficiency of processes, reduction of delivery time, reduction of inventory levels, etc.) and other intangibles such as having more information and knowledge for the decision making.
Obviously, all of these objectives must be integrated into the organization's strategy.
4. Definition of the improvements in the processes and organization that the ERP implementation will provide.
This should not be a statement of intent, but rather the organization's processes should have been modeled and the impact on them of the ERP implementation should be recognized.
In this phase, quantified improvement objectives must be defined for each of the processes and must be integrated into the project calendar.
5. Definition of the change management plan to achieve the change in a non-traumatic way.
Within this plan, the internal communication plan is very important to "sell" the benefits of the project to the members of the organization to ensure that everyone perceives an improvement with the ERP project.
6. Choice of the most appropriate technological solution and implanter based on the analysis carried out in the first phase as well as the modules and necessary parameters.
At least the following parameters will be used to choose the ERP:
- Quantity of requirements for the specific case resolved by the standard ERP Flexibility to adapt to the requirements of the specific case Cost of the solution Experiences and success stories in the sector Quality of the VAR (Value Added Reseller) Financial strength of the vendor.Technologies used.Stability in the technologies used.Number and profile of clients.Technological robustness of the solution.Investment in R&D. Customization capacity. Number of modules adaptable to needs. Ease of use. Implementation methodology. Independence of the operating system and database engine Usability Scalability Flexibility to manage new lines of business
For implanter evaluation, at least the following parameters will be used:
- Experience in the sector Cost. Knowledge and experience of the staff, especially the project leader in product implementations. Knowledge and experience of the staff, especially the project leader in product implementations in the sector. Implementation methodology. training.Experience with the product.Geographic proximity.Global presence.Commitment in the implementation.Knowledge and experience in systems integration.Capacity of staffing.Financial stability of the implanter.
As can be seen in the choice of both the product and the implanter, cost is an important but far from definitive parameter.
7. Definition of an approximate calendar and associated budget.
Obviously this phase will be directly related to the previous phase since depending on the technological choice and the attached developments, the calendar and budget will vary.
In this section, all the items that go into a project of this type have to be calculated:
External costs
- Application licenses.
- Custom development.
- Implementation consulting.
- Hardware.
- Training.
- Costs of updates and maintenance.
Internal costs
- Hours dedicated by the organization's staff to the project.
- Problems that may appear due to the implementation of the ERP.
8. Define the return on investment (ROI) of the project and the key KPI parameters to define the monitoring of the implementation as well as a sensitivity analysis to the variation of certain parameters.
9. ERP implementation
This section will not enter into this article as it will be the subject of the next article in this series.
10. Monitoring and strict control of the previously defined objectives as well as the critical elements for the profitability of the project.
It is very important that there is a strict control of the project so that the objectives defined in the early stages are met.
In conclusion, it is important to highlight the importance of the analysis prior to the implementation, since in most cases it will define the success or failure of the entire subsequent project.
