ERP Implementation Support

ERP systems are fraught with danger. There is plenty of evidence to suggest that around 80 % of ERP system implementations either fail to deliver the promised benefits, cost anywhere between 150% and 200 % of the original budget, and run way over time. The opportunity cost associated with the delay in a project is always huge.

The typical scenario is that a company sees it has difficulties in managing inventories, or is failing to give the customer want they want and when they want it. They are struggling in getting reliable forecasts, and cannot get accurate data on costs and business performance.

They will then go through a software selection process with a well-known arm of their accountancy partner or similar, who will then recommend a solution. Today the choice is relatively narrow.

The software company will present benefits in terms of IT cost maintenance reduction, improved cash flow, better control, and improved profitability. The company then signs up the software and a consulting partner. A Project Team and task teams are set-up to implement the system. There are then two possible scenarios:

1. The consulting partner tries to make the business processes fit the tools. In which case the consulting partner goes through a mammoth exercise to do an "As-Is" analysis, does a "Gap Analysis" between the current processes and the way the system requires things to be done, and then forces the new business processes in place. Insufficient time is spent on education and training, so people who are expected to use the system after going live are left feeling alienated, bewildered, inadequately trained, and as a result they resort to spreadsheets, data becomes inaccurate, and the system fails to get used effectively. As it gets closer to the go live day critical things like data accuracy, people training and education get compromised or left out completely. Then you find you can't ship product, customers complain, you lose business, and everyone blames the system.

2. The consulting partner acquiesces to the client, and enables the tools to be fitted to the processes. A simple example is that the current processes allow for negative inventory; product is despatched before it is completed in manufacturing. The system is re-written to enable this to happen. Thus the consulting partner goes through a similar as-is mapping process, the gaps between this and the way the system currently works are identified, and modifications are made to enable the system to do what the client wants. This can lead to modification of the core system. The system is implemented, but in two years time the system gets upgraded, the company cannot upgrade because of the cost of upgrading the modifications. The consulting partner has achieved significant revenue through specifying the changes, and the software partner has charged a significant amount extra for the upgrades. Additionally, insufficient time has been spent on education and training, and users revert to spreadsheets.

Either which way, no-one from the project ever admits anything other than success.

Often a lot of time is spent doing process analysis independent of how the system will handle the processes. At worst this can mean that when the client comes to try transactions in the system, the system will not handle the processes that have been designed.

There are three elements to a ERP system implementation. The tools, the processes and the people. The thing that causes most ERP implementations to fail is the absence of an adequate People Education and Training programme that manages everything from getting people to understand which keys to press in which order through to managing the sensitive cultural aspects of organisational role changes, and job alteration, either through automation or substantial role redefinition.

The Delos Partnership has developed - through many successful ERP implementations - a well-defined process for successful implementation. The key elements are :

1. Choose a system which will meet the criteria laid out by Chris Gray. See the Right Choice book, available from this website http://www.delospartnership.com/innovation/books.htm. We will help you find one quickly, depending on your industry and size of company and type of business model. We do not waste too much time on As-Is [you are going to throw a lot of it away], and we know what to look for in systems, so we don't waste too much time and your money reinventing wheels. We suggest you start implementing Sales and Operations Planning or Integrated Enterprise Leadership now. It sorts out your processes, and gets the organisation on a formal process footing.

2. Develop Company II - get all managers and the senior team to understand what is best practise in terms of ERP systems, Lean and Six Sigma, and develop the working model that incorporates the way that the company will work. Build this around the chosen system. Use a small project team to develop this. You need a full-time Project Leader who comes from the business and not IT and 2 full-time people for every two hundred people in the company up to a total of 10 people. Our Education from the Top Management Overview, to Master Scheduling and Lean and through to Data Accuracy should be used to get understanding of how the company should be run. This will take 4-5 months to complete.

3. Set up task teams who will then go on and develop all the details of the way the company will be run. They will develop how the system will be used, the ways of working, the roles and responsibilities, the performance measures and the kind of culture you want to have in place - eg teamwork, and absence of blame culture. An output of this is a complete definition of the way the company will run. You know it will work now. All you have to do is get people to understand!

4. Educate and Train everyone in the company on how the systems and processes will work, and build this around business pilots, to test peoples' understanding and to test the chosen ways of working will operate. As a rough rule of thumb 80 % of the people need around 80 hours of Education and Training, and 20 % need between 20 and 40 hours. Pilots should last around 3-4 weeks for 3 hours per day, and be held at critical points. Often consulting and software companies run pilots, but they test the software and not the combination of people, systems, processes and organisation, and so when they go live people still really do not understand and follow the formal processes. They are done through predetermined scripts, rather than as a simulation of how the company will run. Hence after go live, people who have not fully understood go back to spreadsheets and the old ways of working. This will take 8-12 months to complete. That may seem a long time. It is short compared to getting the project wrong.

There is always a debate about going live big bang or modular. Going big bang is perfectly possible if sufficient time and money has been spent on education and training. If not it will be a disaster. Going about an ERP implementation module by module as a way of testing the system only delays the overall implementation and means having to work with existing systems via manual or system interfaces for too long. In the end you are implementing a new company with new ways of working and new systems, and not a software system.

Our fundamental point is that the risk of failure is not with the system [on which people will spend a fortune] but on the quality and detail of the education and training required to get people to work with the new system, [on which people spend very little]. Around 10-20 % of the IT cost should be invested in Education and Training and change management. This will provide 80 % of the benefit. It is an unfortunate statistic that around 80 % of the cost of the project in terms of software and hardware only contributes to around 20 % of the benefit. Most companies try to get away with < 2 % on Education and Training. Educate, educate, educate and train, train, train.

All of this is described in our ERP implementation documents, which you can download at http://www.delospartnership.com/innovation/articles.htm.

  • ERP Implementation Guide
  • Seven Habits for a successful implementation
  • White Paper on ERP Implementation - pilots