How to Optimize Your ERP System (and avoid implementation mistakes)

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Table of Contents

Introduction: Optimizing ERP 3

Focusing on Process Improvements 4

Securing Organizational Commitment 5

ERP Selection 6

ERP Selection: Questions to ask about the Vendor 7

Project Management Strategies 9

Ensuring Data Accuracy 10

Investing in Change Management 11

Implementing Education and Training 13

Focusing on ROI 14

The Litcom Approach 16

More and more organizations have turned to Enterprise Resource Planning (ERP) to provide their decision makers with fast, accurate access to a unified view of their operational and financial information. ERP solutions offer proven, best-practice processes for business functions; including business planning, product development, sales, manufacturing, logistics, finance, and human resources. Properly implemented, ERP delivers optimal efficiency and productivity, while reducing information management system costs. An ERP system selection and implementation must maximize your return on investment (ROI) by focusing on the challenges that are most relevant to your business, such as:

• Forming collaborative relationships with partners

and clients

• Reducing cost of goods sold

• Cutting inventory, lead times, and order-to-cash

cycle time

• Improving response time and client satisfaction

• Increasing revenue, reducing expenses and accelerating

earnings growth

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Introduction: Optimizing ERP

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Focusing on Process Improvements

It is not difficult to overlook process analysis in the course of an ERP implementation. Nevertheless, the key focus should be optimizing existing processes and customizing the system functionality to complement them. Organizations should be cautious not to automate non- value-added processes in the new system. It is also vital to measure process effectiveness and efficiency on a regular basis and to embrace and enhance best practices at length.

Avoid: Neglecting the real reason behind implementation

Organizations can focus too much on replacing the systems and functionality they currently have and neglect to learn enough about the proficiencies the new ERP system can deliver. Likewise, numerous organizations experience ERP implementations without a step by step roadmap, making it troublesome to accomplish continuous improvement. Organizations should not neglect to analyze existing business processes and identify opportunities for organizational improvement (presuming the software will cover up weaknesses).

Securing Organizational Commitment

Before an ERP implementation project gets underway, key management must outline clear goals and objectives to achieve their vision for how the organization will function with the new technology in place. These expectations must be clearly communicated throughout all levels of the enterprise. Without commitment from the entire organization, the capabilities of the ERP system will never be fully utilized. It is vital to secure buy-in from users of the new system and increase their stake in the success of the program. One of the simplest ways to achieve this is to have those who will use the system most, be a part of the core design team. This helps break down barriers to change by making employees more comfortable with the application and workflows.

Avoid: Lack of commitment from top management

If company executives are not fully committed to the system, or do not actively engage in the implementation, the implementation has a high probability of failure. Top management often tends to delegate the implementation to lower management levels, which can lead to their being out of touch with critical events or lack the understanding of the scope, size, and technical aspects of the project. Top management must consider the ERP implementation as a transformation in the way the company does business.

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ERP Selection

Organizations have various choices when selecting an ERP system. While most bundles have similarities, extensive contrasts do exist. Since an ERP system may impose its own rationale on an organization's strategy and courses of action, the company’s system choice must be an educated one. The business must feel good with the vendor's perspective of best practices and how they will affect the organization's business processes.

Every organization should choose and actualize a system that goes with its remarkable competitive qualities while serving to overcome competitive shortcomings. It's imperative for the organization to focus the basic needs it is attempting to address and distinguish the desired features and aspects of the chosen system.

The organization should check the vendor's references thoroughly. When speaking to a reference, the individual should establish what role the contact performs at the organization, what parts of the product he or she utilizes specifically, and whether the individual was included in the initial implementation process.

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ERP Selection: Questions to ask about the vendor

Questions to ask might include:

• How much training and implementation services were required from the vendor to get the system up and running? Was this correctly indicated in the vendor’s proposal?

• What modules were obtained, and have they all been executed or scheduled? What else do they plan to implement?

• Does the vendor offer periodic updates to the software? If so, has the user received any updates?

• Does the vendor offer accessible customer care for inquiries or concerns? What type of response time does it afford?

• Has the software functioned as promised? Are other divisions utilizing it as expected and obtaining the information they need on a timely basis?

• If they had it to do over, would they buy again from this vendor?

ERP Selection

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Avoid: Inadequate ERP system selection.

A large percentage of the biggest ERP system implementation disappointments happen on the grounds that the new system's competencies and needs are not appropriately aligned to the organization's current business processes and methods. Inadequate selection happens when an organization hasn't sufficiently created practical requirement definitions or when the ERP team doesn't take the time to go through the system's screens as they would throughout the course of their day to determine if the software's features will accommodate their needs.

Numerous ERP selection teams find it enticing to choose a

well-known ERP provider. Perhaps they feel comfortable with

the software’s “brand name” and the vendor’s reputation. But

ERP implementation success means more than a prominent

name. It also means a vendor who offers strong experience in

installing the new software, one who knows the issues that

could emerge and how to oversee them adequately.

Project Management Strategies

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To understand the true ability of an ERP system, the technological parts of the implementation must be overseen as a component of the bigger project. The implementation group should incorporate exceptionally talented representatives from all offices and capacities. Directed by executive level input, the group should have the responsibility to distinguish and look at existing business processes. With full backing from top management, they should additionally have the power to reengineer existing business processes or create new business methods to help the organization’s objective.

Avoid: Poor project managementManagers may be amazed by the degree, size, and multifaceted nature of an ERP implementation. Accordingly, management may not initiate the essential level of detailed project management planning and control. Short-cutting important milestones in the task plan–such as time for documentation, reclassifying and incorporating methodologies, or testing before going live–is a major error.

The implementation team should take a discipline methodology to

project management, including a clear meaning of objectives,

development of a work plan, and foundation of a resource

requirement plan. Points of reference should to be made, and

advancement against those developments or milestones should be

followed.

Ensuring Data Accuracy

For the ERP system to function properly, accurate business data is needed. Methodologies to guarantee data accuracy should be set up before the implementation process starts, and they must be a top necessity throughout the execution. Educating users about the difficulties that data errors and mistakes can cause throughout the organization can help in this manner.

Avoid: Incorrect DataDue to the coordinated nature of ERP, inaccurate data entered into the common database will have a negative impact throughout the organization. Erroneous data can prompt failures in market planning, production planning, material acquisition, capacity acquisition, and so forth. Inability to guarantee precise data is entered into the ERP system will cause the system to lose reliability, and employees will become frustrated and disappointed by the new system.

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Investing in Change Management

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An ERP system will change the current mode of operation within and between functions. Organizations that have effectively implemented ERP systems typically approach the execution as an activity in change management.

To support this process, they will choose an experienced leader to head the activity, backed by a solid project team and the resolute support of top management. To be effective, the organization must acquire an earnest commitment to the change process from all capacities and all levels of the organization.

In exchange, since system users will need to manage organizational restructuring while adapting new courses of action, management will need to make a solid commitment to fulfill the needs of these individuals.

Organizations encountering issues actualizing ERP systems frequently experience issues in the areas of cultural adaptability. A comprehensive change management methodology can choose the destiny of the project. Along these lines, a different plan for change management technique, including arranging, correspondence, and execution, is not only prudent, but essential for an ERP program's success.

Investing in Change Management

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Employees may become discouraged by the need to educate themselves on yet another software system. Users might additionally be overwhelmed by all the new competencies the system offers.

User understanding and buy-in of the new system are essential success factors. If users are unable to comprehend how the system works, they will tend to formulate their own processes utilizing those features of the system they know how to control.

Avoid: Ignoring user hesitation for new applications

Implementing Education and Training

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A practiced vendor will afford broad training and education to boost the knowledge base and comfort level of the IT staff who will be liable for maintaining the system. It is crucial that financial support be allotted to secure the training involved so the new ERP system can be most fully employed.

Also, top management should comprehend that training and education is a continuous process. A significant part of the training originates from hands on utilization of the system throughout every day operations. The implementation team leader should stay in touch with all system users and monitor the use of the new system. Regular meetings should be organized with system users to help recognize issues and exchange information acquired with the new system. Further training should be planned when needed.

Avoid: Ignoring Staff implementation concerns

Employees tend to be happy with the current status quo and as such, may be fearful of changes realized by any new system. IT managers may be unable to avoid the fact that the new system may make their roles more difficult, reduce their importance, or even cost them their jobs.

Thus, a new ERP system may generate a great deal of uncertainty in some people as to whether or not they will be able to perform their jobs as well as they did under the old system.

ERP results tend to be costly. Subsequently the organization will need to justify it’s investment by consistently measuring the system's execution and effect on business operations.

To measure appropriately, companies should focus precisely on how an ERP system increases the value to their organizations. Since ERP can convey value through a large number of business parameters, it is vital to choose a couple of key execution markers and concentrate on those that adjust to the company's organizational vision. The capacity to demonstrate a measurable, year-on-year payback will demonstrate the investment was advantageous.

Also, ERP implementations deliver greater ROI over time when scalability and integration aspects that impact business performance are kept in mind. Therefore, for this reason, the ERP software should feature a robust technical architecture, effective data management practices, and a strong business intelligence backbone that is aligned with the current landscape and takes into account future business expansion, including mergers and acquisitions.

Focusing on ROI

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Avoid: Unrealistic Expectations

Numerous organizations misjudge the measure of assets, time, and outside help needed to finish the task. Moreover, management and users frequently hope to see prompt improvements once the system is introduced. Yet organizations should be prepared to see an initial frustration after the new software is executed, essentially on the grounds that a new system may be intricate and hard to master. As employees get to be more acquainted with the new system, the expected improvements will result.

Focusing on ROI

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As global economies become more uncertain, organizations encounter increasing pressure to remain competitive. Although an ERP system can help, it’s only as efficient as the effort placed on the implementation. By being mindful of the reasons implementations fail and knowing what best practices can be employed to help ensure success, companies can save valuable time and money and achieve a higher return on investment.

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The Litcom Approach

Organizations that have installed an ERP system often fail to achieve the expected return on investment and many implementations do not optimize the benefits associated. At Litcom we believe that long term success lies in the execution of a continuous improvement program, such as ERP Optimization.

An effective ERP system must support a company’s financial and operational processes. Often, the ERP system is relegated to serve as a financial reporting tool only and does not support management’s decision making process or the seamless integration with other functional areas. Such an ERP system is a prime candidate for improvement or optimization.

We help our clients through the intricacies of initial implementation as well as post-implementation optimization projects. Our team applies a structured methodology and has extensive experience with ERP vendors such as SAP, Microsoft and Oracle. In order to achieve the desired results, we utilize a structured methodology which breaks projects into four distinct phases:

- Planning and Analysis - Development and testing- System design and prototyping - Training and rollout

To learn how we can help your organization with its IT needs, please contact us at: info@litcom.ca.