By John A. Haas
Management Strategies Group
with Michaël Charchaflian of
Automation & Information Planners
Ironically, the more advanced automation systems become, the more their success depends on human interaction. Manufacturers who attempt to install Enterprise Resource Planning (ERP) software learn this quickly.
Why ERP Often Fails
Of the 6 key reasons ERP systems fail; 5 relate directly (and 1 indirectly) to human behavior:
ERP systems are technology solutions to help a business operate more efficiently. Yet, only 15% of companies successfully implement ERP systems, and just 4% achieve the optimal alignment between their ERP system and their business processes needed to make the best use of their ERP software. We must remember people operate businesses, and their involvement and buy-in are critical to successfully implement any ERP system.
Launching the ERP Initiative
The ERP project should not be aimed merely at automating the status quo. Inefficient manufacturing processes will be inefficient even after they are automated. Rather the ERP project should begin with a review of all manufacturing processes, and elimination of processes that don't add value.
Before selecting ERP software, a broadly representative project team that involves the CEO should identify the goals and specifications for an ERP system, and assure they are consistent with enterprise strategies.
To prevent a crisis of confidence, it is essential that the ERP selection and implementation processes have the unflagging support of the CEO and other top management. Their visible support will only come from understanding its value to current and future operations.
Selecting ERP Software
Before even looking at software the system's scope must be defined. Collect and evaluate process flow data and goals for each department, using Information Flow Diagrams (IFDs) to form a business profile.
Next, match the business profile to available software. While there are more than 120 vendors selling more than 300 products, none of these products will exactly fit the needs of the enterprise. By translating the IFDs into functional specifications and prioritizing them, we can develop a scoring matrix based on the features offered by the vendors and identify some finalists.
Before making the final selection, the evaluation team must identify and deal with any deficiencies in the various alternatives. What if, for example, you must log off the system to fix a purchase order? Or what if you can't reconcile the system unless it's the end of the month? Any ERP software is likely to have some quirks, and the vendor who's selling it is unlikely to point them out before the sale is made.
Use a Cross-Functional Implementation Team
Next, a cross-functional team of users should be formed to guide the hardware and software implementation process.
In the past, implementation of new software was handled by the IT organization alone. But because ERP is complex and enterprise wide, successful implementation requires a commitment from employees at all levels throughout the organization. The successful implementation of an ERP system typically takes a year or more.
We have found that micro-implementation and testing at the department level before involving the entire workforce is time and cost effective. Standard operating procedures must be reviewed, data must be transferred and converted, and employees must be trained. Once the software is proven through this pilot project, the system is ready to go on line. Data must be purified in real time, and on-line switching must take place.
The final phase is system optimization and alignment. We must identify areas where the system is not aligned with the needs of the organization and initiate a gap analysis. We must deploy tools to fill the gaps, and institutionalize new processes.
ERP implementation can be grueling, and there are certainly opportunity costs. But an inclusive selection and implementation process will greatly ease the burden and increase the benefits realized.
Volume 8, Number 2