Originally designed for manufacturing companies, ERP, or Enterprise Resource PLanning has since expanded to serve nearly every industry in managing their day-to-day business processes and operations primarily because or its capability to integrate all these processes into a single system that also facilitates resource planning.
Because ERP systems are designed to address the unique needs of a wide range of businesses, the list of modules available for any given ERP system is extensive. Common ERP modules include:
Manufacturing
Finance and Accounting
Human resources
Customer relationship management
Marketing automation
Business intelligence
Procurement
Inventory management
Supply chain management
Given these capabilities, ERP systems are regarded as essential tools in the day-to-day operations of the enterprise. But before the business embarks on setting up an ERP system for its operations, there is some essential information that must be taken into account in order to ensure its efficiency for the organization.
Hidden costs
ERP in itself entails significant costs for the enterprise. But there are four specific factors that can further determine how much resources ERP would need for its implementation within the organization, something that is often overlooked.
Business process change - Once teams see the results of their improvements, most feel empowered and might seek additional improvements which entail additional costs.
Organizational change management – Many business leaders are unfamiliar with the nuances of organizational change management, a key characteristic whenever an organization implements a new ERP system for the first time.
Data migration – ERP requires tight editing of data, which would be a challenge for enterprises that have been plagued with overlapping databases and weak editing rules. As such, the time required to edit such data is easy to underestimate, particularly if all data sources cannot be identified.
Custom code – Customization increases implementation costs significantly, makes upgrades difficult, and voids the warranty. Because of these problems, it is not recommended for organizations to customize their ERP systems. But if such customization has already been done, any problems reported to the vendor must be reproduced on unmodified software.
Why ERP projects fail
ERP projects fail for many of the same reasons that other projects fail, such as ineffective executive sponsors, poorly defined program goals, weak project management, inadequate resources, and poor data cleanup. But there are a couple of factors that have something to do with ERPs themselves.
Inappropriate package selection - Many enterprises believe a Tier I ERP is the “best” for every enterprise. In reality, only large global enterprises will be able to derive the most value from Tier 1 ERPs in terms of features and cost. Conversely, large global enterprises may find that Tier II or Tier III ERPs lack sufficient features for their needs.
Internal resistance - While any new program can generate resistance, this is more common with ERPs. Remote business units frequently view the standardization imposed by an ERP as an effort by headquarters to increase control over them. Even parties supporting ERP can become disenchanted if the implementation team provides poor support.
The success of the ERP implementation lies in the level of knowledge business leaders have with regard to the organization’s specific needs that ERP can fulfill and even improve on, as well as the high degree of support that ERP vendors and point persons within the organization can provide during the ERP implementation stage and beyond.
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