ERP and Critical Success Factors

Enterprise Resource Planning (ERP) implementation can be critical to business growth and success.  There are several factors that should be considered when implementing an ERP.  A question that every business should ask is whether its future growth and success is dependent on the implementation of an ERP.  Thus meaning, is the business mature enough to require an ERP system.  Companies that are compiling vast amounts of data which may include financials, marketing, development, production, and inventory management are well suited for many of the powerful ERPs that are available today.  When a company’s growth is stifled by their capacity to manage business effectively, an ERP is essential to maintaining a company’s success.

Once a company has successfully chartered the ERP selection process, the most critical factor to carry the implementation process is the project management team.  This team should be comprised of key stakeholders who are very familiar with all functions of the end user. The team should have a clear vision established by senior leadership within the company to ensure success.  By having a clear vision established, the project team can begin the implementation process with an expectation of the end result.  This technique will also ensure a greater probability of success by the company.  By using key personnel on the project management team, the company will more effectively manage the change while maintaining effective communication to all the functional areas that will benefit from the ERP implementation process.

I have been involved in a number of ERP implementations and I can say from personal experience that support from key stakeholders is absolutely crucial to a successful acceptance of an ERP. The management can provide support in many ways, including setting clear direction and providing directives. One such directive is that no customization is to take place for implementation. Here customization means to alter the functionality of the system to one’s own needs in such a way as to make it difficult to maintain later.

If the ERP is implemented in stages, or waves, there will be multiple stabilization periods that the company will experience.  The waves typically focus on one component of the ERP, such as a finance module, production module, or customer module.  Each wave will experience a stage of stabilization.  This stage of stabilization is also critical for success as bugs are worked out in the system, and end users are having the opportunity to have practical application with the software.  As always, in theory a concept will appear seamless on the surface, but in practice the employees will find all the snags in the concept when moving into practical application.

The organizations usually start with the back office applications, namely HR, finance and purchasing. These departments normally work on established processes and guidelines and there is less gap between what the ERP systems offer and how they operate. Other modules can follow later.

Staged implementation is the optimal approach as it allows everyone to get accustomed to the changes these large systems bring to the organizations. This is also part of organizational and system change management. Change management is under estimated, in my view, for any implementation. I have already written how people react to changes and how it is important that we manage everyone’s expectations, including changes. For change management to be effective, the project team must solicit support from key partners and peers in the organization.

An ERP user group can be a great asset for the company to continually analyze the ERP’s performance.  This user group can discuss various aspects of progress with the software, as well as challenges that will surface during a variety of business practices.  The user group should continue their existence once the entire implementation stage is complete.  The leader of the user group should be the overall champion of the initial ERP implementation process.  Maintaining the same champion or sponsor of the entire ERP implementation process is central for success.  Continuity is essential in a company while changing implementation of the structure.  This will enable the company to smoothly integrate future maintenance and improvements to the system.

The aforementioned components of implementing an ERP system are critical to the system’s success, as well as, the company’s return on investment of time, energy, personnel, and money.  These factors are key components to the successful future of the overall company.

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