Learn how to successfully launch an ERP system by following best practices.
An ERP is a major investment, so successful implementation is crucial. Yet the launch of an ERP doesn’t always go as planned—and failure can bring high costs and other risks. Let’s unpack why failures can happen so you can learn how to succeed.
In this article, we explore the following points:
- Why ERP implementations sometimes fail
- Case studies of ERP failures
- How to mitigate the causes of potential ERP failure
With this understanding, you’ll be prepared to spearhead a successful ERP system launch.
Why Do ERP Implementations Fail?
ERP failure can happen for a range of reasons:
- Not understanding organizational needs
- Inability to manage change
- Inadequate resources for the project
- Inadequate planning
- Lack of buy-in from leadership
- Unrealistic expectations
By recognizing these challenges, you can avoid or overcome them. To take this understanding a step further, let’s explore a few real-life case studies.
Real-World Examples of Failed ERP Implementations
Even successful companies are far from immune to ERP failure, as these case studies show. By learning from others’ mistakes, you can help your ERP launch go smoothly.
Hershey’s Chocolate ERP Implementation
In the late ‘90s, Hershey sought to integrate multiple legacy tech solutions into a single ERP. Hershey aimed to fully deploy the system by the turn of the millennium—a very tight time frame. To meet deadlines, they skimped on testing, which resulted in issues that led $100 million in orders to go unprocessed.
Also, rather than using a phased approach to launching the ERP, which could help detect and address problems, they decided to roll out all modules at once. “Operational paralysis” triggered a 19% drop in quarterly profits as the system went live.
Waste Management’s SAP ERP Implementation
Waste Management actually sued its ERP provider, claiming the services were defective. Their provider, SAP, said its out-of-the-box solution required no significant customization. But Waste Management found that the ERP didn’t provide the features they needed—and in fact, it was still in the development and testing phases.
In addition, demonstrations of the software had falsely portrayed what it could do. Had they consulted with third-party experts, Waste Management could have found a reputable provider that offered the right features.
Nike’s i2 ERP Implementation
Nike’s ERP from i2 Technologies promised to match inventory to demand. But that failed to happen, leaving Nike with too much inventory for some products and too little for others. On both sides, failure to fully communicate about Nike’s needs and the implementation process may have caused this problem. Further, Nike was pushing its staff’s limits by implementing other major software implementations at the same time.
Haribo’s SAP ERP Implementation
In 2018, the European candy manufacturer Haribo failed to meet demand during the holiday season after replacing their legacy system with a new ERP. Poor project planning and implementation, as well as inadequate testing, likely caused the problem. Process mapping and scenario testing could have helped predict and address disruptions with the right mitigation plans.
Addressing Common Causes of ERP Implementation Failure
Follow these best practices to help ERP implementation go smoothly.
Understand the Role of Business Leadership
Business leadership must fully commit to the implementation process. That means owning accountability for its success and becoming a key ambassador. Further, they must allocate the necessary resources to the ERP launch in a prompt manner and make timely decisions regarding how to roll out the new system.
Further, leaders must ensure key staff can devote the necessary time to the ERP launch. Staff assigned to an ERP project should be able to devote at least 25% of their time to it, says Deloitte. Otherwise, they’ll lose focus. This might mean assigning new staff to help handle their typical responsibilities. Or, it could mean bringing in outside experts to focus strictly on the ERP implementation.
Choose an ERP System That Matches Your Needs
First, map out your business processes, making sure they’re as efficient as possible. You don’t want to realize that you need to update your processes after you have a new ERP in place.
Second, come up with a list of must-have features along with others that would be nice to have. What are the key reasons why you need the new system? Look for bottlenecks and gaps in functions. Get input from all departments and stakeholders about essential features. Use their insights to create an objective scorecard to evaluate the ERP vendors.
When you’re ready to launch, involve all stakeholders in the process and maintain clear communication with them. Ask about their needs prior to implementing a system. Then develop a detailed implementation plan with realistic expectations and target dates, gaining buy-in from them. You can also use analytics to detect hiccups and inefficiencies.
Emphasize Change Management and Psychological Factors
Work to over-communicate with all key stakeholders, encouraging them to communicate closely with their teams in turn. Prepare for every step of the launch thoroughly, providing support for all functions as they get up to speed with the new system.
Address resistance to change with the right coaching and guidance. People often fear change even when they know it can be beneficial. Involving change management specialists can help you approach implementation sensitively.
Create an internal communication plan that spells out how you’ll introduce the system. Outline key benefits and how they’ll help meet organizational goals, highlighting specific benefits for each department.
Finally, create clear training protocols for all managers and teams. Designate a point person they can contact with questions. Give routine “refreshers” throughout the first several weeks to ensure they’ve internalized the information.
Avoid ERP Implementation Pitfalls
Strive to avoid these hurdles as you prepare to launch your ERP:
- Unrealistic expectations. Learn from Hershey’s example by setting realistic target dates for each stage of the launch. And don’t expect to implement all modules at once—instead, phase them in gradually.
- Inadequate planning and direction. Appoint a project manager to track all elements of the implementation and ensure accountability.
- Lack of the necessary resources. Provide adequate training and support prior to, during, and after the launch. With a gradual approach to implementation, you can fully support each function as the new modules it will use go live.
- Lack of a solid data transfer plan. Monitor the data migration carefully so you can address any issues immediately.
By steering clear of these challenges, you’ll start benefiting from your new ERP as quickly as possible.
In Conclusion:
While ERP implementation can feel daunting, a skillful approach will lead to a successful launch. It won’t be completely seamless—there will always be challenges to address. A well-designed process will allow you to devote the necessary time, focus, and resources to each of these challenges as they unfold. Ultimately, this will foster a successful launch, letting you derive the full benefits of your new system.
Sources
https://www.cfo.com/technology/2001/03/how-not-to-spend-400-million/
https://www2.deloitte.com/mt/en/pages/technology/articles/erp-implementation-best-practises.html
https://www.forbes.com/advisor/business/erp-implementation/
https://kopisusa.com/wp-content/uploads/ERP_Implementation_Failure_Hershey_Foods.pdf
https://www.linkedin.com/pulse/hersheys-failed-erp-implementation-importance-testing-hreem-mehta
https://www.sap.com/insights/erp-implementation-best-practices.html
https://www.techtarget.com/searchsap/feature/Haribo-cant-bear-SAP-S-4HANA-implementation