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Performance Improvement

Successful ERP Implementation the First Time

by R. Michael Donovan

t’s not pretty out there. Companies mindset.

I have spent fortunes on ERP soft-
ware and implementation only to find
When ERP implementa-
tions fail to deliver, it’s
2. No amount of advanced informa-
tion technology can offset the problem
that business performance has not usually because manage- of a flawed business strategy and poor-
improved at all. These large invest- ment hasn’t taken the time ly performing business processes. This
ments and negative ROIs have created to structure the organiza- area, in particular, is something that
a whirlpool of controversy, rampant tion to take advantage of ERP software implementers may not
company politics and even a number fully address because it can slow sys-
of lawsuits. The trade press has report-
these systems. tem deployment.
ed many negative ERP stories, and 3. Define a business strategy that
even annual reports have pointed the will give you a competitive advantage
finger at ERP for lower-than-expected or, at the very least, make you compet-
earnings. For some, this has created a accept and operate with the new sys- itively equal. Then, analyze your cur-
higher level of fear about making a big tem. rent business processes and develop
ERP mistake. • The cost to implement was much your objectives. Once this step is done,
Much of the time, ERP software greater than anticipated. the following steps for preparation,
vendors are the targets for blame when How can we avoid some of these ERP software selection and imple-
anticipated results do not materialize. costly mistakes? Here are some guide- mentation can support your strategic
Are the ERP vendors that sold the lines to help you with ERP success. and process objectives better.
software the real culprits for the lack (Rather than repeat a discussion here 4. Acquire flexible ERP informa-
of business performance improve- of pre-implementation preparation tion technology that can accommodate
ment? The answer is, not very often. activities, please refer back to my col- rapidly changing business conditions.
Certainly, it can often be argued that umn in the September 1998 issue of The high-velocity flow of information
ERP system logic is sometimes illogi- Midrange ERP [“There Is No Magic needed to support action up and down
cal, functionality is missing, functions in ERP Software: It’s in Preparation of the supply chain is a major step for-
perform poorly and so on. But the Process and People,” p. 8]). ward for most manufacturers. It will
accountability for ERP software selec- be mandatory in the future just to com-
tion and implementation usually lies to It’s the process pete, much less stay ahead of, the
varying degrees with internal person- Management is getting its hoped-for competition.
nel and often with external consul- results from ERP less often than not, 5. Have the implementation led by a
tants. and this begs an explanation for ERP’s senior executive who has the authority
Selecting and implementing a new often-poor performance. What many to make changes happen and happen
ERP system, and the process changes manufacturers fail to realize is that quickly. Make sure there is a sense of
that go with it, is unquestionably a extensive supply chain improvement urgency and true accountability for
complex undertaking. Regardless of requires that management begin to completing preparation and imple-
your size and perceived resources, an redefine its business in terms of strate- mentation activities on time.
ERP implementation is not something gic opportunities. The purpose of ERP Moving away from functional silos
that should be approached without a technology is to support the business and creating effective cross-functional
great deal of careful planning. Among processes that support the company’s processes that are truly integrated via
companies that have been through a strategic opportunities. an ERP system is not an easy task.
less-than-fully successful ERP imple- There are some basic tenets of ERP When ERP is not fully integrated into
mentation, five reasons for poor that should guide management’s day-to-day business operations, how-
results show up consistently: actions and decisions. ever, it is not likely to be very benefi-
• Operating strategy did not drive 1. There is no magic in ERP soft- cial.
business process design and deploy- ware. ERP’s benefits are a direct result If enterprise integration or more
ment. of effective preparation and imple- advanced supply chain management
• The implementation took much mentation, and appropriate use. This strategies are to have any chance of
longer than expected. seems obvious, but nine out of 10 complete success it will be due, to a
• Pre-implementation preparation companies don’t get it right the first large extent, to the removal of tradi-
activities were done poorly, if at all. time around. Expecting a quick fix, tional cross-functional barriers. These
• People were not well-prepared to silver-bullet solution is a dangerous silos comprise the organizational
Performance Improvement
boundaries where information flow, gy transition quickly. If the technology moves on, the missed schedule prob-
and often cooperation, stop. You must and infrastructure transition are not lems start affecting implementation
ask, “How will we use the ERP sys- done well, the project, at the very quality as the almost-inevitable
tem?” Some not-so-obvious issues least, will be delayed. response is to start taking shortcuts
will surface as you try to answer that One of the biggest problems with and bypassing critical business issues.
question. For example, will you com- implementing ERP is misunderstand- The slam-and-cram method of an ERP
bine demand-based flow and lean ing what ERP is all about and under- software transplant is now in high
manufacturing techniques, which will estimating what it takes to implement gear.
negate the need for some traditional it effectively. Senior operating man-
ERP functionality? Focus on your agement cannot relegate critical deci- Software selection is not easy
business strategy and not just software sions to personnel who may not have Before the nitty-gritty of software
selection and implementation. Many the background or the temperament selection begins, it is a good idea for
problems are reinforced by contradic- for this type of decision-making. management to know how current
tory objectives and performance mea- Companies need a strategy, processes and supporting sys-
sures that actually create inconsistent well thought-out, tems compare to what they could be
value and belief systems, to the com- comprehensive with the new system. In fact, this dis-
pany’s detriment. No amount of infor- process to help covery process should be performed
mation technology will correct these plan, guide and con- every couple of years so management
problems. Management must will know where the com-
aggressively remove them once pany is, compared to a
and for all through business previous stake in the
process redesign. ground. This is a basis
from which to evaluate
Assess your skills and prepare opportunities.
Management too often plunges Many people avoid
into ERP less than fully examining strategy and
informed, with limited knowl- business processes and
edge of what to expect. jump right into looking at
Often, there is a miscon- software functions and
ception that the skills nec- features. Software ven-
essary to select and imple- dors often encourage this
ment ERP already exist in because they want to
the organization. That move you along quickly in
may be partly true, but the sales cycle and get you closer to
few organizations have licensing their product. Be particu-
the skills they need to larly wary of so-called proof-of-
implement ERP effective- concept offers wherein the vendor
ly within a reasonable implements its software at your site
timeframe. Consultants may be able to trol the entire ERP implementation and offers various guarantees. This
fill some of the skills gap, but given effort. Starting an implementation practice adds confusion to the soft-
the high risk involved, it’s important to with an undocumented, skimpy or ware selection process, especially for
make sure they’re genuinely qualified. untailored implementation methodolo- the uninitiated. Obviously, ERP soft-
Another commonly overlooked area gy is an open invitation to disaster or, ware vendors are in the business of
is the issue of information technology best case, a long, drawn-out imple- selling their products (just as your
change. Often, the IT infrastructure mentation. Everyone from the board- company is) and they have their very
changes required to implement a new room to the stockroom needs to under- best people work the sales cycle to
ERP system are not given the high pri- stand his role and responsibilities for guide your organization to their obvi-
ority these technology issues deserve. implementation. Implementation lead- ous best solution for all of your prob-
Certainly, implementing ERP should ers should encourage dialogue to get lems.
be driven by business issues, not tech- people focused on business objectives Start defining software needs by
nology. But it is IT’s understanding and early identification and correction examining current processes that gov-
and skills that support the technology of any problems. Who will be account- ern your flow of information and
that improves business processes. able for results, and when, must be an material throughout the order-to-deliv-
Ignoring the prepartion and education integral part of this understanding. An ery process and ultimately the entire
new information technology requires implementation that’s going astray supply chain. There is a common ten-
is asking for trouble. Further, IT per- becomes recognizable when repeated dency to shortcut this very important
sonnel often must make the technolo- schedule slippages surface. As time activity, but you will pay—sometimes
Performance Improvement
dearly—in time and money for avoid- a big bust for many companies. The out there wish they had paused to eval-
ing this essential step. clean-sheet business process redesign uate their direction. The following
Evaluating and selecting ERP soft- and the subsequent ERP system con- questions do not cover every possible
ware is a complex task. It should be a figuration is complex, costly and time- contingency, but should be helpful to
fact-based process that brings you to a consuming. Consequently, most com- stimulate thought and discussion.
point where you can make a comfort- panies have come to accept the com- • How do we want to run our busi-
able, well-informed decision. The promises and trade-offs that industry- ness?
process requires an objective and com- specific, best-practice templates • What business problems need to
prehensive methodology to guide you require. Preconfigured templates allow be solved?
through the selection process. This faster system deployment and faster • Do we know and understand our
does not mean you should use volumi- benefits. Processes can be refined at a priorities?
nous predetermined questionnaires later date. This is not to say that it is • Do we fully understand our as-is
that do not recognize your specific okay to just slam and cram predeter- condition versus our could-be/should-
needs. Rather, it means your evalua- mined processes into place. On the be processes?
tion and selection process should be contrary, selected template processes • Have we carefully defined an
based on your own strategy and busi- must still be verified for appropriate- action plan for pre-implementation
ness process model. A comprehensive ness, at least for the near-term, before preparation activities?
methodology to plan, guide and con- going forward. • What tasks will be accomplished
trol the effort has the potential for dra- The demand for rapid ERP imple- and when?
matic savings, not to mention the most mentation is high. This was the pri- • What are the missing links in our
important benefit: avoiding big mis- mary driver for the development of current system and our software of
takes. off-the-shelf templates designed to choice?
At some companies, management is speed up and simplify the software • What are the real costs, benefits
so preoccupied with other, seemingly personalization process. But tem- and timetable going to be?
more important activities that ERP is plates, by their very nature, incorpo- • Do we have an executive-level
delegated completely to the IT depart- rate specific best practices that support ERP champion to provide the neces-
ment. The idea that this is strictly a cross-functional business processes. sary link to top management?
technology project because software is On the surface this may sound like • Who will implement ERP and
involved is wrong and, in fact, is one nirvana, but very few organizations make it work?
of the leading causes of ERP failure. take the time to rethink how they ERP and supply chain management
The IT function is not well-positioned should and could run their businesses. systems implementations are, in fact,
to evaluate the business implications By taking the easy way out, these projects without an end. After all, the
of various tradeoffs or to determine companies end up with generic, albeit supply chain is, to a large extent, the
their impact on day-to-day operating industry-specific, functionality. very life blood of a manufacturing
results versus strategic intent. company. For the well-prepared, new
Certainly, this shouldn’t be the case as Plan to succeed supply chain management systems
operating decisions belong with senior Successfully implementing ERP the based on ERP have become significant
operating management and not IT. first time requires a structured competitive differentiators.
Once an ERP system has been methodology that is strategy-, people- Implementing ERP can become a
selected, it’s rare for a company to cut and process-focused. This is the only mind-altering experience for those
its losses and scrap the project until way to manage the risk effectively. A involved. Following a sound method-
many years have passed. The political good methodology covers all the ology will greatly increase your likeli-
fallout is often the biggest obstacle. bases, but when the unexpected pops hood of success the first time. Yet, it
No one wants to tell upper manage- up, as it usually does, you will be pre- will not guarantee your success. Only
ment that an ERP investment of mil- pared to handle these exceptions with- you can do that. ◆
lions of dollars was a mistake and the out severe negative consequences. One
process should be restarted. When a very common mistake is not having R. Michael Donovan
company lives for many years with a your employees prepared to use the is a management con-
poor ERP decision and/or implemen- new processes and support system. sultant based in
tation, however, the costs continue to The consequence here can range all Framingham, Mass.
escalate and the benefits do not come. the way to total failure, but they are He can be reached at
The cost of lost opportunities could be avoidable. (508)788-1100.
massive. The ERP software search, Evaluate your business strategy and Readers may obtain a
evaluation and selection process must ERP plan before you commit to soft- copy of the book, Strengthening
be done right to minimize this risk. ware acquisition and installation. Manufacturing’s Weak Links, and
The clean-sheet-of-paper approach, Doing it right the first time is the only other educational materials through
although alluring in concept, has been cost-effective way to go. Many people