8. How can organizations reduce risk associated with ERP implementation?
What is an ERP System?
An Enterprise Resource Planning system (ERP) is a type of software that is used to integrate and manage the cross-functional activities of a business. It is designed to automate, streamline and smooth the many processes involved in running a business – from managing inventory and accounts payable to customer relationship management. An ERP system offers numerous benefits to businesses seeking to improve their efficiency and accuracy across the board.
Measurement of Successful ERP Selection
When looking to implement an ERP system, it’s important to consider the measurable outcomes of a successful implementation. Any successful implementation should be able to demonstrate the following four success criteria: improved business processes, better customer service, increased profitability, and increased returns on investment.
5 Common Mistakes in ERP Selection- Explain each mistake and give a solution to it.
1. Prioritizing cost-cutting over needed functionality -When selecting an ERP system, many founders prioritize finding the cheapest option available, sacrificing necessary functionality for the sake of saving a few extra dollars. It’s important to find a system that not only meets current business needs, but also can accommodate future growth.
Solution: Research ERP options and prioritize systems that are robust enough to meet current needs, but also flexible enough to grow with the business.
2. Not taking the time to understand the system well enough – In order to have a successful ERP system installation, founders need to understand the particular system they are buying, as well as the business processes and people affected by the software. Without fully understanding the system and its features, founders may miss out on important features, or worse, use the system incorrectly.
Solution: Allow ample time to fully research software options and determine the best one to fit current and future needs. If a system is too complex to comprehend in short period of time, then look for a simpler solution.
3. Underestimating the cost of customization – Founders often underestimate the cost of customizing an ERP system, as well as the cost of maintaining the customizations over time. It’s important to research the total cost of ownership when selecting an ERP system, including customization, training, and maintenance costs.
Solution: Research various ERP systems and factor in all costs associated with purchasing and maintaining the system, including customization and training fees.
4. Selecting the wrong vendor for customization – Once a system has been selected, founders often make the mistake of selecting the wrong vendor to customize the system. Many vendors over-promise what they can accomplish in a short period of time, leading to missed deadlines and poor customization.
Solution: Compare and research potential vendors, and speak with references to determine if they are familiar with the current ERP system and have completed similar projects in the past.
5. Not training the team on how to use the system – ERP systems require that the team be properly trained in order for them to correctly use the system. A lack of proper training could lead to errors in the system that would be hard to undo.
Solution: Train staff on the basics of the system, including proper use of all features and functions, prior to launch. Schedule regular follow-up training sessions so that the team is always up to date.
Summarized table of the mistakes and solutions:
| Mistake | Solution |
|---|---|
| Prioritizing cost-cutting over needed functionality | Prioritize robust & flexible ERP options |
| Not taking the time to understand the system well enough | Allow ample time for system research & selection |
| Underestimating the cost of customization | Research & factor in customization & maintenance costs |
| Selecting the wrong vendor for customization | Research potential vendors & speak with references |
| Not training the team on how to use the system | Train staff prior to launch & follow-up as needed |
Conclusion.
Selecting and implementing an ERP system is not a decision to be taken lightly, and mistakes can be costly. Taking the time to do research, understand the system, weigh the cost of customization, and ensure that staff is properly trained can help ensure that the system is implemented correctly. By avoiding the five costly mistakes outlined in this article, founders can save valuable time, money, and energy when selecting and implementing an ERP system.
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