7 Risks That Lead to ERP Project Failure, And How To Prevent Them

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Companies considering the integration of an ERP system encounter a worrying reality, because research shows that nearly fifty percent of all ERP projects do not succeed, the cost of operating them are significantly overwhelming, schedules are not abided by, and at the end of the day, improvements to business operations are marginal at best.

The data points to one recurring issue, which being, that EPR systems are a whole new ball game for small and medium companies, who have zero to no experience with complex IT projects.

erp project failure

ERP competence is gradually developing within these companies, but the crucial strategic steps need to be taken at the very beginning. Therefore, even before the expertise is developed, the mistakes that occur at the very get-go often derail the whole project and the company loses its foothold on this technology.

The ERP projects fail not due to a poor selection process, not due to the functionality of the ERP itself, but they rather fail because of the incorrect ERP implementation process. The solution to this problem is simply to prepare your company to tackle the risks beforehand.

Studies reveal that there are seven major risks that’s jeopardize ERP projects. Read the write up below to understand how to avoid them.

Risk # 1: Goals which are not clearly defined.

Most companies view the integration of ERP software as a magic spell that will solve all of their problems, but do not take the necessary time to identify and define the details of what they are trying to achieve, or even what their version of success will look like.

Different departments expect their own improvements, so how are companies to ascertain which requirements should be prioritizes? It’s crucial to have clear documentation of what you essentially want to achieve with the newly implemented software. If you cannot develop an organized roadmap which will guide you through every step of the way then you will gradually get caught up in a web of pitfalls, distractions of politics, short sighted thinking, and minor set backs which will result in project derailment.

Examples:

  • Reduce error rates
  • Reduce throughput times
  • Speed ​​up time to hit market
  • Improve quality of service
  • Emphasize coordination between departments
  • Automate and standardize work tasks
  • Provide correct and timely business statistics
  • Support globalization

Risk # 2: Lack of Sufficient Management Commitment

Almost all companies know that an ERP project needs significant hours put in by the employees to use the system, besides their usual work load. But most management teams don’t invest their times though. Leadership that is too out-of-touch or too busy can easily end the ERP project. A single button will not solve all your problems, and the system requires careful monitoring and constant revisiting.

To succeed in the ERP integration, the project team needs thorough support both written and vocal, from upper management. Establishing transparent communication channels and reinstating desired goals should be routine. Besides that, freeing up resources needed, and maintaining a positive and productive work atmosphere, expressing appreciation, and making themselves available for queries and support will help set the tone for development.

Risk # 3: Lacking Expertise on Project Teams

All ERP integration should be done on a methodical basis. The process starts with putting together a proper project team which should include a project manager, primary users and the IT members of staff. To prevent gaps in knowledge the primary users should cover all related areas of business, which includes procurement, marketing, logistics, sales, production, controlling and service. The team needs a leader to deploy the correct skills in a coordinated manner to the ERP integration.

Traits of an efficient project manager:

  • Up to date about routine operations
  • deep knowledge regarding all departments
  • good organizational merits
  • assertive
  • strong sense of teamwork

The ERP project team is most often assisted by a project manager from the spftware provider, who runs the process based on integrating methods and sets about milestones along with the team and gives essential input. Besides that, firm responsibilities and competencies are important. Building a reat team is more than meets the ye and requires a clear framework of operations.

Risk #4: The absence of transparent communication

A lot of ERP integration programs lack the sufficient amount of communication between the management, the project team, employees and the software provider. Obstacles come up when the employees’ questions and concerns go unaddressed, and rumors and negativity take hold.

To make sure that does not happen, communicate as openly as possible from the very beginning. During the weeks leading up to the integration commencement, companies should put in place tools to ensure the continuous flow of information and maximum project transparency. For example, set up a regular meeting each time every week, and also use company newsletters and emails for project updates. It always better to over-communicate rather than under communicate. If you don’t address this issue, the ERP problem, will soon turn into a communication problem and that will lead to organizational friction.

Risk # 5: Production Processes Not Clearly Defined

For an ERP system to map the processes in your company, the current processes must be clearly and thoroughly documented. The process modeling is complex, so enough time should be allocated for this crucial preliminary work.

This is the perfect time for work-optimization! Your software provider should be able to help you evaluate your processes and find areas for betterment before they are installed in your ERP. It pays off to reevaluate and reorganize your workflows:

  • Which processes are necessary and productive?
  • Which processes can be made more efficient with the help of the new software?
  • Which workflows have not been updated in real time, even though processes have changed?

Be opened to change and flexible also, if the new software cannot re create a specific process exactly the way it used to be produced. It will make sense to tweak your process here and there rather than going for a custom programming.

Risk # 6: Over simplifying Data imports

The firm must also transfer old data into the new EPR software. And this step must be done with great care, because thorough injection is required and its not as simple as importing from an excel doc.

Also, people are under the incorrect impression that they will be able to automatically increase the quality of poorly maintained data with an ERP software. The quality of data in the new system will only be as good as that recorded in the old system. To avoid the old saying, “garbage in, garbage out”, duplicates, spelling mistakes, and card details should be corrected before the import from the old system. After the records have been verified, the mapping sequence begins. Each piece of old data is assigned to a counterpart of the new data structure and they are also checked for any mistakes. Only when the new data works in the simulation it will be taken into the production system.

Risk # 7:  Apprehensive about Change

Companies needs to anticipate the fact that not every employee will be happy about the ERP integration. Mainly since information is becoming more transparent, responsibilities are shifting, and this change is sometimes dealt with apprehension. Therefore, the solid benefits of the ERP system regarding daily work, should be translated within the interwebs o the organization and that is how employees can familiarize themselves with the upsides that the project will bring forth. Fear may be turned into a warm welcoming.

Summing up: Integration requires technical know-how!

The challenges and complications involved with and ERP system must not be underestimated because the process considers the close collaboration between systems, processes, and of course the workforce. However, with proper planning and a perfected process organization the obstacles can be eliminated, and the complications can be rectified.

Support from an experienced ERP manager from the software partner provider makes the implementation process much smoother and the methodology adopted in also proven. For a small or medium company, which does not have its own in-house tech-team, the efficiency of the ERP provider is an integral factor to consider when choosing an ERP system. You want a software partner who has helped other companies just like yours, who can walk down the road right beside you, helping you when you trip.

 

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