ERP: What are the problems areas?

The B2B Centre has been involved in helping clients choose and manage the implementation of ERP (Enterprise Resource Planning) systems for some time. We have also found ourselves sorting out problems with ERP both at the implementation phase and when systems up and running.

Martin King-Turner, Director at the National B2B Centre, takes a look at some of the issues that he has encountered and provides some suggestion to help you avoid them.

Introduction

It is worth saying upfront that bringing ERP into your business, whether you’re an SME or a corporate organisation, is a significant decision. There is no hiding from the fact that problems do arise with implementation and use of ERP systems. My experience is, though, that ERP attracts more than its fair share of difficulties even though there are tried and trusted procedures and methodologies that can be used to achieve success.

So let’s take a look at some of the big issues and importantly what you can do to prevent them.

ERP as technology and not a process

Perhaps it boils down to the word “system”. ERP is often recognised only as shorthand for a computer system rather than as a “set of detailed methods, processes and routines established to perform a particular activity”.

ERP should be viewed as more than simply a software application. It is intended to automate and integrate core business processes such as taking customer orders, scheduling operations, and keeping inventory records and financial data. So organisations that believe ERP software on its own will lead directly and quickly to dramatic improvements in business efficiency are starting from the wrong place entirely.

The outcome of a purely technology led project is often failure. The starting point, therefore, for a successful ERP project is that it encompasses the entire way the business operates.

Poor definition of requirements

Understanding what you expect to get out of ERP and being able to articulate that understanding in a format that suppliers can propose against are vital to a projects success. It would be an exaggeration to say that I have seen requirements defined as basically as “We need an ERP system” but sadly not too much of one.

The requirements definition process isn’t just for suppliers, it’s for your business too. It provides an opportunity to think about how you want to work, how the processes used in different parts of your business will need to change, what is required above and beyond the technology (e.g. HR support, database cleansing) and what sort of partners you want to work with.

So take time to create a detailed requirements specification. This is not a job for a trainee and probably not for your IT department but for someone senior and capable – an experienced head who can pull in the input of senior people. The sponsorship of a board member who will benefit from the solution is also essential.

Vendor pressure

I don’t want ERP suppliers to take this the wrong way: you have a job to do and most of you are trying to do the right thing by prospects and clients. However, small companies rarely have the IT project management skills to manage the pressure that they come under both during selection and when an appointment has been made

If you haven’t told a supplier what your requirements are they can’t explain how their solution will solve your business problems. All they will be able to do is talk about how their system will solve generic problems or explain why their system’s features are better than the competition’s.

Vendors usually put Project Management in as an item in their proposals and it is often the first thing to go if buyers say the price is too high, yet it was put in for a reason and still needs to be done. Even when the requirements specification has been well drafted and there is a strong contract in place, there will be divergences between client and supplier in terms of expectations and ability to deliver.

Unforeseen costs

Because ERP can encompass so many parts of the business it is easy to run up an unexpectedly large bill for setting up and running a system.

Particular areas that I have seen issues in are:

  • Integration with other systems, new or existing, where customised interfaces are required to be able to talk to an accounts package, for instance.
  • Database cleansing to make sure that client information is in an appropriate state to be used in the new system.
  • Having to pay for external trainers because “train the trainer” didn’t work or because the system was more complicated to use than expected.
  • Expecting the vendor to manage all elements of your project even those which are internal to your business.

For an SME putting in place ERP for the first time it is easy to see this extra expenditure as unforeseen. In this instance there is no substitute for experience and it is really important to get help from people who have done it before. To be fair your supplier should have a lot to say on these issues. You may want to suspend disbelief for a moment and listen to what they have to say without thinking that they are simply trying to charge more. Alternatively there are plenty of ERP consultants out there who can provide advice.

No buy-in

Lack of buy-in for ERP is often associated with senior levels in a company leading to an “if the directors don’t use it, it can’t be important” attitude among staff but often occurs at lower levels because no one has told the staff why ERP is important to the business.

Most of the attention is given to situations where projects are given the go ahead on, say, the whim of a CEO but without the backing of the rest of the board, and of course that is a big problem.

In smaller companies my experience is that projects are started with the full support of the management team but without the buy-in of the people who have to use the system and work with the processes.

After a while you have a situation where the technology is still in place but where all of the old ways of doing things are back in place. The obvious signs of a problem are a proliferation of post-it notes around an office with important reminders or customer details on them, and the use of spreadsheets to present reports that should have been ERP system generated.

Implementing new systems and new ways of working is a change management issue. You have to demonstrate the reasons and the advantages of making the change to everybody involved and continue to demonstrate leadership on an on-going basis.

What does good look like?

ERP done right has the ability to improve performance across the organisation both in the efficiency of the operation and on the bottom line in terms of revenue and profit.

You would have thought that it would be relatively easy to define some measurable objectives and utilise a set of metrics to track performance and quantify success. Unfortunately this doesn’t always happen and organisations are left in a position where an objective is either unobtainable or unmeasurable – nobody knows whether ERP is any use or not!

So greater consideration of what to measure and how to measure it is required. Be clear about what you want to get out of your ERP implementation upfront. Then use the system itself to track performance and make changes.

Summary

All of the problems that have been outlined in the article are actually easily avoidable. Mostly it takes a bit more upfront planning, a little more understanding of what ERP really is, a realistic review of your capabilities and resources and, perhaps, a little more input from people who have done it before.

If you are considering an ERP system, experiencing a painful implementation or suffering from lack of success with something that’s already in place then feel free to get in contact to see if we can help.

Martin King-Turner
Managing Director, The National B2B Centre Ltd.
martin.kt@nb2bc.co.uk