By: Priyanka Nagpal | February 28, 2023 | Enterprise Resource Planning (ERP) Transformation | ERP Implementation
The introduction of any new technology can be a daunting task for any company. It's not just about selecting the appropriate software but also ensuring its seamless integration with the company's current systems and data. In today's rapidly changing landscape, staying updated with the latest trends is crucial to stay ahead of the competition. According to a Gartner report, ERP implementations can lead to improved productivity and over 20% cost reduction than those without.
ERP software has become a necessity for many companies that want to take advantage of their data, streamline processes and improve efficiency. But despite its benefits, ERP implementation can pose challenges for some organizations. To make this process more complicated, many companies are using multiple systems at once - the software they're using now, plus an ERP system. In addition, outdated systems. limited resources, and lack of time or expertise to understand how ERP implementations work, add to the challenges in a company's ERP transformation journey.
It's essential to understand the needs of the organization from an ERP system to be able to leverage the benefits of ERP.
A company had ambitious growth goals but was facing challenges in effectively managing its business processes due to fragmented data, inefficient processes, and a lack of visibility into operations. To overcome these challenges and become a market leader in their industry, they engaged the help of our ERP consultants to embark on an ERP implementation journey.
As a result of the ERP implementation, the company was able to streamline its processes, reduce manual effort, and minimize errors, leading to improved efficiency and productivity. The company experienced enhanced data accuracy and accessibility, which was a significant benefit of the ERP system.
With ERP, they had a centralized source of truth for business data, allowing employees to access the information they needed to make informed decisions quickly. This resulted in a 35% reduction in decision-making time and increased customer satisfaction through more personalized and responsive service.
However, there were challenges during the ERP implementation journey, with integration issues being one of the biggest hurdles.
Integrating ERP systems with existing systems is complex and time-consuming, and testing for data quality and accuracy throughout the implementation and integration process is crucial to ensuring ERP success.
Maintaining data quality can also be a significant challenge, as ERP systems rely on accurate data. Additionally, user adoption is essential for the effectiveness of an ERP system, which is why change management and training strategies must be incorporated into the ERP transformation plan. The company's ERP journey was not without its ups and downs, but with the right guidance and support, they were able to navigate through the challenges and reap the benefits.
ERP systems are intended to have the ability to expand and adjust to shifting market circumstances, making it possible for companies to expand and adapt.
What could be some business motivators to begin an ERP transformation journey?
ERP systems provide benefits like improved customer service, better financial reporting, faster decision-making, and more efficient operations.
For a company looking to leverage the business case benefits of ERP software, it is important to adequately consider the business processes that need the support of an ERP system. It is essential to understand the needs of the organization from an ERP system, identify business goals, and frequently evaluate the progress of the project against the business goals, to be able to leverage the benefits of ERP.
If you are considering implementing an ERP solution, consider these benefits:
Improved efficiency
By streamlining business processes, reducing manual effort, and minimizing errors, ERP solutions can lead up to a 19% reduction in inventory and a 20% reduction in overall operating costs. With a centralized source of truth for business data, employees can more easily access and use the information they need.
Enhanced customer service
ERP systems can lead to increased customer satisfaction by helping companies better manage their interactions with customers, providing more personalized and responsive service. With an ERP system in place, a company's customers have access to more information about their orders and shipments and can interact with the company faster.
Better financial reporting
The centralized financial data provided by ERP systems facilitate better financial reporting by allowing easy access and analysis of data. This enables real-time monitoring and reporting of financial information across various business departments and locations.
ERP system integrates financial data from different sources such as sales, purchasing, inventory, and payroll to offer a complete view of the company's financial health.
Automated financial processes, such as accounts payable and accounts receivable, can be handled by the system, which reduces errors, enhances accuracy, and improves efficiency. ERP also generates financial reports such as balance sheets, income statements, and cash flow statements quickly and accurately, reducing the need for manual data entry.
By providing businesses with better financial visibility and control, ERP systems help them make informed decisions and stay competitive in today's dynamic business environment.
Faster decision making
ERP solutions enable informed decisions faster due to enhanced data accuracy and accessibility, leading to better decision-making and increased customer satisfaction for companies implementing ERP solutions compared to those who do not. An ERP system also provides real-time data and insights, allowing managers to make informed decisions faster.
While ERP software can lead to many benefits for a company.
Only 20% of organizations achieve the business case benefits of their ERP projects despite investing substantial resources in implementing ERP systems.
What are these challenges?
Companies face various known and unknown challenges throughout the ERP transformation journey.
Overlooking the challenges that come with an ERP system, can lead to suboptimal implementation and underperformance.
We walk you through some of the key challenges faced by businesses implementing ERP systems, broken down by the ERP implementation phase.
What do all these pieces need to work together? And how can you ensure that they do?
Navigating the ERP selection maze: Overcoming challenges to find the right fit
A Gartner research report titled "The Real Reason ERP Implementations Fail to Deliver Value" reveals that many ERP projects fail due to underestimation of complexity and resources, lack of clarity on business requirements, and inadequate change management. The study examined ERP implementation projects in different industries and found that a substantial proportion of them did not achieve the anticipated benefits. The report highlights that many organizations did not give sufficient consideration to the business processes they wanted to support with their ERP system, resulting in subpar implementation and poor performance.
The overall cost of owning an ERP system, including expenses for software maintenance and support, hardware and infrastructure, consulting, training, and internal staffing, typically amounts to around 4.5 times the initial license cost over five years. In some cases, ERP implementations can take more than three years to complete.
Organizations need to establish a clear why for ERP initiatives and have a clear understanding of their technology landscape, consider alternative deployment models, such as cloud-based ERP, which can help reduce costs and improve flexibility. Companies should then consistently evaluate advancement toward the business justification to guarantee that the project remains on course.
A company had been using a legacy system for years and its IT department was rolling out a new system.
Both of these systems required different processes for creating tasks and assigning them to employees, so there was no way for them to communicate with each other easily.
Having a holistic view of needs that considers both a short-term and long-term state was key to finding the right system for their needs. When implementing the new system they considered all tasks and sequences which they need to be completed in both systems.
There are numerous ERP solutions on the market, each with its strengths and weaknesses. To choose the right tool, companies need to understand their unique needs and select a solution that can address those needs effectively.