ERP Explained: Benefits and Challenges
Dec 25, 2019
ERP should be an enabler of growth, efficiency and professional visibility of your business. Being part of a strategic organizational and business transformation haul, significant challenges prey along the way * Rip the benefits, prepare for the challenges
In my last Blog post I outlined the approach and process of selecting an ERP solution. The preceding post explained what is ERP and why you need it for your business. In this third Blog post in the ERP Explained series, we’ll consider the benefits expected from an ERP system against the challenges to prepare for.
Expected ERP Benefits
Depending on your current business state and growth forecast, the following list may reflect the overall potential you may expect from implementing an ERP solution in your business.
Businesses already running on an ERP platform, may use as little as 5% of its capabilities, thus not exploiting the business benefit they have already paid for.
- Enabler of Growth. This is the single most important gain from an ERP system properly implemented and used, in my mind. It harbors other benefits listed here, such as operational efficiency, scalability, consistency and focus on the core. Simply put, without a solid ERP platform, your business will reach a point in which its ability to economically scale will be hindered.
- Some call this “a single version of the truth”. Ideally, your business metrics, KPI’s, and any data in general, is consistent across all business units. A customer (for example) should be maintained only once, in a single storage signature, and serve all processes, departments and business queries. Total revenues for last year should be the exact same number in all presentations and computations applied by any process, report and dashboard.
- If you are handling hundreds of orders per year without an ERP system, ask yourself: Can I handle 100,000 orders per year? For a solid ERP system, it doesn’t’ matter. The business processes supported by the ERP system and the capacity of the ERP system itself are built to scale.
- Operational Efficiency. When you adopt an ERP system, adjust your habits to those designed into and offered by the system (for non-core processes). The ERP solution reflects the wisdom of many like-organizations thus calibrated for the most efficient and streamlined processes, or best practices. Why not take advantage of this?
- Every market change with time. You are required to innovate in order to stay relevant. New regulation may also dictate updates to your processes and systems. Leading ERP providers update their solutions for the benefit of all of their customers.
- ERP vendors update their technologies faster than you would update your own. In addition, the technology stack is usually coherent and limited to a specific “flavor”, which brings us to the next benefit: Skills.
- Maintaining a technical team with a focused skill-set is cost-effective. Technologies change in a fast pace. It’s challenging enough to keep up to date with your ERP technology stack. Minimize your technology diversity to lower your skill-set investment.
- Leading ERP vendors have more resources to invest in securing their solutions than you will have on your own. This is another benefit for all customers to enjoy.
- Culture & Spirit. Last but not least, all departments working on the same platform, speaking the same language and sticking to consistent set of data - contribute to the team spirit, motivation, cooperation and better serve the business goals as a whole.
Anticipated ERP Adoption challenges
As I wrote in my previous Blog posts in this ERP Explained series, adopting an ERP solution is a strategic organizational & business transformation project. This project has significant implications on almost every aspect of your business. Accordingly, significant hurdles await. Here’s the most prominent to be aware of, in my mind.
- Business Continuity. This encapsulate most challenges listed below. How can the wide and deep business and organizational transformation be championed without disrupting the business? Typically, it would be very difficult to sustain business continuity throughout the project lifetime, but can you minimize the business disruption?
- The right match. As I mentioned in the first post of this ERP Explained series, choosing an ERP solution is almost like a Catholic wedding. At the minimum, it is a marriage for many years to come. Therefore, your first challenge is to choose the right partners for you: the vendor, the technology, the solution and the implementing partner.
- Employees buy-in. People feel good in their comfort zone. People resist change. Coupled with their sense of job security – fearing the unknown changes can grow to a major resistance from within. You want your employees to be good ambassadors of the new change, to understand it will improve their well-being and career.
- Change Management. Employees buy-in is the first milestone in managing the anticipated changes to the structure, processes, skill-set, responsibilities and culture. These changes need to be managed properly and addressed in all phases of the project.
- Engraved habits. Why change the 20-years old process we all feel good with? Will I know my job if I no longer need to do my part as I’m used to? How could this possible benefit the business to dismantle our small team that handles this process for so long? These barriers to innovation and “renaissance” should be mitigated by the Change Management plan.
- Skillset Transition. An ERP system often replaces manual work done by professional workers. Receiving this backlog orders Excel file from the fulfillment office and copying these lines into the production planning Excel sheet in the right places is no longer a required task. It is hidden in the ERP workings and now the responsible person needs to learn new skills, engage in more thinking rather than doing. Employees new skill-set requirements needs to be mapped and an educational program needs to be planned.
- Workforce Demand. A major disruption to the business continuity is the attention required from the leading managers and professionals who keep the lights on. If 50% of the job time of the manufacturing manager is now allocated to the “new project”, who’s going to keep production running as full capacity?
- Filling in the Missing Pieces. It is rare to have a single ERP solution meet 100% of your business needs. You need to identify those missing parts and smartly complement the main platform with “satellite” solutions. It could also be the case that you forego a built-in feature in favor of another, 3rd-party, or local development solution, to maintain your differentiating edge. The ERP vendor itself has an eco-system of technologies and solutions partners to consider.
- Financial Burden. Especially when buying an on-premise solution, a significant capital expenditure is written off. Even when subscribing to an on-demand (cloud) solution, the implementation, education and change management effort requires some investment up-front. New monthly/yearly costs need to be accounted for from now on. Hopefully, previous costs are replaced by new ones, in favor of operational efficiency and increased business.
- Turning the Switch. The shift from the “old way” to the new system is a project in itself. Gradual transition requires legacy and new systems to run in parallel for some time. A “big bang” switch across the board requires careful planning and preparedness.
I’ll let you recover from this impressive list of challenges (while reminding you of the comforting list of benefits!), as you get ready for the last post in this ERP Explained series: How to Secure a Successful Project, addressing many of the challenges mentioned here.
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