Is your Enterprise carrying the ERP or the ERP is carrying your enterprise?
ERP is like a Car and Implementation is driving. So any tampering will lead to accident. Making of car is a design and creativity oriented, while the driving needs skill and focus.
A combination Robust car with safe & skilful driving will deliver a memorable travel experience.
It is a big nightmare to see the Gartner’s reports that says 75% of ERP implementations are failure. I am quite not sure which ERP’s, what business segment and which geographies. But the news is scary.
It is tough to assess the implementation needs for the large corporation. The following method of approach could work well for the Small and Medium Enterprises (SMEs).
Right ERP & Right Approach:
Choosing the Right-fit ERP in terms of feature and price is most important. ERP without Return on investment (ROI) will become the pain in the neck for life time.
The foremost reason for ERP failure is the big-bang approach. Meaning, trying to implement all modules at one go. This will be sure short way for the failure. The ERP system has to sync-in slowly across the organisation. Hence a step by step dosage is highly advisable.
Use case wise implementation:
We have to understand as to how an ERP system works. An ERP system is a collection of use cases. Each use case is a Transaction process that starts from one business function and goes through one or many functions.
1. Order to Cash (Accounts Receivable)
Business functions : Sales — DIstribution — Accounts
Transactions : Sale order — Packing Slip —Invoice — Sale Voucher — Receipt Voucher
2. Procure to Pay (Accounts Payable)
Business functions : Stores — Purchase — Accounts
Transactions : Purchase Indent — Purchase Order — Goods Receipt Note — Purchase Voucher — Payment Voucher
Typically for a Manufacturing industry ERP considering all major and minor business scenarios covers about 350-400 use cases.
Phase wise implementation approach:
Also it is equally import to understand the sequence of the data building block. Implementation of ERP is like construction of Apartment. So to schedule the implementation into different phases (floor wise) will be a practical approach. This will help us to stabilise each phase before moving into the next. Because each of the phase forms as a foundation for the next phase.
- Sales and Distribution
- Purchase and Inventory
- Financial Accounting
- Quality Control
- Plant Maintenance
- HR & Payroll
Segregate the use-cases, phase wise:
As mentioned earlier, now we have to segregate the phase wise use cases and identify a champion each of the business use-case. His/Her responsibility is to focus on the respective use case and coordinate with the users of the respective business function for the:
- Master data collection
- Data Migration
- User training
- Configuration and document setups
- Opening Balance migration
- Live entries
By this approach it is easy to handle the issues for the limited scope in each phase.
The Top management has to closely review the use-case wise implementation status on a day-to-day basis. The issues has to be resolved within the time lines.
We do not customise the Car, Refrigerator, many apps on mobile. But when it comes to ERP the customisation goes endless. If we take the product it has to be adapted as it is. If not one can go for a 100% custom developed ERP system. Customisation of ERP system is one of the main reasons for failure. One of the survey reports shows that 15% of the ERP systems that did not opt for customisation was successful.
Focus on Must to have features:
This is a more intuitive and critical stage. Each feature request has to be analysed deeply. Only if it is “must to have” one it has to go for the customisation.With “Nice to have” features, which is endless, the ERP will be under terror attack of customisation. It will block the ERP from going live.
Historic data entry:
Except for Accounting, the rest of the business transactions can avoid the historic data. For example, if the implementation starts on 15th of September, the users can migrate the opening balance as on 01st October and go-live from that date. Historic data entry is another reason for the failure of the ERP systems. Users will get frustrated on the ERP system.
These are the statistics of the successful implementation of the ERP system.
- 15% of ERP projects perform no customisation (Panorama ERP study).
- ERP systems that provide accurate, real-time information about daily operations help companies reduce operational costs by 23% and administration costs by 22% (Aberdeen Group).
- Modern ERP systems are able to increase on-time deliveries by 24% due to improved productivity, order tracking, and decision making (Aberdeen Group).
- Midsized companies who implement modern ERP systems are able to support change and grow operating margins by 21% (Aberdeen Group).
- On average, ERP systems speed up order to shipment times for distributors by 23% (Aberdeen).
- With modern ERP, distributors deliver complete and on-time shipments 97% of the time (Aberdeen).
- ERP Streamlines workflow automation allowing companies to reduce operating costs by 22% and administrative costs by 17% (Aberdeen).
- Modern ERP systems allow distributors inventory accuracy average of 97% (Aberdeen).
The Author S Vijay Venkatesh is the MD and CEO of Syscon. He has 2 decades of experience in ERP.