It’s no small task to implement an ERP system and it may seem intimidating. However, when done properly, the rewards are monumental, providing increased opportunity now and into the future by elevating your business operations. To execute a successful ERP implementation you’ll need the proper planning, resources, and support. Using some best practices during your transition will allow you to achieve:
- Streamlined operations
- An easy to use and intuitive system
- Real-time access to business information from any location at all times
- Adaptability to business needs
- Robust data security
Below are seven best practices for ERP implementation. Use them to help you enjoy a smooth transition as well as greater efficiency, collaboration, insight, and revenue.
1. Assign a Core Project Team
Your ERP project team is the most critical factor in your implementation. A capable and efficient team will ensure your ERP software works as it should. These people need ample time, support, and skills to perform an ERP implementation effectively. Without these three essentials, your company risks delays and growing costs, as the software may not get configured to meet your company’s needs.
It’s important to appoint those who are indispensable employees to the implementation effort. They are typically staff who understand your business processes, know how to interact with others in the company, and command respect from your employees and executive management.
Organizations often assign employees adequate time for ERP projects, especially if they’ve suffered ERP failures or setbacks in the past. Ideally, team members should work full-time on the project, upwards of 40 hours per week. If that’s not possible, they should contribute at least 25 percent (10 hours) to the project per week. Otherwise, the team will struggle to keep up with the pace of activities, adding only negligible value to the project in the long run.
The core project team would ideally consist of a project lead supported by a core team of functional/departmental leads or members who are knowledgeable about the company’s processes and/or have done an ERP project before.
The team also needs executive support, with a member of senior management assigned as a “project sponsor”, to help successfully deliver the project. Major implementations always require decisions on priorities and trade-offs of resources. A lack of top-down buy-in and commitment from executive management can hamper the efforts of even the most qualified team. The project sponsor can help facilitate executive support to ensure the project team is fully committed to the ERP project.
An ERP implementation team should include:
- A project sponsor,
- A project manager, and
- Representatives of critical business units.
The implementation team should:
- Establish goals, requirements, and key performance indicators (KPIs)
- Carry out the daily project management tasks
Besides measuring results, KPIs will help the team effectively manage the project’s time and budget. However, a small company may not have enough resources and may need to engage a consultant to help with the process.
Implementing a modern ERP system on time and on budget is a significant challenge for a company. That’s why you need to have your best people on the implementation team to lay the foundation for future success.
Conflict is almost inevitable in any social environment, and most people are resistant to change; therefore, your project team should be able to resolve disputes as necessary. The team may also need to make mid-stream changes to the implementation strategy after considering user feedback and input. Team members should have a good grasp of how to achieve the best results, and they should have respect from staff across the organization.
2. Define Clear Requirements
Precise requirements that link to business goals are vital to ERP implementation. Those goals may include automating processes to save time and lower costs. Other objectives could be to respond to customers better and improve analysis across the business.
Analyzing current systems, workflows, and critical business processes are aspects of requirements gathering. It’s essential to gather data on what optimization is needed to improve component business processes such as accounting, customer relationship management (CRM), human resources, and inventory to achieve your organization’s business goals. The implementation team needs to understand workflow to realize how the ERP solution can provide improvement.
Analyzing systems and determining their deficiencies helps to develop a list of critical requirements your ERP implementation needs to meet. For example, delivering real-time reporting or reducing the financial close time by 50% are two potential requirements.
Many ERP systems integrate years of best practices from across industries which will usually provide a substantial improvement over a company’s existing workflows or processes.
3. Establish KPIs
As soon as the project team understands the company’s essential requirements, they can identify specific KPIs. These represent metrics to measure the success of the ERP implementation. For instance, a manufacturer may want to improve costs, cycle time, demand forecast accuracy, downtimes, and inventory turns. However, a retailer might opt to work on average purchase value, customer conversion rates, inventory turnover, profit margins, sales per square foot, sell-through rates, and total sales. Defining measurable end goals and benefits will help keep your team focused on the big picture.
4. Ensure a Solid Project Management Framework
Implementation of ERP can take anywhere from a couple of weeks for a system that is used “out of the box” and designed for a small to mid-sized business with little to no customization, and up to one to three years for a very complex system used in a large organization. Unfortunately, ERP implementation projects are prone to scope creep due to a lack of solid project management. It’s critical to have a good project management framework to help guide your ERP implementation to successful completion.
Your vendor partner should have a good project manager to help ensure the scope of your project is well defined and that timelines are met. Project management should focus on aligning the ERP initiative with business needs, sustaining the project, and ensuring that executives and other stakeholders can provide input.
Facilitate user feedback and lean on your partner to evaluate the input received. The customer project manager should work with the partner project manager on such things as testing the system, training staff, gathering feedback, and resolving issues.
Technical aspects such as system configuration, adaptation to specific business processes, security management, and privacy concerns are also essential to project management of an ERP implementation. Each issue should be thoroughly addressed with your vendor partner.
5. Foster Good Collaboration and Communication
Stakeholders must recognize the goals and objectives of your ERP implementation. Everyone in the company should understand why the ERP system is beneficial to themselves and the business.
Clear communication and collaboration will help to foster a mutual understanding. High-level executives such as the CEO should help to communicate the importance of the project. Charts, blog posts, emails, graphs, memos, and presentations can help the CEO clarify the reasons for the ERP implementation. Regular meetings and calls can also assist to coordinate efforts, identify problems, and communicate successes.
A steering committee meeting should be set up monthly or quarterly (depending on the need) with key members of the project team, stakeholders, and essential staff from your vendor partner to discuss and highlight key concerns. These meetings are important to ensure everyone is on the same page and to resolve any issues.
It’s also important to communicate about the implementation to external stakeholders such as business partners, customers, and members so they can understand how the changes will positively impact them.
6. Migrate Your Data
Migrations can lead to loss or corruption of data, especially if you’re consolidating data from various applications. That’s why it deserves plenty of planning and preparation.
Go through your data with your vendor partner early on in the process so they can see how it looks and determine the data quality. Be sure to show your vendor the critical reports you produce to inform them on how the data should be set up in the system to produce the analytics you need.
Data can be transferred to the new ERP system manually or via automation. Automation is faster and less tedious but still needs plenty of oversight to avoid issues. Your ERP partner, your IT staff, and your implementation team will all need to assist for successful data migration.
7. Train Your Users
Your employees need time to be comfortable with the new ERP system. Training makes this possible. There should be a room designated for training and the core project team should be responsible to learn the system and help get others trained.
Selected employees should receive extensive training and then they can mentor others in their departments for a “train the trainer” approach. Custom training through videos and tutorials can help users with the system’s functionality that is relevant to their work.
Regardless of organizational goals and preferences, the success of an ERP implementation project starts with choosing the right ERP system and partner. Cloud-based ERP software has become quick and easy to implement, incurs lower costs, and requires zero investment in hardware. But choosing the right system and partner for your business and industry is still key.
Even with a cloud-based ERP system, implementation best practices are necessary to ensure a successful deployment. It’s essential to have a good project management team set up and to have a vendor partner who will work with you to ensure a successful implementation.
FAQs for an ERP Implementation
What is an ERP implementation?
It’s the process of assessing current business practices and installing software to streamline operations, manage data, manage change, and train users.
How much does it cost to implement an ERP system?
The most significant and long-term cost factor of an ERP implementation is the actual cost of the software, which is typically dictated by the number of users the system will have. The average cost of ERP software is $8,265 per user over a 5-year period (or $137.75 per user per month). This is the average budget per user across businesses of all sizes over a five year period. For small businesses, a typical range is $125 to $350 per user per month, and the range depends on the class and tier of the software and the functionality, technology, and integrations the software comes with. Not all ERPs are created equal, and, ideally, price alone should not be the only driver in selecting an ERP. Ideally, you don’t want to invest in a cheaper ERP system based solely on price if it doesn’t solve your needs and stay up-to-date, resulting in having to replace the ERP system in a few years (or less). You will end up spending more time, resources, and energy compared to when selecting the right ERP system that addresses all of your critical needs, lasts longer, and provides longer term value for your company.
In addition to the software cost, there is typically a cost to implement the software, deemed as a “service” cost for your ERP vendor to setup and implement the ERP software to your needs. This implementation cost for services includes planning, project management, understanding the details of your processes and data, configuring the system to your needs, training, prototyping, and testing the system before going live. An often cited rule of thumb for small to medium-sized businesses for planning purposes is an implementation cost to software cost ratio of 1:1. This is a good “finger in the air” estimate. However, implementation costs are usually higher than the 1:1 ratio for more complex ERP projects. So if your 3-year software cost is $50,000, you can plan for your implementation cost to be around the same, and likely a bit higher.
In the end, small and medium-sized businesses can expect a total project cost (including software and implementation costs) between $75,000 to $750,000. Larger companies can spend upwards of $10 million depending on their needs. Although it is not an inexpensive undertaking, the benefits can easily outweigh the costs in the short and long run.
How long does an ERP implementation take?
For simple, “out-of-the-box” small to midsize projects, it can take as little as a few weeks. But a more complex project usually takes between four months to one year for a complete ERP implementation for small and midsize businesses.
What is the role of architecture in an ERP implementation?
The architecture ensures that an ERP implementation functions effectively by splitting the system into components with specific functions. Users only have access to the functionality that pertains to their jobs. However, the system manages all data and when a user makes a change it is updated immediately with everyone working off of the same information.
How can I ensure a successful ERP implementation?
You can ensure a successful ERP software implementation by using the best practices discussed in this article.
What is “change management” in an ERP implementation project?
“Change management” is the process of preparing an organization’s structure and employees to adopt a new ERP system as seamlessly as possible.
Which is the most critical phase in an ERP implementation?
The most critical phase of ERP implementation is discovery and planning. In this stage, your partner should learn about your processes, data, and ultimately the full scope of the project. This is critical to the rest of the project and how the system will be configured to your processes and data needs. Of course, all aspects of the project are critical, but if your processes and data are not adequately understood, the rest of the project will be at risk and will not maximize your return on investment.